R&D spending in the global healthcare sector is expected to reach $165 billion by 2018; surpassing computing and electronics, it is set to become the largest R&D spending industry globally.
Dubai - R&D in region's sector, however, still below international levels
Published: Fri 3 Mar 2017, 5:28 PM
Updated: Sat 4 Mar 2017, 9:06 AM
Total GCC healthcare spending is expected to hit $69 billion (Dh253.4 billion) by 2020 with governments and private companies making significant investments in the sector to improve the range of medical offerings and services available.
Although rising research and development spending in healthcare is in line with the growth of the GCC healthcare sector, R&D in the healthcare market is currently below international levels. R&D spending in the global healthcare sector is expected to reach $165 billion by 2018; surpassing computing and electronics, it is set to become the largest R&D spending industry globally.
However, GCC R&D is held back by five main factors, said Strategy&, formerly Booz & Company, in a study. The first is limited availability of research funding and grants. The number of GCC healthcare research publications in international peer-reviewed journals and healthcare patents of GCC origin remain below international standards.
According to the 2016 Global Innovation 1000 Study, the World Intellectual Property Organisation's Indicators also show that the UAE and Saudi Arabia rank low when it comes to resident patent applications.
The second factor is an insufficient number of healthcare researchers, which has been driven by the limited number of post-graduate medical education institutions and consequently not enough researchers being produced or receiving training on the ground.
The third is insufficient research infrastructure in terms of research centres and labs. Some GCC countries for example like Kuwait, Bahrain and Oman only have one to two medical schools. The fourth is weak university to industry linkages, while the fifth is limited cross-border research collaboration.
Nikhil Idnani, principal with Strategy&, said the GCC healthcare has significant potential for investment in R&D. The demand for new hospitals, clinics and medical services is growing, and GCC governments are expected to spend and invest significantly more in the sector by 2020.
"This should be accompanied by governments enhancing research funding and a strengthening of linkages between universities, the private sector and governments. If these steps are taken into consideration, the GCC definitely has the potential to provide its patients with world-class care, and its caregivers and healthcare businesses with the ideal opportunities to develop," said Idnani.
According to Alpen Capital's GCC Healthcare Industry report released in 2016, the UAE healthcare market is projected to reach Dh71.56 billion by 2020, achieving an annual average growth of 12.7 per cent, marginally higher than the GCC growth average. The outpatient and inpatient markets are projected to reach Dh44.4 billion and Dh27.5 billion, respectively, in 2020. The country is likely to see an increase in demand for the number of hospital beds at nearly three per cent every year to reach more than 13,800 beds by 2020.
The Strategy& report noted that the face of innovation is changing because of a significant shift toward service and software offerings and away from product-based offerings. By 2020, companies will have shifted the majority of their R&D spending to service and software offerings. The top reason for changing the focus of R&D budgets is to stay competitive according to companies cited. Indeed, according to the study, companies that allocated 25 per cent more of their R&D budgets to software offerings than their competitors reported faster revenue growth.
"Many of the world's major innovators are in the midst of a transformational journey mostly driven by changing - and rising - customer expectations," said Per-Ola Karlsson, partner with Strategy&.
"The shift is also being driven by the supercharged pace of improvement in what software can do, including the increasing use of embedded software and sensors in products, the ability to reliably and inexpensively connect products, customers and manufacturers via the Internet of Things, and the availability of cloud-based data storage."
To support the development of software and services offerings, fewer companies will focus their R&D spending on the electrical and mechanical field. By 2020, the number of companies reporting that electrical engineers are their top employed engineering specialty will fall by 35 per cent and the proportion of companies who expect that data engineers will represent their largest group of employed engineers will double from eight per cent to 16 per cent.
"An increase in software and services, even in more traditional industries, has created a shift towards hiring talent that can develop software and provide platforms to collect and analyze product-related data. The shift is already changing the way business schools think about their course offerings, and will have profound effects both on education and, more generally, on the future of employment," said Karlsson.
- issacjohn@khaleejtimes.com
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