Improving economic circumstances and the expansion of government health insurance coverage look set to drive growth in Indonesia’s pharmaceuticals sector, as the launch of new projects boosts the domestic production capacity of medicines.
In late February local firm Kalbe Farma inaugurated a Rp500bn ($36.3m) medicine ingredients and biological products factory in Cikarang, West Java.
The 11,000-sq-metre site, the country’s first biotechnology-based drugs facility, will initially manufacture erythropoietin, a product used in dialysis treatment, cancer medication and red blood cell production, and will expand into the production of insulin and other cancer-treating drugs within five years. Kalbe said it expects the products to be on the market by the end of the year.
The factory will benefit from a further Rp200bn ($14.5m) investment in research and development, which includes technology transfer from China and South Korea, and will have an initial annual production capacity of 9m units.
Vidjongtius, the president-director of Kalbe Farma, said the development would help Indonesia boost pharmaceuticals self-sufficiency and improve technological capacity, with output not only set to satisfy growing domestic demand, but also provide opportunities for regional exports.
In late January international media reported that the company was set to begin the direct export of products to Sri Lanka, and that it was searching for a local firm to manufacture its generic drugs. The reports also said the firm was exploring plans to break into the Middle Eastern market through its nutritional products.
In addition to the launch of the Kalbe Farma facility, February also saw completion of works on a $15m biopharmaceutical production plant at the Jababeka Industrial Complex at Cikarang.
Developed by South Korean firm DongA-ST and local partner Combiphar, the plant will produce an estimated 4.7m free-field injections per year once fully operational in 2020, and will be equipped with waste and hazardous material treatment facilities.
In addition, DongA-ST will also export raw biopharmaceutical materials used in the production of some of its products.
The recent investment in manufacturing facilities comes amid an expected rise in demand for domestically made generic drugs, driven by government efforts to expand national health insurance offerings.
In 2014 officials launched the Jaminan Kesehatan Nasional scheme, which aims to provide universal health coverage to Indonesian citizens by 2019. Given the significant expansion of services required to meet this objective, the use of unbranded or generic medicines has been encouraged in order to reduce costs.
Changing lifestyles have also been cited as a major factor behind the growth in pharmaceuticals demand.
While attending the opening of the Kalbe facility in late February, President Joko Widodo said improving economic circumstances were providing Indonesians with a greater ability to acquire necessary medicines, but also noted that general lifestyle and dietary changes had resulted in a rise in non-communicable diseases.
“An increase in economy growth and the number of middle-class people has triggered the improvement of hygiene and nutrition, as well as health. Meanwhile, the change in lifestyle has caused illnesses, such as diabetes,” he said.
In line with expanding local drugs manufacturing, the government is also looking to step up production of raw materials, with the aim of reducing reliance on overseas imports, which currently account for more than 90% of inputs.
One area of focus is industrial salt, a product used in the manufacture of some pharmaceuticals products, along with other industries such as glass, food and beverage production.
The government has plans to develop 40,000 ha of new salt farms in eastern Indonesia and is also investing in improving domestic processing, with the aim of becoming self-sufficient in the product by 2020.
On average, the country consumes around 4.2m tonnes of salt per year, with domestic production accounting for 2m, according to the Indonesian Association of Salt Industries.
Efforts are also being made to encourage greater private sector investment in the medical device industry.
In 2016 the government eased foreign direct investment restrictions on the manufacture and distribution of medical devices, as well as hospital management services. Following this, investment in the medical device industry grew nearly seven-fold to Rp4.7trn ($341.5m) last year.
However, despite this increase, industry figures say more could be done to support development and innovation, with many highlighting that the cost of medical equipment and instruments is much higher in Indonesia than in other ASEAN countries.
Endang Hoyaranda, president-director of clinical services provider Prodia Group, told OBG such an imbalance could be addressed through state support to encourage private sector innovation.
“In line with most sectors, the tax environment isn’t conducive to the type of growth Indonesia is capable of,” she told OBG. “Research and development is lacking across most sectors. There is a huge opportunity for growth in the coming years.”
Stay updated on how some of the world’s most promising markets are being affected by the Covid-19 pandemic, and what actions governments and private businesses are taking to mitigate challenges and ensure their long-term growth story continues.
Register now and also receive a complimentary 2-month licence to the OBG Research Terminal.
Register Here×Indonesia is attracting increasing attention from the international communications sector, both as a market for advanced products and due to its burgeoning profile as a centre of development and...
After a surge in uptake during the Covid-19 pandemic, the telehealth industry is courting new investment to further innovation and increase access to care in emerging markets.
The Turkish Prime Minister Bulent Ecevit has spent the last week in the US hoping to garner support for economic reforms at home and trade concessions for Turkish exports to the US.
