2013 Indonesia Pharmaceutical Market Update

This article was also published on PharmaPhorum

Indonesia’s pharmaceutical market is one of the fastest growing in Asia, expanding at an annual rate of 12.5 percent. It is currently worth $4.5 billion, about the same size as Taiwan’s pharmaceutical market. But while Taiwan’s economy is mature, Indonesia’s is still developing. GDP growth in the country of 250 million is predicted to reach 6.3 percent in 2013.

Indonesia’s drug spending per capita is also increasing rapidly. In the past, the country had one of the lowest rates of drug consumption in Asia. For example, spending on pharmaceuticals was just $20 per person in 2010, compared to $50 in the Philippines and about $100 in Vietnam. However, that number is rising quickly. As per capita income increases, Indonesians are spending more money on healthcare. By the year 2015, the typical Indonesian will spend more than $140 annually on their healthcare needs.

Domestic companies meet three quarters of Indonesia’s drug needs. Foreign companies provide the remaining quarter. Indonesia’s largest domestic drug manufacturer, Kable Pharma, has 16 percent of market share. GlaxoSmithKline, Bayer and Pfizer together have 9 percent of market share.

While the future of the Indonesian drug market is favorable, it is also burdened with a number of rules protecting local pharmaceutical companies. A 2008 law requires all drugs registered in Indonesia to be locally manufactured. A separate law requires that Indonesian nationals own at least 25 percent of all foreign invested pharmaceutical companies. These laws have predictably stymied foreign investment in the country’s pharmaceutical market.

In recent years, there has been much talk of abolishing the foreign ownership law and updating the Ministry of Health’s 2008 decree. Already, some changes have been made. In December 2010, Indonesia’s government changed its definition of “local manufacturing” to also include labeling and packaging activities. This change has made it much easier for foreign pharmaceutical companies to adhere to Indonesian requirements on domestic production.


The healthcare climate is changing rapidly in Indonesia. Since 2010, Indonesia’s government has passed laws calling for increased public spending on healthcare, upgrading of inadequate public hospitals and establishing a system of universal healthcare.

By the year 2020, the Ministry of Health (MOH) plans to build hundreds of hospitals and increase the number of hospital beds in Indonesia by 100,000. Currently, the country has just six hospital beds and three physicians for every 10,000 people. This compares to 35 beds and 26 physicians for every 10,000 in the US.

These planned expansions should double the value of the healthcare industry in Indonesia, from $24.5 billion to $49 billion. The MOH is further spending more than $3 billion in 2013 on improving Indonesia’s primary healthcare system. The government plans to train healthcare workers and upgrade 2,000 public healthcare facilities.

In addition, the MOH plans to establish a system for national health insurance by 2014, covering all Indonesians by 2019. Currently, just 155 million Indonesians have health insurance.

This means numerous opportunities and challenges for foreign drug companies. However, many details of the national insurance plan are not yet available, including reimbursement rates for brand name and generic medicines. The lack of clear rules has led to confusion in the healthcare and pharmaceutical industries.


Indonesia’s 2008 “Registration of Drugs” decree stipulated that by the end of 2010, the following regulations would apply to pharmaceutical products registered in Indonesia:

  • All registered pharmaceutical products must be manufactured domestically.
  • Exceptions include patented products and drugs that — due to restrictions on manufacturing capacity — cannot be produced domestically.
  • Foreign pharmaceutical companies must have their own Indonesian manufacturing facility or they must appoint an intermediary.


To register a pharmaceutical product in Indonesia, applicants must submit all materials to Indonesia’s National Agency of Drug and Food Control (NADFC). This organization oversees pre-market evaluation, standardization, GMP certification and all other regulations dealing with pharmaceutical products. In Indonesia, drugs are evaluated on quality, risk, efficacy, safety and the needs of the public. Drugs are classified into four categories:

  • Regular OTC products (Category F)
  • Prescription medicines (Category G)
  • Narcotics (Category O)
  • OTC medicines that have warning labels (Category W)

Applicants who do not hold the original product license must submit authorization documentation from the foreign manufacturer. Applicants must also submit:

  • A drug master file (for new chemical entities and first generic drugs, as well as for generics that treat serious illnesses such as cardiovascular disease or cancer)
  • A manufacturing site master file
  • A manufacturing license
  • An up to date GMP certificate
  • Information from the last GMP inspection
  • Additional documentation, as required


In order to be certified, applicants must use the standard format for Common Technical Documents (CTD) in ASEAN. ASEAN standards should be followed for all clinical and non-clinical studies, stability studies, product specification, GMP standards and bioequivalent studies.

Pharmaceutical product registration can take between one and three years. It takes 40 business days for the evaluation of “me-too” and export-only drugs. It takes 100 business days for the evaluation of drugs that need local clinical trials or orphan drugs. Drugs with new indications or drugs already on the market in other ASEAN countries take 150 business days to evaluate. New drugs, as well as biotherapeutic and biological products not covered in other categories, take 300 business days to evaluate.


Drug labeling regulations in Indonesia require that pharmaceutical products must state their brand name as well as their generic or chemical name on the packaging. Labels must also state whether the drug contains non-halal materials, or has been in contact with non-halal materials. OTC drugs need to be labeled in Indonesian.

Drug advertising in Indonesia is permitted for general OTC products, but not for prescription medicines. All materials must be submitted to the NADFC for approval. Additionally, the NADFC sets spending limits on the promotion of some pharmaceutical products.


Drug distribution takes place through wholesalers, usually local companies that sell to hospitals and pharmacies. Indonesia has more than 18,000 total pharmacies and registered outlets for the sale of pharmaceuticals. Wholesale licenses used to be valid indefinitely, but starting June 28, 2013, such licenses will be valid for five years.

Indonesian wholesalers often resell drugs at about 10 percent over factory prices. Retail outlets raise prices an additional 25 percent.

Pricing for generic drugs is controlled by several national regulations. Pharmaceutical products on the Essential Drug List, for example, may not be sold at a retail margin of more than 50 percent. Generics that have passed a special government sponsored quality assurance test must be sold at specified low retail prices that are the same throughout the country.

But generics do have one very beneficial market advantage.  A law passed in January 2010 stipulates that Indonesian doctors at public facilities must prescribe unbranded generic drugs whenever they can.


Many foreign drug companies see the promise of future profits in Indonesia. Even with restrictions on ownership and manufacturing, more than 50 foreign drug companies do business in Indonesia. Sanofi, Merck and Wyeth all have substantial presences in Indonesia. In October 2012, Merck announced the opening of a $20 million packaging plant in Jakarta. For 2013, it expects that its annual sales will climb between 12 and 20 percent.

Western companies like Novartis and Novo Nordisk are engaged in many consumer education and community outreach programs in Indonesia. Novo Nordisk just launched a large scale education campaign for diabetes management, aimed at the public, physicians and other healthcare professionals. Novartis has launched a similar campaign for communicable diseases.

If restrictions on foreign ownership are done away with, many foreign drug company executives have expressed their willingness to expand their Indonesian operations. Recently, the president of Novartis said that her company would like to open R&D facilities in Indonesia, provided that they do not have to contend with regulations requiring Indonesian ownership.

As far back as 2009, the MOH hinted that it might drop ownership restrictions in Indonesian pharmaceutical firms. Although this has not yet happened, it is expected that some sort of change will take place in the next few years.