Indonesia’s Role in Pharmaceutical Market

The current global growth of the pharmaceutical market is very promising. It is predicted over the next five years it will grow around 4,7% at a 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 still be in charge as the dominant contributor to global sales growth. While the Pharmerging or A group of countries having a low position on the pharmaceutical market, but having a speed pace of growth 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 pharmerging can be said to be 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 or equivalent to USD 10.11 billion in 2021, this makes Indonesia 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 meet the needs of every resident, which ranges from 260 million people to have insurance and access to healthcare. The program, which was carried out starting in 2016, is expected to be evenly distributed in 2019.

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

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

Consumption of Pharmaceutical Drugs in Indonesia

Little bit looking back on the history Indonesia once ranked lowest in Asia in terms of Drug Consumption. a significant increase in income per person can slowly reverse this situation. In the next decade as per capita income continues to increase, more and more Indonesians will spend their money on healthcare. There is a surge in spending on health care in Indonesia in 2022 could reach IDR 277.4 trillion or 47.1 billion in USD.

The Market Size

The fulfillment of drug needs in Indonesia is divided by 75% for domestic companies and the remaining 25% for foreign companies. The main key to the expansion of the pharmaceutical market in Indonesia is an increase in the types of products and generic drugs.

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 with the increasing number of multinational manufacturers building factories in the pharmaceutical sector, especially for raw materials. Indonesia’s biodiversity became substantial as Indonesia is home to 30.000 medicinal plants and herbs from a total of 40,000 in the world. These companies take advantage of those resources.