Indonesia, an archipelago of over 10,000 islands, has a population of over 255 million, making it the fourth most populous country in the world. Indonesia is Southeast Asia’s largest economy, with a GDP adjusted for Purchasing Power Parity (PPP) of over $3 trillion (International Monetary Fund; IMF). With its growing economy and large population, Indonesia’s pharmaceutical market will continue to expand considerably in upcoming years.
Indonesian Economy and Demographics
The IMF predicts Indonesia’s GDP will grow by 5.1 percent in 2017, compared to a GDP growth rate of 4.9 percent in Southeast Asia, 2.3 percent in the US, and 2 percent in the EU. Indonesia’s annual GDP growth rate will increase each year through 2020 reaching 5.5 percent, and the GDP (PPP) is expected to surpass $4 trillion.
Unlike many other Asian countries, Indonesia has a relatively young population. In 2016, the median age in Indonesia was 29.9 years old, compared to 46.9 years in Japan, 41.2 years in South Korea, and 37.2 years in nearby Thailand. The working age population is growing, as is Indonesia’s middle class.
Indonesian Pharmaceutical Market
At the same time, Indonesia’s pharmaceutical market is also expected to grow significantly. In 2016, Indonesia’s pharmaceutical market was worth over $6 billion, and it is expected to more than double by 2020. In 2016, Indonesia imported over $800 million in pharmaceutical products, an increase of $90 million compared to $710 million in imports in 2014. In 2016, the United States was the largest exporter of pharmaceuticals to Indonesia ($114 million), followed by Germany ($95 million), France ($71 million), Switzerland ($61 million), and the United Kingdom ($58 million).
In addition, private and public healthcare spending combined will grow by over 10 percent annually through 2020. In January 2014, the government launched a universal healthcare scheme with the goal of providing coverage to all 260 million Indonesians by 2019, making it the largest universal health coverage program worldwide. However, please keep in mind the benefits per person are limited. Increases in health insurance coverage, demand for high-quality healthcare, and awareness will help provide opportunities for foreign pharmaceutical companies in Indonesia.
Indonesia’s food and drug regulatory authority is the National Agency of Drug and Food Control (NA-DFC). Recently, the NA-DFC has enacted new regulations to ease the drug registration process. In mid-2016, the NA-DFC enacted Regulation 17 to make three changes to the registration process.
Currently, there are three types of drug registration and seven categories of registration:
- Registration of New Drugs
- Category 1: Registration of New Drugs, Biological Products, And Biotherapeutic Products
- Category 2: Registration of Copy Drugs
- Category 3: Registration of Supplies Containing Drugs
- Registration of Changes to Registered Drugs
- Category 4: Registration of Major Changes to Registered Drugs (Changes Have an Impact On Efficacy, Safety, and/or Quality)
- Category 5: Registration of Minor Changes to Registered Drugs That Require Approval
- Category 6: Registration of Minor Changes to Registered Drugs That Require Notification
- Category 7: Re-Registration of Registered Drugs
Regulation 17 now exempts Category 4 registrations (registration of major changes to a registered drug) from the pre-registration process. Category 5 and 6 registrations are already exempted from the pre-registration process, which involves steps such as determining the category of registration and type of evaluation.
In addition, Regulation 17 expedites the evaluation process for exported drugs from 30 to 7 days and introduces a 10-day evaluation process for Category 7 re-registration. Finally, Regulation 17 allows manufacturers to implement minor changes to drugs immediately and update the NA-DFC every six months with a progress report. Previously, changes could only be implemented once the Category 5 application and supporting documents were submitted to the NA-DFC.
Indonesia is a tropical country, and infectious diseases such as malaria and dengue fever remain highly prevalent. By age 10, 80 percent of Indonesian children have had dengue fever, and malaria is endemic in five of the country’s 34 provinces. Sanofi Pasteur’s (France) new dengue fever vaccine, Dengvaxia, was introduced to Indonesia in late 2016, but the vaccine is not yet part of the part of the national immunization plan, and individuals must pay for the vaccine themselves. Tuberculosis, another infectious disease, is the fourth-leading cause of death in Indonesia.
Non-infectious diseases are also widespread in Indonesia. The leading cause of death is stroke, followed by ischemic heart disease and diabetes. Indonesians tend to consume a diet high in cholesterol, which increases the risk and prevalence of hypertension and diabetes.
Indonesia also has a large smoking population, with over 35 percent of individuals being active smokers, including one in five teenagers between ages 13 and 15. According to the World Health Organization (WHO), nearly 80 percent of adult men in Indonesia are smokers, the highest in the world, compared to 35 percent in Japan and 40 percent in the US. Smoking in Indonesia kills over 240,000 people annually.
Foreign Pharmaceutical Companies in Indonesia
Several foreign pharmaceutical companies have offices and manufacturing facilities in Indonesia. According to the International Pharmaceutical Manufacturers Group (IPMG), an association of foreign pharmaceutical companies in Indonesia, overseas drug companies have invested over $1 billion in Indonesia’s pharma market in recent years.
Bayer (Germany) acquired a manufacturing plant in Cimanggis, West Java in 2005 and invested over $34 million in the facility. In 2016, Bayer announced an additional $9 million investment into its Cimanggis facility to increase production of pharmaceutical and consumer products. Roughly 30 percent of Bayer products produced in Indonesia enter the domestic market, while the rest are exported to over twenty countries around the world.
Since 2015, Merck (USA) has also invested in its Indonesia packaging and manufacturing facilities and is currently aiming to double its production capacity in Indonesia by 2018. Other foreign pharmaceutical companies operating in Indonesia include Pfizer, AstraZeneca, Sanofi, and Novartis.
Indonesia’s large population and growing economy provide numerous opportunities for foreign pharmaceutical companies, especially as the government looks to develop its healthcare services and provide better drug treatments to its citizens.