Drug Companies Enter Indonesia and the Philippines

An increasing number of pharmaceutical companies are targeting emerging markets. Indonesia and the Philippines are starting to gain considerable attention, due to their growing healthcare systems. A report by Datamonitor shows that interest in Indonesia and the Philippines will rise as both are currently reforming and expanding their respective healthcare systems.

Indonesia: An Attractive Market in the Long Term

Indonesia is the fourth most populated country in the world and has a large patient population. The introduction of a full universal health insurance is a much-needed step to increase access to healthcare, given that only 26 percent of Indonesians are covered by health insurance and the fact that they often find medications to be unaffordable.

This is one of the primary aims of the government, which targets to cover all its citizens by 2013. However, due to its large population and the low current coverage, opportunities for the pharma industry will likely only be seen in the long run.

In the absence of a true universal healthcare system, Indonesians without coverage opt for cheaper drugs, namely branded generics that are usually produced by the local industry. “The market remains dominated by branded generics despite the availability of even cheaper unbranded generics, indicating market potential for Big Pharma, as Indonesians seem to be willing to pay more for a reputed brand” says Maura Musciacco, healthcare analyst at Datamonitor.

The Philippines: Beneficial in the Short Term

Reforms in the universal health insurance system have made greater headway in the Philippines, with 78 percent of the population being covered. This, in combination with the dominance of more expensive branded drugs over cheap generics, generated a market that is valued at double that of Indonesia’s in 2008, with sales of US$2.1 billion.

“The prices of medicines in the Philippines are some of the highest in the region, ranking second to Japan. With 14 percent of the Filipino population living below the poverty line of US$1 per day – double that of Indonesia – this makes patient access a major challenge,” comments Musciacco.

Due to the mounting need to make drugs both accessible and affordable, the government has taken measures that are likely to create a challenging environment for foreign companies. In mid-2009, the government imposed 50 percent price cuts on 21 essential drugs, which are likely to impact sales for these companies.

Multinational players have garnered considerably higher sales and faster growth rates in the Philippines, reflecting the country’s more fertile market for foreign companies. Going forward, however, branded pharma will find the Philippines more challenging as the country is shifting towards a generics-based market.

In the long run, Indonesia should offer a larger market where multinationals can better position their high-value drugs due to a more Westernized disease pattern.