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European Biopharmaceutical Review

Investigating in the Future

A young but rapidly growing oil-rich Azerbaijan presents itself as an untouched ground for investment in all areas. With the country’s gross domestic product (GDP) continuing to grow steadily, healthcare expenditure is set to follow the same path, and various reforms have furthered this sector’s development.

The demand for healthcare services is increasing, and the current shortage of pharmaceuticals, equipment and devices creates a favourable position for investment. The government’s realisation of this potential makes it a very attractive investment ground for global investors.

Upward Trend

Globally, we see a trend in making healthcare universal. This is mirrored in Azerbaijan too, where the state has been passing reforms to provide health insurance for all citizens. The government is still in the process of implementing these reforms, which will provide a great window of opportunity for private investments.

With a growing population of over nine million, and life expectancy of around 30 years of age on average, Azerbaijan’s future healthcare depends on a systematic and well-established public health sector. Due to a modern lifestyle, an increasing number of circulatory diseases, as well as hypertension cases, have been reported – one third of citizens over 40 years of age are currently diagnosed with hypertension. Azerbaijan has also been fighting an ongoing battle with diabetes, tuberculosis and thalassemia.

The country’s long-term plans focus on further developing its primary care, with universal coverage as its end goal. It is easy to see why Azerbaijan is perceived as an attractive future destination for healthcare industry investors looking for an untouched opportunity.

Attractive Shortage

However, the renovation process has been a work in progress. Despite all the energy dedicated to improving the healthcare industry, Azerbaijan is still suffering from a shortage of pharmaceuticals, high-tech equipment and facilities. Recognising its flourishing economy and the growing healthcare system, the government’s promising reforms provide an opportunity in the healthcare industry for improvements in these areas, as well as in personnel investments.

Healthcare Budget

The proportion of Azerbaijan’s expenditure which has been set aside for healthcare comprises only a small part of the state budget compared to its GDP; it therefore results in a higher proportion of ‘out of pocket’ (OOP) payments for patients. In 2007, 62 per cent of the fees were paid OOP, which leaves the burden of healthcare to citizens.

Yet the government has realised that this is an issue and claims to be dedicated to improving its healthcare infrastructure. The recent reforms, which were approved in 2009, focus on giving more financing freedom to hospitals and other healthcare providers. $225 million has been spent on nine state healthcare programmes, and total spending was $612 million in 2010. In 2013, this figure is expected to rise to $760 million.

Imported Products

The growing Azerbaijan holds huge scope for investors, as over 60 per cent of its pharmaceuticals are imported. These are sourced from a wide range of countries, ranging from the EU, Turkey, Russia and India, among others – although European countries are favoured due to their high reputation. However, they tend to be more expensive than the Turkish, Russian or Indian products. Therefore, the key is to produce a high volume of quality products for a cheaper price.

There are only two pharmaceutical production facilities located in Azerbaijan, both of which lack most of the necessary manufacturing capabilities. The main purpose of these facilities is repackaging and redistribution. Less than four per cent of medicine is produced domestically, and the country owns no international manufacturing plants.

Clearly, there is ground here for import and investment opportunities. Out of the 62 per cent of OOP payments made, more than 70 per cent of it is spent on purchases of pharmaceuticals. In 2010, the total population expenditure on pharmaceuticals was $129.6 million. The high figure spent on health, and on pharmaceuticals in particular, makes this industry a favourable one – with a 29 per cent annual growth rate expected.

Critical Demand

There is also a critical market demand for medical equipment, due to the lack of domestic production. Currently, this is being supplied from the US, Germany, Japan, France, Russia and Turkey, with varying degrees of quality. The Russian and Turkish firms are popular as they provide low-cost equipment, but the Japanese brands Aloka and Shimadzu are also becoming renowned for their low prices combined with higher quality products.

We also see the German company Siemens dominating the country’s hospitals – Siemens recently installed the Caucasus region’s first dual energy computed tomography unit in Azerbaijan. AvroMed – based in the country’s capital city Baku – is one of the largest distributors of medical equipment, currently handling over 200 supplies, and with plans to expand into other regions too.

Medical Facilities

We also see the government allocating more money for remodelling and building healthcare facilities equipped with cutting-edge technologies. Over 400 facilities have been remodelled in the last five years, bringing them up to international standards.

Privatisation of 350 healthcare facilities in 2003 was a big step in opening up the market. Most of these consisted of dental practices and pharmacies located in Baku. Much of Azerbaijan is suffering from a shortage of medical facilities and access to pharmaceuticals, so this again demonstrates a potential area for investment that is likely to see considerable growth in the future.

Next Investment Market?


Azerbaijan, understanding the need to improve its healthcare, has increased its budget more than 10 times in the past 10 years, and has built and/or remodelled over 500 healthcare facilities. In 2006, the expenditure increased by 59 per cent in an effort to fight poverty, which dropped to 15.8 per cent in 2008 from 49.6 per cent in 2001. The fight against both infectious diseases and social diseases has been one of the country’s main priorities. The reforms, improvements in health financing and better facilities are the initial steps to a better medical system.

As a resource-rich country, Azerbaijan is seen as a potential hub for the Caucasus region, to not only provide the latest medical facilities with the best expertise to its citizens, but also to attract interest from neighbouring countries. Investments in pharmaceuticals, medical equipment and healthcare facilities promise a bright future ahead. As the average household income continues to increase, people will look for better services and a higher quality of medicine; by investing in the healthcare market, the money drain can be kept within the state, as well as attracting other countries in the region. Over 60 per cent of pharmaceuticals and the majority of devices are imported – and more are expected as new facilities are built and existing ones are remodelled.

Azerbaijan has the capacity for huge growth and development as its economy follows an upward trend, and any investment in the country’s healthcare industry should prove to be fruitful.

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About the author

Uldouz Berenjforoush obtained her BA from the University of California, Berkeley, with a double major in Political Economy and Public Health, and her MS degree in Finance at Sabanci University. She has over three years of experience in research, and has conduced market insights highlighting the opportunities available in the healthcare markets. Uldouz also produces analyst briefings in the medical devices, medical technologies and pharmaceuticals sectors. Currently, she is working as a Research Analyst at Frost & Sullivan and is interested in the areas of finance and healthcare.
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Uldouz Berenjforoush
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