Strategic Report 01 Overview 02 03 04 Healthcare market size According to forecasts by Frost & Sullivan, the total healthcare market Georgia’s healthcare services market (including hospitals, polyclinics is expected to grow at a compound annual growth rate of 8% from and pharma) was estimated to be worth GEL 3.8 billion in 2018. The 2018 to 2021. The outpatient clinic segment is forecast to outpace market maintained a strong compound growth momentum of 14% the total market and grow at a compound annual growth rate of 10% between 2011 and 2017, and is expected to continue growing at 8% in the same period. The main growth drivers are the following: between 2018 and 2021. • Population income growth andrising health awareness. • The total hospital market was estimated at GEL 1.4 billion in 2018, Economic growth in Georgia is expected to outperform most of the while the addressable market was estimated at GEL 1.3 billion.1 developed and CIS countries – the IMF forecasts annual average The total hospital market is forecast to grow at a compound annual real GDP growth in Georgia at 5.1% in 2019-2023 and per capita growth rate of 7% between 2018 and 2021. GDP is expected to surpass US$6,000 in 2022, the highest in • The polyclinic market (outpatient market, excluding the revenue the Caucasus region. Rising population incomes and awareness from dental and aesthetic services) was estimated at GEL supported by Government efforts to develop preventive medicine 0.7 billion in 2018 and is forecast to grow at a compound annual will create growth opportunities for the polyclinic segment. growth rate of 10% between 2018 and 2021. • Filling the service gaps – growth of private investment • The total pharma market was estimated at GEL 1.6 billion in 2018 in technology and equipment. While Georgia has achieved and is expected to grow at a compound annual growth rate of 9% significant success in certain fields of healthcare, some areas between 2018 and 2021. remain underdeveloped and there are a number of service gaps in the country. Many laboratory tests are still performed abroad. Healthcare service providers (both state and private) generate revenue There are two PET/CT scanners in Georgia, while at least four are from out-of-pocket payments (including fee-for-service and the UHC required to comply with the WHO recommendations. There are co-payments), transfers from state healthcare programmes and also shortages in Georgia of the following equipment: laparoscopic payments from private medical insurance companies. Pharma instruments, equipment for interventional endoscopy, including companies’ revenue generation is primarily driven by out-of-pocket endoscopic retrograde cholangiopancreatography, microwave retail revenue of the pharmacies, together with wholesale revenues tissue ablation systems, arthroscopes, choledocoscopes, muscle from hospitals, insurance companies and the state. Medical insurance reinnervation systems, intraoperative ultrasound probes, vacuum companies depend on revenues from medical insurance policies machines, Flowtron mechanical compression units pH meter purchased by employers for their employees and by individuals for units, Intraoperative Neurophysiology and navigation systems in their own use. Out-of-pocket expenditure on healthcare in Georgia Neurosurgery. Private investment in high-technology equipment still exceeds public financing and private insurance. The share of should strengthen local capabilities, increase the number of out-of-pocket expenditure in total healthcare expenditure in Georgia procedures and improve the quality of care. was 61% in 2016, the share of Government expenditure was 37% • Growth in the number of outpatient visits.Georgia lags behind and the remaining 2% came from other sources.2 most of the developed countries in terms of the number of outpatient visits per capita. This is partially explained by cultural Outlook and main growth drivers differences (practices of self-treatment, distrust of outpatient As described above, the Georgian healthcare market has shown service providers). However, with growing private investment double-digit growth in recent years, estimated at GEL 3.8 billion in in this segment, expected market consolidation and Government 2018 and forecast to reach GEL 4.8 billion by 2021. The hospital support, the market will see growth in outpatient visits, which will segment accounted for 37% of all revenues generated in the 2018 positively impact the polyclinics’ revenues. healthcare market, outpatient clinics 20% and pharma 43%. Growth in healthcare market expected to continue (GEL million) 6,000 CAGR ‘18-’21 5,000 4,765 4,397 968 4,062 884 10% 4,000 3,760 806 3,488 734 1,722 3,062 3,218 669 1,611 3,000 696 607 1,504 7% 2,464 1,404 1,311 2,034 543 1,217 1,716 1,092 2,000 1,552 438 908 1,903 2,075 305 343 782 1,622 1,752 714 1,395 1,508 9% 1,000 675 1,273 814 1,013 573 659 0 2011 2012 2013 2014 2015 2016 2017E 2018F 2019F 2020F 2021F Pharma Hospitals Polyclinics Source: Frost & Sullivan analysis 2017; Hospitals market includes revenue of c.10% from specialty beds, which is a non-addressable market for GHG polyclinics market excludes dental and aesthetic services. 1 GHG estimate – total market adjusted to exclude the revenue from specialty beds. 2 NCDC 2017. 31 Total market CAGR 2011-2017 of 14%Total m arket CAGR 2018-2021 of 8%