Investment in expanding clinics and hospitals improving Algeria's health indicators

Over the past five decades Algeria has made significant progress in the provision of health care to its citizens and tackling communicable diseases. Although basic health indicators have improved and living standards have risen, the country has witnessed an increase in chronic diseases, a common occurrence in a number of emerging markets, and these now represent the main burden on the country’s health care system.

While many countries in the region struggle to finance health infrastructure and services, Algeria – on the back of years of high oil revenues – has been able to divert significant funds into the expansion of clinics, hospitals and preventative care in a bid to improve overall health indicators.

Sector Funding

Under the 2010-14 five-year plan, the government expected to spend AD619bn (€5.7bn) in health care, with the majority of the funds directed to the establishment of over 1500 health facilities. In 2015 the government said it had allocated €4.85bn for the sector as part of plans to build 10 hospitals and renovate existing ones. According to local press reports, in line with the 2015-19 plan, the government is also investing in human resources by creating 58,000 jobs for nurses, doctors and health care assistants.

Although the vast majority of spending is directed to capital expenditures, current spending is taking up an increased amount – pharmaceuticals, for example, of which the government is the primary buyer, see sales that run in excess of $3bn annually. The high level of funding has also seen annual per-capita spending figures rise. According to the WHO, in 2013, the country saw a per-capita health expenditure of $778 versus $438 in Morocco, $123 in Mauritania, $539 in Egypt; only Tunisia is higher, at $791.

Indicators

The financial backing that the state has provided for health care is impressive on its own. Many baseline indicators have witnessed a dramatic improvement over recent decades. According to the World Health Organisation (WHO), the infant mortality rate has dropped from 40 deaths per 1000 live births in 1990 to 22 deaths per 1000 live births in 2015.

The country’s maternal mortality rate has also declined, standing at 89 deaths per 100,000 live births in 2013, the latest WHO data confirms. The country’s life expectancy currently stands at 70 and 74 years of age for men and women, respectively, according to the WHO.

Health Cover

Public investment coupled with the emergence of private clinics targeting specific illnesses such as cardiovascular diseases have greatly enhanced Algeria’s health care services. Instead of sending patients overseas for surgery, these clinics have enabled cardiovascular patients to be treated in-country. In terms of expenditure, the public health sector accounts for 80% of health spending. A number of public national insurance schemes provide social security, focusing on workers, retirees, the unemployed and non-salaried citizens. Covering more than 80% of the country’s population, the National Fund for Social Security for Salaried Workers (Caisse Nationale de la Sécurité Sociale des Travailleurs Salariés, CNAS) provides cover for workers and their families. Treatment in Algeria’s public hospitals is free, and medicine purchases are reimbursed by the government.

Another initiative, the National Unemployment Insurance Fund, was established in 1994 to help support the unemployed. Both insurance schemes are financed through contributions from both employees and employers. In addition, non-salaried Algerians are provided for through the National Fund for Non-Salaried Workers (Caisse Nationale des Non-Salariés, CASNOS).

Smartcards

Ongoing efforts to modernise and improve access to health services were given a boost in 2007 through the implementation of the “Chifa” card, a personalised electronic smart-card. Introduced in 2007, the Chifa card contains medical information about the beneficiary, from their insurance status to issued prescriptions. CASNOS announced that starting in 2015, its 2m beneficiaries would be able to activate their cards remotely in 6500 pharmacies across Algeria.

CASNOS has signed agreements to extend coverage, allowing beneficiaries of the scheme to access a larger pool of facilities offering haemodialysis treatments and cardiovascular surgery, including private clinics. However, rising costs for care, as the number of beneficiaries supported by the system increases, might lead to a rethinking of financing methods for the health system. At the moment, an estimated 40% of health care expenses are financed by the state through direct payments to hospitals, while the other 60% is financed by social security. In 2013 total social security payments to hospitals for patient treatments reached AD75bn (€690m).

Private Sector

The number of private clinics has jumped to around 250, although hundreds more offer health-related services such as diagnostics. Going forward, 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, including maternity clinics and haemodialysis centres.

Private health care operators in Algeria have the freedom to establish their own fee structures, and in 2014 the construction of the country’s first private hospital in the province of Blida, around 50 km west of Algiers, was approved by the Ministry of Health, Population and Hospital Reform (Ministère de la Santé, de la Population et de la Réforme Hospitalière, MSPRH).

The private health care sector is growing much faster now than 10 years ago according to Khaled Mohabeddine, chairman of Clinique Diar Saada. Much of the increased activity is coming through the expansion of convention agreements with public facilities – whereby patients are transferred from public hospitals to private facilities for additional care – which is an area the government is trying to bolster. This bodes well for improving service provision overall, Mohabeddine added, since growth in the private sector helps to develop treatments and services that can then trickle down to the public sector.

Given the rapid proliferation of new private facilities, however, challenges have arisen in terms of ensuring quality. In 2015, for example, the health ministry announced the closure of 20 private health centres in Algiers following surprise inspections. According to local media reports, the principle infringements included procedures done without ministry approval and improper staffing and personnel reporting.

Non-Communicable Diseases (NCDS)

A key trend helping to define the development of Algeria’s health care sector is the rise in NCDs. Algeria has taken steps to address the issue, both in terms of preventative care and disease management, particularly for cancer and diabetes.

Cancer accounted for 21% of mortalities in Algeria and a third of deaths from NCDs among the 30-70 age group in 2008, according to the most recent data from the WHO. The prevalence rate, which increased from 80 cases per 100,000 people in the 1990s to 120 cases in 2008, is expected to reach a total of 300 cases per 100,000 people within the next 10 years. This is comparable to rates found in the US, Canada and France.

In 2003, Algeria became one of the first countries in the North Africa region to establish a publicly funded national cancer prevention programme, which promotes healthy living, early testing and enhancing the quality of care. However, the country still faces a shortages in terms of hospitals, specialists and equipment.

Most cancer patients seek care at one of Algeria’s six public cancer centres, which operate beyond their capacity. In order to address the shortage, under its 2010-14 five-year plan, the government invested in new facilities, with 15 specialised health centres dedicated to oncology.

The total planned expenditure on cancer-related activities in the government’s 2015-19 five-year plan comes to AD180bn (€1.7bn), according to a report on the plan presented by the minister of health, population and hospital reform in May 2015. This includes AD77bn (€708.4m) for investments in modernisation and over AD100bn (€920m) in oncology and anti-cancer centres. The expenditures will be disbursed in line with the eight-point National Cancer Plan, which mandates the construction of a total of 19 anti-cancer centres (centres anti-cancer, CACs), five functional radiotherapy centres and five privately run cancer clinics. The budget allocation for each CAC has been set at AD4.5bn (€41.4m).

Preventative Care

Preventative care and initiatives to increase public awareness are important elements of the government’s health strategy, with a particular focus on prevention as well as diagnostic tests and cancer screenings.

“Cancer is a problem because there is no testing and check-up policy, and a lot of the cases are discovered too late,” according to Jamal Eddine Khodja Bach, general director of Al Azhar Clinique. “Cardiovascular treatment is no longer a problem, it is done locally, and the private clinics have an important role in this. Government should take notice on the good example of the way cardiovascular was taken care of, 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.”

The opening of two specialised centres in Batna and Sétif should improve access, at least in the eastern provinces. The CAC at Batna, some 70 km inland of the coastal midpoint between Algiers and Tunis, will eventually serve the city and its five neighbouring provinces. Opened in mid-2012, its 90-bed day hospital offers diagnostic services and outpatient chemotherapy. The full 240-bed facility opened in 2014, offering a range of in- and out-patient diagnostics, treatment and surgical services. About 130 km north-west of Batna, the 160-bed Sétif CAC officially launched its oncology ward in late 2013. These two radiotherapy clinics should relieve some of the pressure on the cancer treatment facility in Constantine. In 2014 CACs in Annaba and Tlemcen were also completed, and studies have been commissioned for several others to be built elsewhere.

Diabetes

Diabetes, particularly type 2 diabetes, has increased in part as a result of higher obesity rates. The prevalence of diabetes in Algeria has increased from an average of 6.8% overall in 1990 to around 10% in 2015, although certain segments of the population see even higher rates. The increased incidence rate is leading to forecasts for a significant rise in diabetic treatments and drugs. According to Danish pharmaceutical firm Novo Nordisk, Algeria can expect to see an increase of 5-10% in terms of demand for insulin in the years to come. According to Jean-Paul Digy, the company’s corporate vice-president, Africa region, there is a distinct need to improve research on the impact of NCDs, such as diabetes, on the local population. “When, in the late 2000s, we first started collaborating with the government on this front, it became quickly apparent that much more had to be done to correct the deficit in information and to offer earlier diagnosis,” said Digy.

In collaboration with the authorities and patient associations, Novo Nordisk also established a diabetes-focused mobile clinic, which was launched in November 2011 and travels around remote regions spreading the word and offering on-the-spot diabetes diagnosis.

Infrastructure Development

Alongside the focus on NCDs, the government is continuing to spend significant amounts on additional new facilities to ensure capacity is able to keep pace with the growing population.

One key part of this effort is the establishment of new university hospital centres (centres hospitalier universitaire, CHUs), with plans to build a further 10 CHUs – in addition to the existing 14 – by 2018. The total cost of this initiative will be AD1trn (€9.2bn), according to Lazhar Bounafaâ, director-general of the National Agency of Project Management and Equipment of Health Facilities.

Some AD400bn (€3.7bn) has been set aside for the development of five CHUs in the provincial regions of Algiers, Constantine, Tlemcen, Ouargla and Tizi Ouzou. The building works for these centres began in 2015, with construction projected to finish over the next two years. These are far from the only new public health projects under way. Another 325-bed, AD5.2bn (€47.8m) hospital is under construction in Touggourt, while two more hospitals, providing general and specialised care, are also being built in Megarine and Rouissat. Expansion of public health care infrastructure will allow Algeria to boost capacity by 90,000 beds by 2019, a sizeable increase on the 65,000 beds that the government reported in 2013.

Shortages

Large investments into health care infrastructure, ranging from new hospitals and clinics to machinery and ambulances, is helping expand the scope of access for the broader population, but there remain challenges associated to staffing. “Although Algeria is investing significantly in the expansion of new infrastructure and the acquisition of new equipment, there is a lack of qualified staff to operate them,” said Nadir Abderrahim, managing director of medical supply firm Industries Médico-Chirurgicales.

The shortages extend beyond personnel, with many health care institutions also facing difficulties when it comes to acquiring or maintaining up-to-date and modern equipment. “The ministry’s policy is looking towards building additional health facilities while all health sector experts agree that the focus must be on the improvement of current ones,” Abderrahim said.

A component of the challenge to improve existing facilities stems from broader trade regulations. “Importing medical equipment is a relatively easy task; the complexity lies within providing adequate maintenance,” said Najjat Belbachir, CEO of plastics manufacturer SIMAP.

While the new establishments, such as the CACs, will help improve access to specialised care, existing centres currently face equipment shortages. To remedy this, in September 2013 Algeria formed partnerships with two major manufacturers of linear accelerators, the primary machinery used in radiotherapy – US-based Varian Medical Systems and Sweden’s Elekta. The agreements ensure the supply of machines, along with the maintenance and personnel training to improve equipment performance in the long term.

Pharmaceuticals

Algeria is the second-largest pharmaceuticals market on the continent after South Africa, with annual sales expected to reach close to $4bn in 2015. Demand for medication is increasing at double-digit rates, driven by various factors. One of the biggest contributors to rising sales is Algeria’s changing demographics, characterised by rising numbers of adolescents and the elderly. Algeria’s age dependency ratio stood at 52% in 2014, according to World Bank data. The rising prevalence of NCDs also require more complex and costly treatments.

Algeria’s public health system offers near-universal coverage free at the point of delivery. Out-of-pocket payments account for just 20.9% of total health spending, according to the Mediterranean World Economic Foresight Institute, much lower than Tunisia (39.8%) or Morocco (53.5%).

Domestic Focus

Regulations that prohibit the importation of drugs that are already being produced locally, initially introduced in 2008 and scaled up in 2012, are playing an important role in driving growth in the pharmaceuticals sector.

In the first nine months of 2015 imports of pharmaceutical products fell by 24.7% to $1.37bn, according to a report by Algeria’s National Statistics Office. This compares to growth of 10.4% in 2014. Prices of imported drugs have also fallen, according to the MSPRH, following negotiations with drug companies.

“In light of reduced oil prices and the fact that many inputs are imported, fluctuations in currency have become an important factor for local pharmaceutical manufacturers. It is important that this dynamic be taken into consideration with respect to pricing policies,” Raed Alashhab, general manager at Hikma Pharma Algeria, told OBG.

A new methodology for medicine pricing, based on international benchmarking and aimed at getting the best deals in Algeria, has been adopted. Meanwhile, local production levels rose 41% in 2014, according to the MSPRH, while the number of pharmaceutical plants and production units in Algeria has reached 132, with 230 additional projects currently under development. Approximately 30 large-scale drug manufacturers are operating in the domestic market, according to health IT company IMS Health, including France’s Sanofi Aventis, the UK-based giant GlaxoSmithKline and Hikma Pharmaceuticals of Jordan.

Chinese and Indian firms are now taking on a bigger role, according to media reports. Limited to 49% ownership under law, foreign players are also required to accept government-administered prices on drugs, gradually reduce imports and stimulate local production, especially of generics.

Production Boost

The largest local player, the majority state-owned SAIDAL Group, was called on in August 2015 by Prime Minister Abdelmalek Sellal to substantially increase its output to a minimum of 30% of national production. Announcements from several industry players in 2015 of major capital plans for their Algerian operations are likely to strengthen the government’s bid to increase local production and boost market share. In June 2015 AstraZeneca announced plans to build a new $125m facility to manufacture cardio, cancer, gastroenterology and diabetes drugs as part of a 51:49 joint venture with two local firms, Salhi and Hasnaoui. The plant is expected to be finished in 2017. Shortly after, Sanofi said it would invest €70m in a third plant in Algeria – its largest in Africa – producing 100m units per year at full capacity, equivalent to 80% of the current volume of Sanofi’s local distribution.

Non-European players are also showing increasing interest. In October 2015 the Indian manufacturer Cipla announced that it was planning to establish a 40:60 joint venture company – with the remainder to be helped by an Algerian consortium led by Biopharm – to produce respiratory products. The joint venture company plans to invest up to $15m in a new manufacturing facility in Algeria.

R&D Spending

As part of its efforts to advance technology transfer and innovation in the pharmaceuticals and biotechnology sectors, the government is making efforts to encourage companies to establish operations in purpose-built parks, such as the technology park at Sidi Abdallah and the industrial park in Constantine. So far, approximately 20 pharmaceuticals factories been established in these parks. However, while there are a handful of research and development (R&D) initiatives, currently ongoing, it can nonetheless be a challenging market for companies to navigate.

According to Faiza Gamoura, corporate affairs and market access director of drug producer Eli Lilly, “Value innovation needs in Algeria are high, but the cost of investment in R&D is a deterrent.” Intellectual property rights laws exist but are not enforced, while price regulation can somewhat limit the revenues that might otherwise be diverted into innovation, she added.

Exports

Algeria is looking to eventually transform the new capacity into an export industry, targeting markets elsewhere in Africa. The potential is vast, given the limited volumes of pharmaceuticals production in regions like West Africa, but such a move will be challenging. “The government’s goal to supply 70% of domestic pharmaceutical production is well intentioned, but will be difficult to achieve since many multinational laboratories see other jurisdictions as more attractive,” Julien Gilbert, managing director of Biopharm, said. “Algeria has enough domestic demand to support an extended expansion of local pharmaceutical production. But if Algeria aims to become an exporter of pharmaceuticals to sub-Saharan Africa, it will have to contend with a long-running tradition of imported Chinese and Indian medicines that are much cheaper.”

Outlook 

While communicable diseases have held the attention of Algeria’s health care system for the past few decades, the sector’s focus is now shifting to the prevention and treatment of lifestyle-related chronic illnesses. With substantial investment being channelled into the expansion of medical facilities and preventative care, ensuring that funds allocated for these purposes are adequately disbursed will be a priority going forwards. With regards to the pharmaceuticals industry, further liberalisation of the investment laws and the lowering of bureaucratic barriers that make conducting business comparatively expensive would help to boost Algeria’s competitiveness.