Pharma in Indonesia: competing for higher margins

IPMG members have invested heavily in Indonesia's pharmaceutical industry for the construction of factories and clinical research.


Bayer IPMG


 

IPMG members – including Novartis, Merck, Bayer, Boehringer Ingelheim, and Pfizer – have invested more than US$1 billion in Indonesia’s pharmaceutical industry over the past few years, particularity for the construction of factories and clinical research.

 

An example is Bayer, which recently invested £8.1 million in the expansion of its factory in Cimanggis (West Java). This factory produces multivitamins and medicines, about 75 percent of which is exported to 26 countries.
Concurrently, Indonesia’s largest pharmaceutical company, Kalbe Farma, is shifting from being a maker of generic drugs to a high-tech pharma developer. Besides producing cancer drugs, Kalbe has been investing in R&D on stem cell therapies. Significantly, a lack of generic substitutes in these fields in Indonesia implies no government-set price ceilings, and therefore these products offer higher margins.

 

In fact, there are more than 200 drugmakers in Indonesia, most of which produce only low-margin generics. While they control 95 percent of the market by volume, they have a combined 75 percent share in value terms. Therefore the few multinationals operating in the country have been able to make more profits because of their focus on high-value products.
Such activities are taking place while Indonesian President Joko Widodo is pushing its universal health care program to cover the country’s projected population of 270 million by 2019, a leap from the 170 million currently covered. This year for the first time, government expenditures on health care reached the legally mandated five percent of the state budget. Health care spending is expected to grow 12 percent every year through 2020.

 

To join the discussion on all developments in this industry sign up for CPhI South East Asia and its LinkedIn group. CPhI is the must-attend pharma event in Indonesia comprising of a trade show and state of the art conference where the regional industry meets to leverage connections, knowledge and insight to spur business. Launched six years ago, the next edition takes place during 22-24 March 2017at JIExpo in Jakarta. Workshops and exhibitors’ presentations will add into the mix, and will complement the three days together with a business matchmaking platform.