The current global growth of the pharmaceutical market is very promising. It is predicted that over the next five years, it will grow by around 4,7% per year, or 4,7% compound annual growth rate (CAGR). By 2023, it is predicted to reach US$1.5 trillion in global market sales.

The Major Developed markets will remain in charge as the dominant contributors to global sales growth. While the Pharmerging or A group of countries having a low position on the pharmaceutical market, but having a rapid pace of development, such as China, India, Brazil, Russia, South Africa, Mexico, Indonesia, and Turkey, overall contribution to global sales growth will continue to rise to almost 35% over the forecast period.

Indonesia’s contribution as one of the emerging countries is quite significant. This is because Indonesia is one of the fastest-growing pharmaceutical markets in Asia and is home to 260 million people. With a market value of around IDR 141.6 billion, equivalent to USD 10.11 billion in 2021, Indonesia is the largest pharmaceutical market in the ASEAN region.

Top 3 Factors of Indonesian Pharmaceutical Growth

The growth of the Indonesian pharmaceutical market is arguably very promising because it is supported by several factors, such as:

Strong and steady pharmaceutical growth

This strong growth factor is also supported by several elements, such as the National Health Insurance (Jaminan Kesehatan Nasional, also known as JKN), Generic Medicines, and drug manufacturing.

JKN is a government program that aims to provide insurance and access to healthcare for every resident, ranging from 260 million people. The program, which began in 2016, is expected to be evenly distributed by 2019.

The unbranded generic market contributed 10.8% to the pharmaceutical market’s growth. It is estimated at around IDR 8.7 trillion, or equivalent to USD 619 million. It is hoped that this growth will continue to rise in line with the JKN program.

Of the 210 drug manufacturers, 70% of which are domestic, the government has eased ownership restrictions. The government’s new regulation on ownership limits allows foreign companies to hold 100% ownership, up from 75% previously. The new regulation will have a very positive impact. It is estimated that, over the period 2015-2025, direct investment in the pharmaceutical sector will reach IDR 277.4 trillion, equivalent to USD 19.8 billion.

Consumption of Pharmaceutical Drugs in Indonesia

Looking back on the history, Indonesia once ranked lowest in Asia in terms of Drug Consumption. A significant increase in per capita income can slowly reverse this situation. In the next decade, as per capita income continues to rise, more and more Indonesians will spend more on healthcare. Health care spending in Indonesia in 2022 could reach IDR 277.4 trillion, or USD 47.1 billion.

The Market Size

The fulfillment of drug needs in Indonesia is divided 75% among domestic companies and 25% among foreign companies. The primary driver of the pharmaceutical market’s expansion in Indonesia is an increase in product and generic drug types.

As previously explained, the new government regulation on partial ownership of foreign companies to 100% ownership is expected to attract more foreign investors in the pharmaceutical sector. In 2017, these results began to appear as the number of multinational manufacturers building factories in the pharmaceutical industry, especially for raw materials, increased. Indonesia’s biodiversity is substantial, as it is home to 30,000 medicinal plants and herbs, representing 40,000 worldwide. These companies take advantage of those resources.