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Indonesia Pharmaceuticals and Healthcare Report Q3 2008
Business Monitor International, Sep 2008, Pages: 83
Indonesia has a rapidly growing population of 240 million and has witnessed many of its neighbours, such as India and China, going through periods of rapid economic growth. However, it remains one of the poorest in the region. The country faces both economic and healthcare threats, such as rising inflation and the increasing prevalence of HIV/AIDS, avian flu and dengue fever.
Despite this, life expectancy is increasing (from 66.2 years in 2004 to 69.4 in 2006) and baby mortality is decreasing (from 36/100 births in 2003 to 32/1000 births in 2006). This is despite a healthcare insurance system that is overly complicated and has resulted in many of the country’s poorest having inadequate and incomplete access to free/affordable healthcare.
The growing population ensures that despite the low per capita consumption of pharmaceuticals, the pharmaceutical market is predicted to grow at around 5-6% per annum to reach US$3.75bn in 2012,. Sales of traditional herbal medicines, known as jamu, are expected to considerably outpace those of conventional pharmaceuticals in terms of annual growth. Recent government support for jamu could also result in increased revenues from export. The most significant threat to the country’s continuing healthcare development is its patent protection and the volume of counterfeit products. Despite action being taken in these areas, progress is unconvincing.
The government has a stake in some key local manufacturers and is looking to consolidate the sector with plans to merge Kimia Farma and PT Bio Farma. The aim is to take advantage of economies of scale. However, BMI understands that there are few synergies between the firms. This will inevitably limit potential gains, especially since the most significant cost in production is the cost of raw materials.
Despite such issues, the government may potentially include other companies, for example Indofarma, in the merged entity in the face of intensified competition within the sector.
In January 2008, two state-run Indonesian pharmaceutical companies, Kimia Farma and Indofarma, contracted a Chinese active pharmaceutical ingredient (API) supplier, CSPC, to provide bulk antibiotics to protect themselves from rising costs of raw materials and to enable them to provide an affordable supply to the Indonesian market, which has suffered shortages of various antibiotics in recent years.
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