An expanded investment agreement with China would help Indonesian drug makers thrive and keep the country’s health care mandate on track

The recent policy changes in Indonesia’s national health insurance programme have been invaluable: they have not only made health care accessible to millions of formerly neglected patients, they have also breathed fresh air into the country’s pharmaceutical industry thanks to now soaring demand for drugs from new patients.
Perhaps the most interesting aspect of Indonesia’s pharmaceutical industry is the fact that almost 90 per cent of the raw materials used in making drugs are imported from China – and yet the Indonesian government has not made any significant efforts to strengthen or institutionalise its partnership with Beijing in the sector.
A closer look at a few key facts surrounding the partnership underlines how China could become Indonesia’s strongest partner in the pharmaceutical sector, undergirding Indonesia’s health care reform.
Because of the expanded patient coverage in Indonesia, the demand for drugs has increased significantly. In the year after the health insurance programme was started, the pharmaceutical industry grew 11.8 per cent, with a total value of US$4.6 billion – or US$19 per capita. Since then, the pharmaceutical industry has grown steadily at about 6 per cent per year.
The number of Indonesians using the programme has also increased steadily. The programme recorded 92.3 million hospital and health care provider visits in its first year, and that number had grown to 277.9 million by August 2019.
Although drug production and sales have increased due to rising demand, pharmaceutical companies are expected to continue to suffer losses if the BPJS cannot pay its bills. And the pharmaceutical companies face an additional price squeeze from the high cost of raw materials, 90 per cent of which come from China and India.
Vincent Harijanto, chairman of the Committee on Trade and Industry of Pharmaceutical Raw Materials, said Indonesia’s pharmaceutical industry would face difficulties if the rupiah exchange rate continued to weaken and the price of foreign raw materials could not be controlled, making it even more difficult for drug companies to pay their foreign suppliers.