Post-sanctions Iran is all set to boost its local manufacturing to not only meet its domestic requirements, but also to enforce stricter quality control regulation and even venture abroad to build a couple of advanced hospitals in neighboring war-torn Afghanistan and Iraq.
A sign of this upward trend in Iran's medical device sector is the signing of a cooperation agreement by Russia's regulatory agency, Roszdravnadzor, and Iran's Food and Drug Administration, on the regulation of drugs and medical devices.
The agreement, signed by Russia's health minister, Veronika Skvortsova, and Iran's minister of health and medical education, Hassan Hashemi, is part of the framework of the Russian-Iranian working group on health and aims to enhance regulatory cooperation concerning the quality control, efficacy and safety of medical products, laboratory and expert control, and post-marketing surveillance of the safety of medical devices.
The concern over quality has its roots in the sanctions era when Iran sometimes struggled with – and had to make do with – imported devices of either low quality or second-hand Asian products, partly due to lack of liquidity in the country. Also, a weak supervision system left the country at the mercy of smuggled products, especially since 2010.
"In the post-sanctions era, the Iranian government has two priorities," said Mirmohammad. "One is to support local manufacturers and the other is to supervise the quality of imported products."
The government plans to encourage well-known European and Asian brands to assemble their products in Iran as an immediate step to boost in-house manufacturing and eventually start domestic production over the next three to four years. This will allow the country to access high-tech products with lower cost of production. For this purpose, the government will provide several incentives such as a five-year tax exemption, free custom duties on the required machinery and equipment, and an extendable three-year resident permit to foreign workers and their immediate families.
The medical device market in the resurgent post-sanctions Iran is poised for a bright future over the next five years, with a projected compound annual growth rate of 10 percent and up over the next 10 years, according to Frost & Sullivan, a market research consultancy.
"Iran, which imports most of its medical devices to the tune of $1 billion, plans to move to hi-tech manufacturing in medical devices, with the government announcing in September 2015 new plans for in-house manufacturing of some of the imported devices," said Ali Mirmohammad, senior consultant and business development manager, MENASA (Middle east, North Africa and South Asia), at Frost & Sullivan. Mirmohammad is optimistic that mid-2018 onwards will see a boom for the Iranian economy.
The Iranian government also plans to support knowledge-oriented companies via subsidized long-term loans, and some free facilities and infrastructures to produce high-tech medical devices.
To improve the quality of imported devices, Iran now stipulates that every brand must be officially registered through a local trader and it should provide a guarantee and after-sales services to customers. Foreign brands that plan to sell to Iran need a track record of sales in Europe or the U.S., and need to provide relevant European and/or FDA certificates. The traders must be authorized sales representatives of the origin.
Hurdles remain. These include absence of custodian banks and international credit insurance companies; some continuing 1995 sanctions over human rights issues; weak reconnection with a swift system; limitations in international banking transactions; lack of clarity over sanction reliefs on Iran; and restrictions on transactions based on the U.S. dollar in trade with Iran.
Iran, the 17th largest economy in the world, offers a potentially large market for the medical device and health care industry. The total medical market for drugs and devices is about $6.5 billion, of which 40 percent is accounted for by imports.
But the medical device market is also struggling with smuggled products that have yet to be calculated, but are pegged informally at $1.8 billion. The market has doubled since 2005 due to increases in health ailments and disorders, attributed in part to stresses over economy, environment and demographic changes. Currently Iran imports a majority – 70 percent – of high-tech medical devices and domestically produces most – 90 percent – of general and disposable products, according to Mirmohammad.
The country has more than 500 local manufacturers and over 2,000 traders in the medical device industry. In 2015, Iran manufactured an estimated 800 kinds of equipment and devices worth $450 million, and also exported over $24 million worth of general products. An estimated 100 Iranian companies manufacture and export medical equipment and instruments, including autoclaves, orthopedic equipment, dental seats, general surgical instruments, intensive care unit beds and cardiac monitors.
The economic and technological sanctions imposed by the West in fact spurred Iran to boost its local manufacturing in some areas.
"During the sanctions, Iran had good progress in the design and pilot production of some high-tech devices such as radiography equipment, extracorporeal shock wave lithotripsy devices, laser devices for prostate surgery, skin laser devices and dental lasers," said Mirmohammad. "However, the country is still weak in high-tech production."
This in-house technological capability in the medical device sector, developed during the sanctions era, is set to receive a boost in the post-sanctions era too, with the injection of fresh financing into the economy. Iran plans to construct over 100,000 new hospital beds, along with hundreds of specialized clinics and imaging centers, and to renovate over 35,000 existing hospitals beds, laboratories and medical clinics.
This augmentation spree is mainly due to a rise in cardiovascular diseases, cancers, and neurological diseases in the Iranian population, and the current facilities are not well distributed to meet the demand.
There is also a growing market for medical devices for disabled and elderly people, such as wheelchairs, scooters, seats, hearing aids, safety equipment, walkers and equipment for blind people.
Besides catering to its local demand, Iran has also promised to construct a couple of large and advanced hospitals in Iraq and Afghanistan, once the wars are over in both Iraq and Syria.