Shifting investment and infrastructure to fight against chronic disease

Having made considerable gains in health care provision over the past five decades, Algeria has been undergoing a transition in terms of its health challenges. With improved basic health indicators in the field of infectious diseases, the country is now battling a rise in chronic disease affecting the population. This is being accomplished through a combination of public and private investment efforts, and the matching of health service provision with regional needs.

Under the current 2009-14 five-year plan, the government had pledged €4.56bn for the establishment of new health infrastructure, with an ambitious plan for 1500 new facilities. Of these, 1000 would be new health centres across the country, 172 new hospitals, 377 clinics, 45 specialised health units as well as 70 centres focusing on people with disabilities.

Renovation of existing facilities is also being undertaken, coordinated with a certain level of decentralisation to allow the management of health efforts to become more autonomous in the regions.

Transitional Figures

In 2012 Algeria’s expenditure on health as a percentage of GDP reached 5.3%, compared to 6.4% in Morocco and 7% in Tunisia, according to figures by the World Health Organisation (WHO). These figures may be slightly misleading, however. Morocco spends a larger percentage of GDP on health than Algeria, but Algeria’s GDP is much larger. Tunisia allocates a generous percentage of its budget to health, but besides a smaller GDP, around 30% of health expenditure in that country is related to foreigners coming for medical care in Tunisia. Per capita expenditure may be a more useful measure: in Algeria it was €323, compared to €250 in Morocco and €504 in Tunisia.

Algeria’s focus on improving its health provision gained full force with post-independence governments. In 1962, when the country gained its independence from France, there were approximately 9m Algerians, with a life expectancy of 49 years. The population was mainly affected by infectious diseases such as tuberculosis and cholera. But the establishment of a free health care system in the 1970s, financed by an oil boom which gave the young country a comfortable financial position, allowed for money to flow into health. Vaccination campaigns run through local health centres across the country lead to a change in the dynamics of life expectancy across even the more isolated regions.

These campaigns, with a focus on combating infant mortality, were efficient in fighting infectious diseases such as diphtheria, polio and tetanus. Under-five mortality rates were reduced, and now stand at 20 per 1000 live births, compared to a regional average of 95 per 1000 live births and 40 per 1000 live births as a global average, according to 2012 figures by the WHO. These gains allowed progress in terms of life expectancy, which in 2012 stood at 73 years for women, and 70 years for men, according to data from the WHO. Maternal mortality rates have also seen major improvements, standing at 89 per 100,000 live births in 2013. This is a considerable gain when compared to a regional maternity rate of 500 per 100,000 live births, and 210 per 100,000 live births globally. Under-five mortality rates have also improved from 37 in 2003 to 25 in 2013.

New Disease Patterns

Lower mortality due to infectious diseases has been outbalanced by an increase in the number of patients suffering from chronic disease such as diabetes, cancer or heart problems. According to the WHO, cardiovascular disease accounts for 41% of all deaths in Algeria, followed by cancer at 8% and diabetes at 7%. Overall, non-communicable diseases now account for 77% of deaths in the country, while communicable diseases, in conjunction with prenatal and maternal issues combined, account for 15%. This shift is in large part the result of the increasing income levels and more urban lifestyles of the population. Also noticeable have been the changing habits such as an increased consumption of sugar, relatively high prevalence of smoking and raised levels of pollution. “The health policy has to change. Vaccination must continue, of course, but it is no longer the most important health goal. The main thing now is to take care of these other diseases,” Rachid Bougherbal, president of the Commission on Health and Social Affairs at the Algerian parliament, told OBG.

Health Cover

Health care services have improved through both public investment and the emergence of private clinics targeting specific problems such as cardiovascular diseases. This has enabled cardiovascular patients to be treated in country rather than sending them overseas for surgery, which consumed considerable resources, with around 1500 patients being treated overseas annually only a decade ago.

The public health sector remains the most important in terms of expenditure, accounting for 80% of health spending. Several public national insurance schemes provide social security, focusing on workers, retirees, the unemployed and non-salaried Algerians. By providing cover for workers as well as their families, the National Fund for Social Security for Salaried Workers (Caisse Nationale de la Sécurité Sociale des Travailleurs Salariés, CNAS) covers more than 80% of the population. Treatment in public hospitals is free, and purchases of medicine are reimbursed by the government.

Another scheme, the National Unemployment Insurance Fund (Caisse Nationale d’Assurance Chômage, CNAC) was established in 1994 to support the unemployed. Both these insurance schemes are financed with money coming from both employees and employers. In addition to these, non-salaried Algerians are looked after through the National Fund for Non-Salaried Workers (Caisse Nationale des Non-Salariés, CASNOS).

Smartcard & Services

Efforts to modernise and facilitate access to services were accelerated in 2007 with the implementation of the Chifa card, a personalised electronic smartcard containing the beneficiary’s information, ranging from insurance status to prescriptions. CASNOS recently announced that starting in 2015, its 2m beneficiaries would be able to activate their Chifa cards, remotely in 6500 pharmacies.

CASNOS has also signed agreements to extend coverage, allowing beneficiaries to access a larger pool of facilities offering haemodialysis treatments and cardiovascular surgery, including at private clinics. However, rising costs for health care, as the number of beneficiaries supported by the system climbs, might lead to a rethinking of financing methods for the country’s health system. Currently, the country uses a mixed system, in which a part of health expenses are financed by the state through payments to hospitals, but another part is financed by social security.

Social security funds are used for public expenses, but it is not state money, since social security is supported by workers and employers. Some 60% of the financing for public health is derived from social security, while the remaining 40% is channelled from the state through direct financing of hospitals, according to Bougherbal. As such, hospitals also get financing from social security to support treatment of beneficiaries, which in 2013 reached AD75bn (€697.5m).

Chronic Disease

The rising prevalence of chronic diseases is an important factor affecting health costs. Expenditure on radiotherapy, for example, jumped from AD11bn (€102.3m) in 2000 to AD35bn (€325.5m) in 2013, according to the Ministry of Health, Population and Hospital Reform. According to health authorities, only 8000 of 28,000 cancer patients receive radiotherapy due to the lack of infrastructure. Sector leaders are aiming to address the issue by establishing anti-cancer clinics across the country (see analysis).

However, the large amount of cases left untreated has led some private sector practitioners to call for social security schemes to cover the cost of cancer treatment, meaning that patients could be treated in either public or private clinics with the state picking up the bill as part of the public system’s coverage. Using the private sector in this way to make up for insufficient capacity in public structures has helped address cardiovascular illness, which can be treated in private and public institutions under social security schemes. This has helped to ensure that all cardiovascular operations are now done in country, although the lack of sufficient practitioners means that doctors sometimes need to come from abroad to perform surgery in Algeria to make up for the shortage in human resources (HR) capacity. “Cardiovascular treatment is no longer a problem; it is done locally and private clinics have an important role in this. The government should take notice of this example and apply it to dealing with cancer treatment. This should be done through the opening of new centres and making them payable by the social security system,” Jamal Eddine Khodja Bach, the general director of Clinique Al Azhar, a private clinic, told OBG.

Cancer is the cause of 9% of deaths in the country, but at present costs some 55% of medicine expenditure in Algerian hospitals. Instead of making treatment directly payable by social security, an intermediate solution would be to allow private clinics to fill the gap in capacity under supervision from public institutions. “Radiotherapy can be done in the private sector, but the order should be for it to be done in public hospitals. So if a hospital does not have capacity to deal with radiotherapy requests, it can subcontract it to the private sector. If you leave the private sector do whatever it wants in this field, the social security resources will be limited,” Bougherbal told OBG.

Kidney failure has also become increasingly common. The number of new cases has jumped from 13,000 in 2010 to 20,000 in 2014, according to local media reports. The growing number of cases raises concerns of mounting costs. Because the treatment for kidney failure is paid for by the state, the number of private clinics responding to this need have multiplied. There are currently 292 haemodialysis centres operating in Algeria, 131 of which are private.

Infrastructure Boost

Developing new infrastructure is part of restructuring efforts taking place in the sector. Adding to the existing 14 university hospital centres (centre hospitalier universitaire, CHU), authorities plan to build an additional 10 by 2018. Construction has begun on five of these in Tizi Ouzou, Ouargla, Constantine, Tlemcen and Algiers. Expansion of public infrastructure will allow Algeria to increase hospital capacity by 90,000 beds by 2019. Government figures put the number of existing beds at 65,000 in 2013. However, it is unclear how these facilities will be adapted to the needs of the regions they will serve.

“We decided to build 10 CHUs plus about 100 small hospitals, but to my knowledge there were no specific studies to determine which CHU will serve the specific regions. If you build a CHU in the south, for example, you need to cater it to the needs of that region, because each region has a specific prevalence of certain diseases,” Bougherbal told OBG.

New infrastructure is also being funded through other avenues. The national energy company, Sonatrach, has announced it will be financing two new cancer hospitals to be built in the Hassi Messaoud area in Ouargla province, close to some of the most important hydrocarbons-producing areas. These facilities are part of a growing private health sector, which first began to take root in Algeria in 1988. Recently, expansion of private health clinics has been driven by increased coverage of treatments by social security.

The number of private clinics has climbed to around 250. Although private clinics have had an important role in bridging gaps in treatment of certain illnesses, future growth in the number of private clinics and their specialities will depend on what public policy deems suitable to be supported by social security.

Certain areas have seen a rise in the number of private service providers, such as haemodialysis centres and maternity clinics. As opposed to some countries where maximum prices for treatments are set by the state, private health operators are free to establish their own fee structures. As private clinics flourish, authorities are currently considering whether to allow the establishment of private hospitals in the country.

Skills In Demand

The emergence of a private market has also brought challenges for the sector, at least in terms of HR management. Citing excessive absenteeism of medical staff at public hospitals, in early 2014 the Ministry of Health froze the decree allowing public sector doctors to work in private clinics. Competition for staff between private and public health care centres had been resulting in longer waiting times for patients in public hospitals. To address this issue, authorities have stated that doctors will have to choose whether to practise in the private or in the public sector. In addition to the domestic private sector, public facilities also compete with foreign opportunities for Algerian doctors. Looking for better pay, doctors have sought positions abroad, namely in Tunisia, Morocco and especially France, where over 20% of working doctors were Algerian in 2013, according to media reports.

Algeria currently has around 60,000 doctors, and an extra 2000 come out of its medicine school every year. However, the country faces specific shortages in fields such as cardiology and paediatrics, prompting hospitals and private clinics to bring in foreign specialists for short work stays to meet demand.

Challenges

Contrary to other countries in the region which are troubled by financial restraints that impede them from strengthening investments in the health sector, Algeria has built a solid financial position over the years thanks to hydrocarbons exports. However, despite the strong fiscal standing, health expenditure is sometimes tied up in bureaucracy and red tape, preventing resources from being used more efficiently. This can be seen, for example, in the breakdown of budgets allocated by the Ministry of Health to hospitals and health institutions. As in most countries, salaries take the largest chunk of hospitals’ spending. But equipment budgets are weighed down by the procedures required. For a public hospital in Algeria to acquire new equipment, it needs to prepare a large amount of documentation to present to a commission that will approve or defer the request. Only expenses above AD8m (€74,400) need to go through an approval commission. But depending on the cost of the new equipment, acquisition will need to be approved either by a hospital commission, a wilaya (province) commission or a national commission for the more expensive equipment. This process is time-consuming, meaning that a lot of applications accumulate before the necessary commission can approve them.

These controls, intended to prevent corruption, end up slowing down or discouraging equipment acquisition. “That is why so many hospitals have old equipment. The money is blocked. Because of the long approval times from a budget commissions, money ends up being used on small things such as refurbishments, not on the needed replacement of equipment,” Bougherbal said. An agency was recently created by the Ministry of Health to manage hospital assets and equipment.

Another challenge is lack of qualified staff to operate and maintain the new equipment. “Low levels of maintenance and training also mean the equipment is used to a low capacity,” said Mohabeddine. Nadir Abderrahim, managing director of medical supply firm Industries Médico-Chirurgicales, agrees. “Although Algeria is conducting massive investments in the acquisition of new equipment in the health sector, there will be a lack of qualified staff to operate them.”

To address these concerns in the long term, an agreement is in place between Sweden-based Elekta and US firm Varian Medical Systems to ensure the supply of machinery, maintenance work and training for use of the equipment (see analysis).

Furthermore, although private health care providers have helped boost the availability of services, some capacity limitations remain. Khaled Mohabeddine, chairman of private clinic Clinique Diar Saada, told OBG, “Private facilities often lack the financial means to conduct a large volume of surgeries. If public health insurance were to cover ophthalmology surgeries, such as those for diabetic retinopathy, glaucoma and cataracts, this could increase the number of surgeries completed and have a major positive impact on the population.”

Pharmaceuticals

In an effort to reduce pharmaceuticals imports, which reached a total of €1.68bn in 2013, the government has been establishing legislation designed to facilitate the development of the domestic sector. The government first introduced a ban on certain pharmaceuticals imports in 2008 and then modified the ban in 2011. At present, imports of more than 250 pharmaceuticals that can be procured from local manufacturers are prohibited.

As a rule, imports of generics that are made in more than three domestic production facilities are banned. Authorities are also working to increase the number of production facilities in the country. In September 2013 Groupe Saidal, Algeria’s largest pharmaceuticals manufacturer, announced it would be investing €100m in three new production plants, in Algiers, Constantine and Chérchel, to be built in partnership with Italian, Spanish and Algerian partners. The facilities will come online between 2014 and 2015 and are expected to help to increase the production capacity of the group by 75%. At present only 30% of pharmaceuticals sold domestically are manufactured in Algeria, but the government plans to boost this figure to 70%.

The government’s drive to build new hospitals and specialised clinics to deal with issues such as oncology is galvanising the market for pharmaceuticals. With 90% of the population covered for prescriptions through the government insurance programmes, Algeria remains an attractive market for pharmaceuticals firms, with an estimated annual value that reached €2.28bn in 2013.

A large number of joint ventures between foreign pharmaceuticals companies and local manufacturers have been established over the years to increase the country’s manufacturing capacity and attract further investment into the country. The interest shown by international manufacturers bodes well for the industry, which is expected to be valued at €3.68bn by 2017.

Competition

However, there may be some limitations as to the number of pharmaceuticals products that can be fully produced domestically.

“Today we are in a globalised world in which 90% of pharmaceuticals are manufactured in China, India, Brazil, South Africa and Pakistan. In the Algerian market you have big global players and you have local private and public entities. But the only element manufactured in Algeria from beginning to end are the antibiotics, because we have previous experience in that,” Bougherbal told OBG.

Further liberalisation of the country’s investment laws and the breaking down of bureaucratic barriers that make conducting business comparatively expensive will help to make Algeria more competitive with the countries where manufacturing of pharmaceuticals is thriving. However, many in the sector see significant potential for further growth – to the extent that would exceed domestic requirements.

Mohamed Houssam Soued, CEO of pharmaceuticals company El Kendi, told OBG, “The government has strongly pushed the growth of the domestic pharmaceuticals sector by investing in public health and social security. As the industry develops and the population is better served, we should see more pharmaceuticals producers begin to look at exporting.”

Outlook

Algeria’s health sector has increasingly benefitted from the financial attention it has received from the government. However, this has not always meant that the money is spent in the most efficient manner, and the rising costs of health care might warrant a rethink of the way in which treatment is financed in the country. The positive role that the private sector can have in health care provision has proven to be positive in fighting chronic diseases in many other countries in the region and elsewhere.

Overall, many of the challenges that hinder the speedier development of the health care sector are the same as those that have restricted growth in other sectors of the Algerian economy. Excessive bureaucracy, for example, tends to curb investment, while low levels of competitiveness are serve to limit sales.

However, by redesigning the way that expenditure is approved in hospitals, authorities would be able to ensure that government funding reaches its intended targets, especially in terms of equipment purchases and provisioning. As the number of public hospitals and clinics increases sharply over the coming years, ensuring that funds allocated for these purposes are adequately disbursed will be a priority for keeping the system accessible, effective and financially balanced.