Domestic Economy

Giant Strides in Iran’s Health, Medical Sector

Giant Strides in Iran’s Health, Medical Sector
Giant Strides in Iran’s Health, Medical Sector

Over the past two decades, the Islamic Republic of Iran has made significant progress in the health and medical sector, expanding both in market size and coverage. 
The country’s ever-growing medical innovation ecosystem is supported by ongoing policy framework developments, incentives and regulatory bodies.
In addition, the emergence and development of the complex, high-tech biopharma sector of Iran host several successful local export firms, according to the “Global Innovation Index 2019” report published by Cornell University, INSEAD, and the World Intellectual Property Organization, in partnership with other organizations and institutions. 
The evolving pro-innovation ecosystem of the health sector in Iran has achieved effective policy and regulatory synergies, and supported the supply and demand side of medical innovation. 
Demand-side innovation has paved the way for advanced endogenous medical innovations in Iran while, historically, conventional medical solutions were not easily accessible due to sanctions or affordability.



Advancing Health Coverage, Research and Innovation

Iran’s improvement in health-related indicators has been consistent and promising. 
According to the Human Development Index, the mean years of life expectancy in Iran has increased dramatically from 51.1 in 1980 to 76.2 in 2018, an approximate 25-year increase over the past three decades.
From a science, technology and innovation (STI) perspective, Iran has boosted scientific production in nanotechnology, biotechnology, biomedical engineering, bioengineering, biomaterials and biophysics. 
For instance, rankings have improved from either non-existent or around
60th position in the late 20th century to fourth in nanotech, 12th in biomedical engineering, ninth in bioengineering and eighth in biomaterials in 2017.
STI efforts to transform the medical and health sector resulted in synergies among human capital supply, technological regime and the innovation ecosystem. 
In addition, state-of-the-art medical innovation continues to advance through expanding medical education, support for university- and firm-level research and development and the creation of an evolving pro-innovation, medical policy framework. 
The medical innovation ecosystem—supported by over 19,300 faculty members from medical universities and research institutes, and responsible for roughly 37,450 scientific papers and 1,589 patent applications in 2018—has the capacity to host various research activities.
In 2018, the National Medical Device Directorate reported that the Iranian medical equipment market was worth $2.5 billion, of which 30% belonged to over 1,000 domestic firms. 
On a global scale, 56% of 500,000 medical equipment items available in the world market have Iranian versions. In pharmaceuticals, around 70% of Iran’s $4.5 billion market are domestic products and, in 2018, 97% of pharmaceuticals consumed in the country were manufactured locally. In 2018, 67% of the active pharmaceutical ingredients (APIs) used to produce drugs in Iran were made locally.



Boosting Medical Innovation Ecosystem Through Policy Framework

Iran has integrated its healthcare system with medical education to improve health conditions. 
Sixty-five medical universities, responsible for both health services and medical higher education, constitute a decentralized network of provincial healthcare bodies that are managed centrally by the Ministry of Health. This network has contributed to the creation of a strong healthcare system characterized by extensive and convenient access to medical services, both in rural and urban areas. 
In each province, public medical universities provide medical services, administer vaccinations and assist in fighting local diseases. Because of countrywide distribution, the network has the ability to undertake endogenous research and innovation, and train medical cadres based on local demands and epidemic situations.
Since the early 1990s, the Ministry of Health has followed a five-year national development plan (FYDP), revised in five-year intervals, as the principal policy framework for enhancing Iran’s health sector. 
In 2014, during the 5th FYDP, the ministry initiated and funded the Health Transformation Plan, which has resulted in a sharp decrease in the share of medical expenses paid by patients—from an initial out-of-pocket expense of 37% of overall patient health costs to 5% for rural citizens and 10% for urban citizens. 
The key health policy for the 6th FYDP (2017-22), is dedicated to providing universal health coverage using coordinated public insurance schemes governed by the Ministry of Health. According to the ministry, 100% of urban and 98% of rural areas in Iran now have access to at least primary medical services.
In the 1980s, lack of access to foreign drugs and medical equipment became a threat to national health and well-being in Iran. For this reason, Iran adopted import substitution policies and promoted local production. 


On a global scale, 56% of 500,000 medical equipment available in the world market have Iranian versions. In 2018, 97% of pharmaceuticals consumed in the country were manufactured locally and 67% of active pharmaceutical ingredients used to produce drugs in Iran were made locally

In 2011, the Food and Drug Administration of Iran introduced a set of regulations to support the supply of local medical equipment and pharmaceutical products. These regulations ban or limit the import of foreign drugs and medical equipment to 10% of market share when a similar local product becomes available. 
When local products are available, public health insurances do not cover the costs of foreign drugs for patients, but they do cover 90-100% of the total cost of the domestic equivalent.
Imposing high tariffs on foreign drugs and/or medical equipment, when an equivalent is locally produced and developed to meet domestic demand, is also a tool to support medical innovation. In cases where the domestic equivalent is not available, low tariffs of 4% are set on foreign products. 
However, when the domestic equivalent is available and verified by the Ministry of Health, these tariffs increase from 4% to between 32-45%, and public health insurances will no longer cover patient medical expenses for these products.  
Supporting the local production of drugs has successfully promoted domestic product share in the national pharmaceutical market, from 63.4% in 2009 to 78.6% in 2018.
But, this approach will not guarantee the success of medical innovations in the long run. Policymakers and firms are aware of the possible harmful consequences of import substitution on future medical innovation. 
Hence, exporting medical innovations is strongly encouraged by recent policies, such as the law for supporting knowledge-based firms. This law, approved by the Iranian Parliament in 2010, was introduced as a mechanism to encourage the supply side of technology and innovation in high-tech firms to benefit the health sector. 
The Vice-Presidency for Science and Technology administers this law and Iran National Innovation Fund [Innovation and Prosperity Fund] channels funding to the innovative and technological activities of eligible firms. Eligible firms include private entities that produce high-tech products, require in-house R&D and skilled employees, are high value-added and difficult to imitate. 
In early 2019, $85 million had been allocated in the form of low-interest loans to fund 474 medical innovation projects by Iran National Innovation Fund [Innovation and Prosperity Fund]. Additionally, the Vice-Presidency for Science supports 4,300 knowledge-based firms, of which approximately 1,100 are private health and medical sector firms.
Policy efforts are also in play to push medical innovation on the demand side. One example is the Iran Lab Expo, initiated by the Vice-Presidency for Science in 2012 to promote technology and innovation development by private firms.  
Depending on the depth of domestic capabilities to design and manufacture independently as well as the technological complexities of the lab equipment and/or device, public buyers, such as universities and hospitals, are entitled to a subsidy of 10-40% of total cost. 
To encourage and stimulate demand from private buyers, the Iran Lab Expo grants low-rate, medium-term loans of up to $120,000. 
In addition, the Forex Board of Trustees plays a critical role, on behalf of the Ministry of Health, to procure and supply medical disposables, devices and equipment to public hospitals and medical centers. 
The board also provides patients with prerequisites for getting easy access to domestic treatment, minimizing dependency on foreign treatment and medical expenditure.

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