The oil-rich and rapidly-growing nation of Azerbaijan is presenting itself as a very attractive ground for global healthcare investors, and the nation's pharmaceutical market is particularly promising, according to new research.

Continuing government reforms, coupled with a shortage of medical expertise, equipment and personnel, are driving transformation in the country's healthcare market, says the study, from Frost & Sullivan, which points out that the government has increased its healthcare budget more than 10 times in the past decade and built or remodelled over 500 healthcare facilities so far.

With a growing population of over nine million people, average age 30, Azerbaijan's future healthcare system will depend on an organised and well-established public health sector, it says. Currently, the country’s healthcare expenditure remains small compared to its Gross Domestic Product (GDP) and this means high out-of-pocket (OOP) payments for patients - in 2007, 62% of their fees were OOP. 

To alleviate this burden, the state is aiming for universal welfare as well as other reforms to boost the healthcare infrastructure and financing freedoms for hospitals and healthcare providers. In 2010, the government spent more than $225 million on nine state healthcare programmes, and total spending on healthcare for the year was $612 million, a figure which is expected to rise to $760 million this year.

Azerbaijan's long-term plans focus on further developing its primary care and making coverage universal, and this ongoing process provides a great opportunity for private investments, says Uldouz Berenjforoush, healthcare research analyst at Frost & Sullivan.

"Further, most of the modern technology and equipment used in the new and renovated hospitals are imported, which positions Azerbaijan as an attractive destination for healthcare vendors. The flourishing economy and growing healthcare system provide lucrative opportunities for the pharmaceutical sector, medical facilities and equipment, as well as personnel investments," he adds.

In particular, the market for pharmaceuticals is considerable, especially in delivering high-quality, low-cost products. Out of the 62% spent OOP by Azerbaijani patients, more than 70% goes on pharmaceuticals, 60% of which are imported. Turkey, Iran, India, Ukraine and Russia supply low-cost products, while medicines from the US, France, Germany and other EU regions are much more expensive but have a better reputation.

Moreover, Azerbaijan does not currently produce medical devices, making this another highly-promising sector for investors. These products are currently imported from the US, Germany, Japan, France, Russia and Turkey, with firms from the latter two countries providing lower-cost equipment. 

Healthcare infrastructure is currently concentrated in the capital Baku, while the rest of the country lacks sufficient bed numbers for residents, and this offers a good area for investment with considerable future growth, the report advises. Building the latest treatment facilities, specialising in care such as cancer, eye and heart-related treatment for Azerbaijani citizens in their own country, will reduce the treatment opportunities lost to medical tourism. Currently, patients who can afford better treatment travel to Turkey - 4,106 did so in 2012 - and Iran, to which an estimated 1,600 Azerbaijanis traveled daily for medical procedures last year.

And while the biggest issue for Azerbaijani healthcare currently is its lack of doctors and nurses with up-to-date expertise, the government is promoting programmes to encourage young people to enter medical careers. 

"By sponsoring their education abroad in Turkey, Europe and the US, a new wave of well-trained doctors is getting ready for work," says the report.

A resource-rich country, Azerbaijan is seen as a potential hub for the region to not only provide the latest medical facilities with the best expertise to its population but also to attract interests from neighbouring countries, with investments in medical equipment, pharma, healthcare and training facilities, it forecasts.

"Azerbaijan's market outlook is very positive, with its high growth capacity, the economy's upward trend and the government's focus on development. Any investment in the country's healthcare industry, therefore, promises to be rewarding," concludes Frost & Sullivan healthcare industry analyst Hilal Cura.