As the international Arab Health medical conference nears its close tomorrow in Dubai, few will be aware that a nondescript building on Al Najda street in Abu Dhabi houses one of the largest players in the medical laboratory market in the capital.
The company first entered the emirate in 2001 and is an example of the quietly developing laboratory landscape here.
Dominated by a handful of players in the capital, the emirate’s market is slowly consolidating as the health authorities get stricter with the safety and hygiene protocols.
The Jeddah-based Al Borg Laboratories conducts more than 300 procedures running 5,000 tests a day from its Abu Dhabi branch.
“Insurance wise, the diagnostic market in Abu Dhabi is the largest in the UAE,” says Hosam Fouad, the business development manager at Al Borg Medical Laboratories in Abu Dhabi.
“The healthcare sector is growing more [than other emirates] in the Abu Dhabi area and based on that the diagnostic market is growing as well.”
The largest driver for the growth in the volume of tests and patients for labs in the capital is the mandatory health insurance for all employees in the emirate that kicked in 2005. Dubai initiated mandatory health insurance early last year and by middle of next year, everyone in Dubai is expected to have mandatory access.
Al Borg is among a group of three large medical laboratories in the emirate. Dubai has about 40 companies of various sizes from small to large.
Stricter health authority regulations, access to health insurance and awareness among public are among the factors changing the market, say companies and analysts.
“Increased medical insurance coverage and penetration in UAE, which entails covering medical expenses incurred in standalone [clinics], has been a major driver in the growth of this segment of the market,” says Imad Bokhari, the healthcare leader at the transaction advisory services for Middle East and North Africa region at EY. “Previously, this coverage was allocated primarily to hospital-based labs.”
The lack of a mature referral network is another reason.
Hospital-based clinical laboratories could have capitalised on this by building relationships with standalone clinics, which they did not, Mr Bokhari says. As a result the gap in the market was filled by standalone clinical laboratories that operate independently.
“This may lead to a revolutionary change in the sector — taking the service straight to the consumer,” according to Mr Bokhari. But standalone laboratories have their own challenges due to the relatively low volume of tests they handle.
While there is no concrete data for the local market, a 2012 study from George Washington University (GWU) on the independent and community clinical laboratory market in the United States showed most small to medium standalone labs were operating at low margins.
Nearly half of the 77 such labs in the GWU survey had an average profit margin between zero and 3 per cent.
“As a result the US market was seeing increased consolidations in the independent laboratory industry as these laboratories terminate the business or improve efficiencies by joining larger networks,” says Rasha Al Zamil, an analyst and resident lab technologist for EY’s transaction advisory services in Dubai.
With many small US labs facing closure, patient groups such as homecare and nursing home patients tend to feel the brunt, according to the GWU study.
“As laboratory services contract or laboratories curtail those services that are not profitable, patients who are underserved by other segments of the laboratory market will have fewer opportunities to receive the critical diagnostic and monitoring services that they need,” it says.
The UAE could be preparing for a landscape of consolidation as well.
With the growth in the number of independent labs, prices for lab tests could see a decline and eventually minimal returns.
“Private insurance companies driven by competitive insurance premium offerings, exercise constant pressure on healthcare providers for less expensive healthcare services,” Ms Al Zamil said.
“This could shift healthcare utilisation in favour of independent laboratories initially but may lead to lesser returns for themselves later as providers try to push the burden on to the suppliers and outsourced functions, most likely leading to consolidations or terminations.” Mr Fouad says he has seen an increase in consolidation in Abu Dhabi over the past 18 months.
“Smaller labs are not there [any more], it’s only medium to large ones,” he says.
In Dubai, the number of small labs is greater as they tend to offer cheaper test rates than big companies, according to Mr Bokhari.
With Health Authority — Abu Dhabi (Haad) expected to come up with new guidelines on the number of professionals, new quality controls and implementation of accreditations for such facilities this year, there could be further consolidation. Because of economies of scale, many hospitals prefer to use outsourced reference labs.
“We’re seeing an increase in providers outsourcing lab services to larger, locally based independent labs like National Reference Laboratory, rather than sending samples abroad for testing,” says Abdul Hamid Oubeisi, the general manager of National Reference Laboratory (NRL).
Besides cutting costs, consolidation has helped plug shortages in qualified staff.
Where as there were 50 per cent too few health professionals between 2007 and 2010 for the overall market in Abu Dhabi, that decreased to 30 per cent between 2010 and 2012, and now stands at about 10 to 20 per cent, Mr Fouad says.
“Salaries have stabilised in the last two years as well, mainly in Abu Dhabi,” he says.
Al Borg, which has two centres in Dubai where it entered in 2002 and one in Sharjah, will open in Al Ain in March. About 90 per cent of its clients are corporate such as hospitals, medical centres, polyclinics and small clinics in the UAE.
It is managing and operating two medium-sized labs in Abu Dhabi, but plans to increase that figure to six by the end of this year.
Mubadala Development’s NRL opened its first centre in Dubai Biotechnology and Research Park (DuBiotech) in 2010. The 12,000 square feet facility can conduct basic tests such as blood counts and cholesterol tests, as well as complex diagnoses of genetic conditions, cancers and rare diseases.
In Abu Dhabi, it opened its first phase in 2012 with a 20,000 square feet facility in Musaffah. It is operated by Laboratory Corporation of America (LabCorp).
Its test menu includes more than 4,000 basic and advanced procedures, including genetic testing, and it is one of the largest such facilities in the Arabian Gulf region.
Besides, it also manages and operates three on-site labs at Mubadala’s Imperial College London Diabetes Centres in Abu Dhabi and Al Ain, Healthpoint hospital in Zayed Sports City, and when it opens this year, it will add Cleveland Clinic Abu Dhabi to its stable. Mubadala’s NRL supports more than 200 health facilities in this country and the wider region, including government and private hospitals, medical centres, physician practices, and standalone labs.
“Our vision is to [enable] tests to be performed locally rather than being sent abroad,” Mr Oubeisi says.
“We expect to perform more than 5 million tests this year across our network.”
During the first half of last year, Mubadala’s healthcare division’s revenues increased to Dh426 million from Dh368m in the same period in 2013, on the back of expansion of volumes at NRL, among other things.
In keeping with the growing market for medical laboratories and devices, the annual four-day ArabHealth exhibition is expanding. About 500 companies will exhibit at the event’s MedLab segment.
The top exhibitors at MedLab are some of the largest players in the region. These include Roche, Abbott, Al Borg, Siemens and Randox.
At Roche, for instance, the diagnostics division contributed 5.14 billion Swiss francs (Dh21bn) in global sales, or one fourth of its total sales, during the first half of 2014.
That compared with 5.13bn Swiss Francs during the same period a year earlier. Of that, 47 per cent came from Europe, Middle East and Africa.
In Abu Dhabi, Al Borg expects to introduce 10 new tests to the market this year in cardiology, urology, oncology and obstetrics and gynaecology.
Among its most popular tests are Vitamin D blood tests and cervical cancer tests.
“We do around 150 Vitamin D tests a day alone in Abu Dhabi, recommended by hospitals,” Mr Fouad said.
“Most people living in hot countries escape to air-conditioning and do not get exposed to sunlight.”
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