Indonesia - What is expected to be the fastest growing sector of the Indonesian pharmaceutical market?

The rapid growth of the OTC market and pharmacy sector will be mutually beneficial to one another.

The Indonesian OTC market has a double-digit growth rate according to some estimates, which can be attributed to a number of factors that will continue to make it an attractive market. The first of these is that as Indonesia is generally a poor country, its citizens will continue to self-medicate. This can also be linked to a long history of self-medication in the country, albeit with traditional Indonesian medicines. Another factor that will help the OTC market grow is the fast-growing pharmacy sector, helped by companies such as Apotek K-24 and Century. Companies such as these have not only made OTC products more accessible and affordable, but they have also increased consumers’ knowledge of drugs, and their confidence to self-medicate. The success of pharmacy companies such as Apotek K-24 with franchising has forced the state-owned company, Kimia Farma, to follow suit. This is likely to increase sales of OTC products throughout Indonesia, making it an attractive market.

The future growth of the generics industry in Indonesia is uncertain, and is arguably dependent on a number of factors. The first of these is the value of the rupiah against the US dollar; if the rupiah continues to devaluate against the dollar as projected, many smaller generic companies could go out of business, as the market is heavily reliant on imported raw materials. Another factor is government price cuts of branded generics, which are intended to give poor citizens access to branded drugs. However, the cuts could also be viewed as biased towards the government, which owns most of the non-branded drugs. Having said that, the generics market is estimated to make up 75% of the total pharmaceutical market in Indonesia, and it will continue to dominate the country in the forecast period.

Further reading - An in-depth analysis of the Indonesian pharmaceutical market is available from Espicom: The Pharmaceutical Market: Indonesia (published January 2010)