Indonesia’s pharmaceutical market is the largest market in the Association of Southeast Nations (ASEAN) and is expected to reach US$10.11 billion by 2021, according to GlobalData, in the company’s latest report: ‘CountryFocus: Healthcare, Regulatory and Reimbursement Landscape – Indonesia’.
The key drivers for the market are the introduction of 15 economic policy packages to attract foreign investors, the implementation of Universal Health Coverage scheme (JKN), and growing urban population. However, inadequate public and private infrastructure, traditional and counterfeit medicines, and poor healthcare spending remain major challenges.
The Ministry of Health of the Republic of Indonesia (MHRI) manages the pharmaceutical production, regulates drug ceiling prices and ensures the availability of 484 essential drugs listed in the National List of Essential Medicines. In 2015, ethical, branded and unbranded generics accounted for 62% of the pharmaceutical market and OTC drugs covered the remaining share.
Sharath Chandra, Healthcare Analyst at GlobalData, commented: ‘According to the MoHRI, there were 215 drug manufacturers in 2016, of which 70% were domestic. The ownership restrictions were eased and now foreign companies can own 100% partnership which was previously 75%. Investment in the pharmacy sector is expected to reach $19.8 billion during the 2015–2025 period.’
In 2015, the unbranded generic market was $619 million, representing 10.8% of the pharmaceutical market and share is expected to increase further as Indonesians begin to rely increasingly on JKN.
The medical device market of Indonesia is expected to reach $3.54 billion in 2018. The Directorate of Production and Distribution of Medical Devices regulates the medical devices in Indonesia. The domestic industry is still under-developed and imports more than 90% of its medical devices. In 2016, its medical device imports were worth $1.04 billion stating an increase of 42.5% over 2015.
The imported medical devices subject to an import tax of 0–5% and a value-added tax of 10%. FDA-approved products that are available in the US market are easily approved for distribution in Indonesia.
Chandra continued: ‘In 2012, the Medical Device Product Working Group (MDPWG) released the ASEAN Medical Device Directive (AMDD) to implement a reliable and uniform medical device registration system across the member states, to attract more foreign manufacturer investment. In 2015, the AMDD agreement was signed by the 10 ASEAN countries and is expected to come into effect in 2020.’
Since 2014, the government implemented 15 economic policy packages aimed at various industry sectors, which have stimulated economic growth and attracted foreign investment.
The government’s tax amnesty, which began in July 2016, was implemented in three phases. More than 800,000 taxpayers joined the tax amnesty program and declared $433.5 billion in assets, which is equivalent to 40% of GDP and 90% of the money supply.
Chandra added: ‘Indonesia has made progress in reducing poverty, unemployment and initiated several plans to develop infrastructure. Although Indonesia’s overall debt is increasing, the debt-to-GDP ratio declined significantly from 56.6% in 2004 to 20% in 2016, mainly due to the gradual reduction of foreign loans and diversification of investments in infrastructure. With GDP growth of over 5% in 2016, strong domestic demand, stable political situation and conservative macroeconomic policy, Indonesia is an attractive destination for Foreign Direct Investment (FDI).’