Government Targets Pharmaceutical Investments to Rise by 60 Percent

The government targets pharmaceutical industries investment increase by 50 to 60 percent amounting to US$ 750 to 800 million compared to last year's projection of US$ 500 million. This follows after the government increased foreign ownership of this sector from 75 percent to 100 percent.

Sri Indrawati, Director General of Development of Pharmaceutical and Health Equipment Ministry of Health, said that the investment prediction of that amount is assumed for pharmaceutical factory construction. If a company only builds a packaging factory, the investment required will only be US$ 250 million. Whereas, a company building a factory with full production (upstream to downstream) will need US$ 500 million of investments. “It depends on the production and the type of drugs,” she said to IFT. Types of drugs also determine the amount of investment allocated by the company to build a factory.

With a larger portion of foreign ownership, multinational pharmaceutical principals can make Indonesia as their production base, that includes technology-transfer for this sector. Modern prescription drugs price can also be cheaper. The production capacity of national pharmaceutical industries will also increase, particularly for ethical drugs which have yet to be produced in local factories. Examples of these are medicines for cancer, heart, and diabetes.

According to Sri, the investments will add to the national drug supplies. People can more easily procure their required medications. The type of drugs proposed for the investmen are ethical drugs. Parulian Simanjuntak, Executive Director of the International Pharmaceutical Manufacturing Group, explained that those kinds of drugs should be produced in Indonesia, so there is no need to go abroad to buy them.

In 2010, the national pharmaceutical markets projected reach Rp 32.9 trillion in sales, increased by 11 percent compared to that of 2009 at Rp 29.7 trillion. Indonesian pharmaceutical markets keep growing at the average of 11 percent per year.

Foreign pharmaceutical producers dominated the market last year with Rp 6.9 trillion, while local accounted for 79 percent or Rp 26 trillion. The market share of foreign pharmaceutical industries dropped by 16 percent over the last five years. In 2005, the market share of the same industry scored 25 percent. But in 2009, the number dropped to 21 percent.

Based on data from the International Pharmaceutical Manufacturing, this reduction has been occurring since 1985. At that time, the market share reached 75 percent, while the rest were dominated by local pharmaceutical industries. However, 1995’s market share dropped to 52 percent.

The government’s regulation prohibited foreign pharmaceutical companies to sell their products in Indonesia without production facilities and tight regulations of quality standard restricted foreign producers' role in national pharmaceutical industries.

Parulian assesses that the condition of foreign and local pharmaceutical market share domination in Indonesia is still the best among other ASEAN countries. If foreign pharmaceutical producers in Indonesia dominate with 21 percent and local with 79 percent, the percentages are in opposite in other South East Asia nations.