COUNTRY BOOK

PHILIPPINES:

The Philippines officially known as the Republic of the Philippines is a sovereign country in Southeast Asia in the western Pacific Ocean. With a population of more than 92 million people, the Philippines is the 7th most populated Asian country and the 12th most populated country in the world. An additional 12.5 million Filipinos live overseas. Multiple ethnicities and cultures are found throughout the islands.

Geography Conditions:

The Philippines is an archipelago of 7,107 islands with a total land area, including inland bodies of water, of approximately 300,000 square kilometres (120,000 sq mi). Its 36,289 kilometres (22,549 mi) of coastline makes it the country with the 5th longest coastline in the world. It is located between 116° 40', and 126° 34' E. longitude and 4° 40' and 21° 10' N. latitude and is bordered by the Philippine Sea to the east, the South China Sea to the west, and the Celebes Sea to the south. The island of Borneo is located a few hundred kilometres southwest and Taiwan is located directly to the north. The Moluccas and Sulawesi are located to the south-southwest and Palau is located to the east of the islands.

ECONOMY:

The national economy of the Philippines is the 45th largest in the world, with an estimated 2011 gross domestic product (nominal) of $216 billion. Major trading partners include the United States, Japan, China, Singapore, South Korea, the Netherlands, Hong Kong, Germany, Taiwan, and Thailand.

The country's total labour force of around 38.1 million,

The agricultural sector employs close to 32% but contributes to only about 13.8% of GDP.

The industrial sector employs around 13.7% of the workforce and accounts for 30% of GDP.

The 46.5% of workers involved in the services sector are responsible for 56.2% of GDP.

The unemployment rate as of July 2009 stands at around 7.6% and due to the global economic slowdown inflation as of September 2009 reads 0.70%.

Gross international reserves as of July 2011 are $75.174 billion. In 2004, public debt as a percentage of GDP was estimated to be 74.2%; in 2008, 56.9%. Gross external debt has risen to $66.27 billion. The country is a net importer.

Demographics

Demographics of the Philippines are records of human population in the country, including its population density, ethnicity, education level, health, economic status, religious affiliations, and other aspects of the population. The Philippines has a population growth rate of 2.04%, one of the highest in Asia. As of 2011, the estimated population is 95,800,000. According to the executive director of the Commission on Population Tomas Osias, the population of the Philippines may reach 101.2 million by 2014.

Sex Ratio:

Total 1 male(s)/femaleAt birth 1.05 male(s)/femaleUnder 15 1.04 male(s)/female15-64 1 male(s)/female 65-over 0.76 male(s)/female

34.60%

61.10%

4.30%

Age structure

0-14 years14-6565-over

Demographics of Philippines:

Population 95,800,000 (2011 est.)Growth rate 2.04% (2011 est.)Birth rate 25.34 births/1000 population (2011 est.)Death rate 5.02 deaths/1,000 population (July 2011 est.)Life expectancy 71.66 Years

Male: 68.72 years (2011 est.)Female: 74.74 years (2011 est.)

Fertility rate 3.19 children born/woman (2011 est.)Infant mortality rate 19.34 deaths/1,000 live birthsNet migration rate 1.29 migrant(s)/1,000 Population (2011 est.)

Government Policies On Drug Regulations:

Years Population1960 27,087,6851970 36,684,948 1975 42,070,6601980 48,098,4601990 60,703,2061995 68,616,5362000 76,504,0772007 88,574,6142010 92,337,852

The Philippines is projected to be the 12th largest economy in the Asia Pacific region by 2017. High government spending to stimulate the economy has improved conditions temporarily but in turn has created a large budget gap. The Philippines remained on the USTR’s Watch List in 2011, primarily due to the fact that “the United States remains concerned about amendments to the patent law that prohibit patents on certain chemical forms unless the applicant demonstrates increased efficacy”. Demographically, the population of the Philippines will be the seventh largest in the Asia Pacific region covered by 2017.The population remains relatively young.

The Philippines has one of the highest drug prices in the world. Changes brought about by the controversial Cheaper Medicine Act have impacted the Philippines pharmaceutical market in a number of areas, including IP laws, competition and drug price control mechanisms. Since the Act’s implementation, a considerable number of drugs have seen price reductions by up to half. The immediate term will be the most volatile, as the government battles with the international pharmaceutical industry for ground in the market, which up until recently experienced a free-market policy with no price regulations in place.

The Philippines is heavily reliant on imports of finished medicaments, and exports little in way of pharmaceuticals, therefore the deficit in the balance of trade is likely to increase during the forecast period. The Philippines OTC sector is dominated by three Filipino pharmaceutical companies that control over half of this sector. The Philippines generics sector is being actively backed by the government and is led by UniLab.

Government Support

Enabling Laws/policies:

Universally Accessible Cheaper & Quality Medicines Act of 2008 (R.A. 9502)

-Allows parallel importation of patented medicines from other countries where they are affordable -Imposes price ceilings (Maximum Drug Retail Price) on essential drugs upon the recommendation of the Department of Health

Philippine Generics Act of 1988 (R.A. 6675) - mandates the implementation of the Philippine National Drug Formulary (PNDF) to rationalize the pharmaceutical sector and give consumers more informed choice and greater cost savings.

Intellectual Property Code of the Philippines (R.A. 8293)

Special Law on Counterfeit Drugs (R.A. 8203)

2010 Investment Priorities Plan - provides fiscal and non-fiscal incentives for:

-Drugs and medicines covering the manufacture of chemical compounds or biological substances, other than food, intended for use in the treatment, prevention or diagnosis of disease in humans and animals, including (1) articles recognized in official Pharmacopoeia or national drug formulary; (2) articles intended for use as a component of the articles in (1) above; and (3) herbal and/or traditional drugs which are articles of plant or animal origin used in alternative medicine.

-Research and development for commercial and in-house R&D activities.

Development Plans and Programs:

Department of Health Administrative Order No. 2010-0036 - The Aquino Health Agenda: Achieving Universal Health Care for All Filipinos focused on three (3) major strategies:

- Financial risk protection through expansion in National Health Insurance Program (NHIP) enrolment and benefit delivery;- Improved access to quality hospitals and health care facilities;

- Attainment of the health-related Millennium Development Goals (MDGs)

Formula ONE for Health – Roadmap for Health Sector Reforms in the Philippines 2005-2010 – in consonance with health system goals identified by the World Health Organization, the MDGs and Medium-Term Philippine Development Plan (MTPDP)

- Better health outcomes

- More responsive health system

- More equitable healthcare system

R&D support

Philippine Council for Health Research and Development (PCHRD) creates and sustains an enabling environment for health research in the country.

SPENDING ON HEALTH, 59%

SPENDING ON HEALTH, 23%

SPENDING ON HEALTH, 18%

SPENDING ON HEALTH

OUT OF POCKETGOVERNMENTSHARED -RISK SCHEMES

INCENTIVES

FISCAL:

4 to 8 years Income Tax Holiday (ITH). Special 5% tax rate on gross income after the lapse of ITH (for IT Park/Eco-zone locators). Tax and duty exemption on imported capital equipment (for IT Park/Eco-zone locators);

Duty-free importation of capital equipment (for BOI-registered firms under E.O. 528). Exemption from 12% input VAT on allowable local purchase of goods and services, e.g.,

communication charges (for IT Park/Eco-zone locators). Additional deduction for labour expense.

NON FISCAL:

Unrestricted use of consigned equipment. Exemption from warfare dues and export tax, duty, impost and fees. Employment of foreign nationals. Special Investors Resident Visa.

Size Of Pharmaceutical Market:

The Philippine pharmaceutical market has total value of approximately US$2.5b (2007) with similar growth of 9% for the past three years. MNC's value shares remain stable, however, national companies are significantly climbing up the ranks. Causes of mortality and morbidity remains the same; trending is reflected in top therapeutic categories.

The US$2.5 billion (2007) Philippine pharmaceutical market is growing at around 9% annually.

Top causes of mortality and morbidity continue to be respiratory and cardio vascular diseases, which is reflected in strong demand for drugs in these categories.

About 80% of the products are sold through drugstores, about 10% through the hospitals and another 10% through government institutions, dispensing physicians (2007 data)

Branded products account for 97% of drugs sold and generic products for 3% (2007 data)

Multinational companies account for approximately 65% with national companies meeting 35% of the demand.

The Philippines is currently ranked as the 11th most attractive pharmaceutical market in the Asia-Pacific region, and the third biggest market in ASIA after Indonesia and Thailand. The Philippine pharmaceutical market is valued at US$2.51 Billion in 2008, and forecasted to reached US$3.91 Billion by 2013. In terms of the overall market this is comparable to Pakistan and Thailand, and in terms of per capita, it is similar to China and Iran.

The total Philippine pharmaceutical market includes all products classified as drug or non-drug.Drugs are either ethical (Prescription) or over the counter (OTC) products use for medication or in the diagnosis, cure, mitigation, treatment or prevention of diseases in human beings;Non-drug items include nutritionals (health foods), infant milk preparations, baby care, cosmetics, diagnostic and other medical devices.

Nutritionals7%

OTC Products24%

Ethical(Rx)Products69%

Share Of Major Product Categories On Sales

The bulk of the pharmaceutical sales in the Philippines is from ethical or prescription drugs, which represents about 70% of the total sales. Breakdown of Pharmaceutical Industry Philippines Over-the-counter (OTC) products account for about 24%, while nutritionals occupy the remaining share of pie. About 85% of products are sold through drug stores ad

15% are distributed to end users in hospitals and doctors clinics. Fourteen (14) of the top 20 pharmaceutical companies in the world have manufacturing facilities in the Philippines. The share of the local manufactures in the drug market is seen to rise 38% and likely continued to expand through 2010 and beyond. Multinational drug companies grew by 4% in 2009.

Market opportunities:

There is an apparent big demand for medical and pharmaceutical products in the Philippines with importation increasing at an annual average rate of 12% from 2004-2008. Importation in 2009 is projected to reach US$736 Million. Pharmaceutical Demand in the Philippines. With Philippines population projected to increase to 92.23 million by the end of 2009 from 88.27 million in 2007, increase in demand for pharmaceutical products is more likely to happened.

Also, with the expiration of the number of patents in 2012, as well as those that had lapsed over the past 2-3 years, local manufacturers will have the opportunity to start introducing generic versions of patented drugs. This would not only reduce the cost of medicine but would also expand the domestic market.

Total family expenditures for drugs and medicine increased to Php 39.04 Billion in 2009 from Php 33.323 Billion in 2006 or by 17% over a 3-year period. About 45% of the total expenditures in 2009 were spent by families living in the National Capital Region and its nearby cities/municipalities of Regions III and IV. From 1998-2005, there is a steady increase in the number of hospitals, both private and government, from 1,172 to 1,755, or an increase of about 50% over a period of 7 years. From 2001-2006, there is also an increase in the number of medical practitioners, specifically medical doctors, from 44,238 to 45,555, or an increase of about 3% over a period of 5 years.

The pharmaceutical market in the Philippines is valued at more than $700m. It is a promising market, with a large population of 95 million people.

There are more than 3,500 pharmaceutical brands marketed in the Philippines, with most being generic drugs. Sophisticated pharmaceutical products are mainly imported in the Philippines. These drugs are distributed through about 20,000 local pharmacies, including those in general hospitals, private clinics, and government medical institutions.

Foreign drug companies account for 70% of the drug market in the Philippines. The UK, Germany, France and Switzerland each hold around 10% of the local drug market. The US, on the other hand, has less than 8% of the market.

The Food, Drug and Cosmetic Act provides the regulations to monitor food, drugs, medical devices, diagnostic reagents and other chemicals in the Philippines. The governing body for the Filipino drug market is The Bureau of Food and Drugs (BFAD).

ADVANTAGES OF PHILIPPINES:

Human resources Availability

About 470,000 college-degree graduates in 2009 1. About 38% are graduates of medical/natural science and engineering/technology

courses suitable for the pharmaceutical sector. 2. Over 20,000 per year of new licensed medical and allied sciences practitioners, and

more than 25,000 new licensed engineers/year. Annual growth rate of tertiary level graduates estimated at 3.8%.

Quality

Literacy rate of 92%, one of the highest in the world due to a culture-based desire to be educated and skilled to attain a better quality of life.

3rd largest English-speaking country in the world. Highly-educated, flexible, productive, loyal, dedicated with excellent work ethics and

attention to detail Surveys of executives in the Asian region have consistently ranked both skilled and unskilled

Filipino workers high in terms of quality of work, communication capabilities and receptiveness to technology transfer.

Pioneering Market for Research And Development:

Existing manufacturers are concentrated on the manufacture of products discovered and developed outside the Philippines, and about 90% of the raw materials used are imported.

A pharmaceutical activity concentrated on research and development and discovery of new drugs are a pioneering activity.

INDUSTRY POTENTIAL:

Growths

Number of industry players:

From 373 totals registered pharmaceutical companies in 2003 to 471 in 2007, or an increase of 26% in 5 years.

Local companies – from 208 in 2003 to 240 in 2007, or an increase of 15% Foreign companies – from 165 in 2003 to 231 in 2007, or an increase of 40%.

Sales:

Sales of pharmaceuticals increased by an average of 9.6% per year based on the 2004-2008 performance of the industry.

In terms of counting units (CU) or the number of tablets, capsules, millilitres sold, sales increased from 36 billion CU in 2003 to 45 billion CU in 2007, or an increase of 25%.

Market share:

Philippines’ share in the world pharmaceutical market in 2007 was placed at 0.31%. Within Asia-Pacific region, the Philippines contributed 3.9% in 2007.

New Product Introductions

In 2002 to 2007, there were about 240 new products introduced into the market by both foreign and local pharmaceutical companies.

DEATH RATE OF ASTHMA

Coronary

heart

disease

Influenza

& pneumonia

Stroke

Tuberc

ulosis

Hypert

ensio

n

Diabete

s mell

itus

Violence

Lung d

isease

Kidney dise

ase

Asthma

0100002000030000400005000060000

Population

Population

S.No Disease Population in numbers % of total deaths death rate/100,000

1 Coronary heart disease 57,864 13.73 122

2 Influenza & pneumonia 46,900 11.13 99.15

3 Stroke 40,245 9.55 82.77

4 Tuberculosis 35,867 8.51 52.82

5 Hypertension 35,001 8.30 72.35

6 Diabetes mellitus 18,512 4.39 36.19

7 Violence 17,512 4.07 21.50

8 Lung disease 13,473 3.20 29.10

9 Kidney disease 12,960 3.07 23.26

10 Asthma 10,471 2.48 19.48

According to the latest WHO data published in April 2011 Asthma Deaths in Philippines reached 10,471 or 2.48% of total deaths. The age adjusted Death Rate is 19.48 per 100,000 of population ranks Philippines 24 in the world

DEATH % RATE WORLD RANK10,471 2.48 19.48 24

Total projected demand for drugs and medicines

Assuming that there is no substantial change in the annual population growth rate of the country, it is forecasted that total demand will rise up to around 222 billion pesos in 2015, more than triple that of 2008’s. This shows an average annual growth rate of total demand of around 17 percent.

Total projected demand for drugs and medicines 2008-2015 (billion Philippine pesos)Year Out-of pocket expenses Government Total spending2008 64.78 1.56 66.332009 77.14 1.63 78.762010 91.85 1.7 93.552011 109.38 1.77 111.152012 130.25 1.85 132.12013 155.1 1.93 157.032014 184.7 2.01 186.712015 219.94 2.1 222.04

Top 10 players in Pharmaceutical market of Philippines:

Rank Company %CAGR 4YRS1 United Laboratories 10.242 Glaxo-Smith Kline 2.573 Pfizer 10.724 Wyeth 11.465 Sanofi-Aventis 8.606 Abbott 13.887 AstraZeneca 5.61

8 Novartis 5.739 Roche 16.4110 Johnson & Johnson 8.41

Economic Report:

Labor Force by Occupation :Agriculture: 33% Industry: 15%  Services: 52% (2011 EST.) 

Unemployment: - 7.2% (2011 EST.)

Economic 2011 2010 2009

GDP (US $ billion nominal) 202 188 161

% Real Growth 6.4 7.63 1.15

% Inflation 5.4 3.81 3.23

Per capita 4400 3969 3720

Demographic 2011 2010 2009

Population 101,833,938 93,260,798 91,703,139

% Growth Rate 1.9 1.7 1.7

Under 15 years 34.6 35.44 35.81

15 – 64 years 61.1 60.92 60.62

65 years 4.3 3.64 3.57

Health expenditure 2011 2010 2009

Total (US $ billions) 8.10 7.18 6.15

% Public exp 34.8 34.8 34.8

% Private exp 64.2 64.2 64.2

% GDP 4 3.82 3.82

Per capita (US $) 57 62 66.88

Physicians 3054

Pharmaceutical Market 2011 2010 2009

Value at retail price (US $ billion) 2.8 2.48 2.21

% Growth rate 12.63 12.6 12.6

Respiratory drug market (US $ mil) 336 297 265

Source: WORLD BANK DATA

STATISTICS:GDP - purchasing power parity: $394 billion (2011 est.)GDP - real growth rate: 3.7 % (2011) GDP per capita purchasing power parity: $4,111 (2011 est. in 2011 US dollars)GDP nominal: $216.1 billion (2011)GDP per capita: $2,255 (2011 est.)GDP - composition by sector:

Agriculture: 12.3%

Industry: 33.3%

Services: 54.4% (2011 est.)

Most of the above statistics are sourced from the CIA World Fact book - Philippines

SWOT Analysis: (investors)

Strengths:

It is the 11th most attractive pharmaceutical destination in ASIA- Pacific region and 3rd

biggest southern ASEAN market next to Indonesia and Thailand. Government follows Universal health care policy and reimbursement policy. Demand for Imported (western) and branded drugs. Philippines are endowed with rich natural resources. It has second biggest producer of

geothermal energy in the world. It has a wide distribution network of more than 40,000 pharmacy retail outlets.

Weakness:

High population density have resulted slow economic growth irrespective of endowed with rich natural resources.

Inadequate infrastructure, logistics and communication are headwinds for foreign investors.

Low purchasing power equated to demand for cheap drugs. International perception of political instability, unclear labour policies and bureaucracy

hampered investors thrust. Service sector contributes more than 54.4% of the total economic output. Poor management

Opportunity:

To protect the interest of generic manufacturers, special laws on counterfeit drugs have been laid.

Government Investment incentives policy targeted mainly at foreign investor.

Threat:

Lack of transparency in medicine pricing. Labour migration to other countries Low availability of workforce. High competition.

Indonesia:

Indonesia officially the Republic of Indonesia is a country in Southeast Asia and Oceania. Indonesia is an archipelago comprising approximately 17,508 islands. It has 33 provinces with over 238 million people, and is the world's fourth most populous country. Indonesia is a republic, with an elected legislature and president. The nation's capital city is Jakarta. The country shares land borders with Papua New Guinea, East Timor, and Malaysia. Other neighbouring countries include Singapore, Philippines, Australia, and the Indian territory of the Andaman and Nicobar Islands.

Indonesia is a founding member of ASEAN and a member of the G-20 major economies. The Indonesian economy is the world's 16th largest by nominal GDP.

Geographic conditions:

Indonesia lies between latitudes 11°S and 6°N, and longitudes 95°E and 141°E. It consists of 17,508 islands, about 6,000 of which are inhabited. At 1,919,440 square kilometres (741,050 sq mi), Indonesia is the world's 16th-largest country in terms of land area. Its average population density is 134 people per square kilometre (347 per sq mi), 79th in the world, although Java, the world's most populous island, has a population density of 940 people per square kilometre (2,435 per sq mi). Indonesia's location on the edges of the Pacific, Eurasian, and Australian tectonic plates makes it the site of numerous volcanoes and frequent earthquakes. Indonesia has at least 150 active volcanoes. Lying along the equator, Indonesia has a tropical climate, with two distinct monsoonal wet and dry seasons.

ECONOMY:

Indonesia has a mixed economy in which both the private sector and government play significant roles. The country is the largest economy in Southeast Asia and a member of the G-20 major economies. Indonesia's estimated gross domestic product (nominal), as of 2010 was US$706.73

billion with estimated nominal per capita GDP was US$3,015, and per capita GDP PPP was US$4,394 (international dollars). June 2011: At World Economic Forum on East Asia, Indonesian president said Indonesia will be in the top ten countries with the strongest economy within the next decade.

The Gross domestic product (GDP) is about $1 trillion and the debt ratio to the GDP is 26%. The industry sector is the economy's largest and accounts for 46.4% of GDP (2010), this is

followed by services (37.1%) and agriculture (16.5%). However, since 2010, service sector has employed more people than other sectors, accounting

48.9% of the total labour force; this has been followed by agriculture (38.3%) and industry (12.8%). Agriculture, however, had been the country's largest employer for centuries.

According to World Trade Organization data, Indonesia was the 27th biggest exporting country in the world in 2010, moving up three places from a year before. Indonesia's main export markets (2009) are Japan (17.28%), Singapore (11.29%), the United States (10.81%), and China (7.62%). The major suppliers of imports to Indonesia are Singapore (24.96%), China (12.52%), and Japan (8.92%). In 2005, Indonesia ran a trade surplus with export revenues of US$83.64 billion and import expenditure of US$62.02 billion. The country has extensive natural resources, including crude oil, natural gas, tin, copper, and gold. Indonesia's major imports include machinery and equipment, chemicals, fuels, and foodstuffs. And the country's major export commodities include oil and gas, electrical appliances, plywood, rubber, and textiles.

INDUSTRIAL SECTOR

SERVICE

AGRICULTURE

0.00% 5.00% 10.00%15.00%20.00%25.00%30.00%35.00%40.00%45.00%50.00%

INDUSTRIAL SECTOR, 46.40%

SERVICE , 37.10%

AGRICULTURE,16.50%

GDP

DEMOGRAPHICS:

According to the 2010 national census, the population of Indonesia is 237.6 million, with high population growth at 1.9%. 58% of the population lives on Java,[133] the world's most populous island. Despite a fairly effective family planning program that has been in place since the 1960s, population

is expected to grow to around 265 million by 2020 and 306 million by 2050. Chinese Indonesians are

an influential ethnic minority comprising 3–4% of the population.

0-14 years, 27.30%

15-64 years, 66.50%

65 and over, 6.10%

Age structure0-14 years 15-64 years 65 and over

POPULATION:

YEAR POPULATION PERCENTAGE CHANGE

2000 205.132 -1.11 %2001 207.928 1.36 %2002 210.736 1.35 %2003 213.551 1.34 %2004 216.382 1.33 %2005 219.852 1.60 %2006 222.747 1.32 %2007 225.642 1.30 %2008 228.523 1.28 %2009 231.37 1.25 %2010 237.641 2.71 %

DEMOGRAPIC CHART OF INDONESIA:

Population 245,613,043 (July 2011 est.)Median age Total 28.2 years

Male 27.7 yearsFemale 28.7 years

Population growth rate 1.069% (2011 est.)Birth rate 18.1 births/1,000 population (2011 est.)Death rate 6.26 deaths/1,000 population (July 2011 est.)Urbanization Urban population: 44% of total population

(2010)Rate of urbanization: 1.7% annual rate of

change (2010-15 est.)Infant mortality rate Total: 27.95 deaths/1,000 live

births

Male: 32.63 deaths/1,000 live births

Female: 23.03 deaths/1,000 live births (2011 est.)

Life expectancy at birth Total population: 71.33 years Male: 68.8 years Female: 73.99 years (2011 est.)

Total fertility rate 2.25 children born/woman (2011 est.)Literacy Definition: age 15 and over can

read and write Total population: 90.4% Male: 94%Female: 86.8% (2004 est.)

Maternal mortality rate 240 deaths/100,000 live births (2008)Health expenditures 5.5% of GDP (2009)

INDUSTRIAL SECTOR:

Contribution to GDP: 47% Real Sector Growth: 4.8%Main areas: Automotives, Electronics, Textiles, Footwear, Food & Beverage, Palm Oils, Metal Products, Chemicals.Employees in the Sector: 14.4 million

PHARMACEUTICAL SECTOR IN INDONESIA:

The domestic pharmaceutical industry consist mostly formulation or assembling industry. There are only a few companies classified into fully manufacturing companies and less than 5 companies producing pharmaceutical basic materials. This situation is driven by the fact that expenditures on research and development of local pharmaceutical companies are very small i.e. around 1-2% of total sales as compared to some 15-16% of multinational companies.

With a population of around 240 million people, Indonesia has been regarded as a huge potential market. The prospects of a big market have prompted domestic as well as many foreign investors to develop industries producing goods and services. The pharmaceutical industry represents one of these sectors. However, in Indonesia, as in other large developing countries, there has been a big gap between "potential" and its realization. This applies also to the pharmaceutical industry.

Not all companies operating in Indonesia have profited from the increased consumption of pharmaceutical products. Many firms are beset with difficulties amid fierce competition; however, along with the economy, the pharmaceutical industry in general has grown.

The level of healthcare in Indonesia is poor and subject to considerable regional inequalities. Maternal health is a major problem, and infant mortality is high at 27.95 in every 1,000 births. Compared with

other low-income countries, Indonesia has fallen behind in terms of investment in infrastructure and financial resources for health since the economic crisis of 1997-98. Demands on the system are increasing: demographic trends show an increasing number of people over 60 years of age, and growing migration to the cities. Average life expectancy has been rising, from 61.2 years in 1990 to 71.33 years in 2011, resulting in an increase in degenerative diseases.

The public sector’s ability to invest in healthcare provision is limited, owing to budgetary constraints. In 1998-99 Indonesia’s total health spending accounted for 1.6% of GDP, compared with an average of 4.5% of GDP in other low-income countries (World Bank data).

The government has therefore been actively promoting private healthcare provision, particularly at secondary and tertiary level.

The increasing role of the private sector in healthcare raises questions about access, although private facilities are required to provide subsidized services to the poor.

The country has recently implemented an essential drugs list, resulting in a considerable decline in the excessive use of antibiotics, multi-drug combinations and injections. State-owned companies are the main source of pharmaceuticals. Generic drugs are now produced by 4 government and 26 private companies. Essential drugs are subsidised in the public sector, and prices are controlled in the private sector. The drugs market has typically been growing by about 20% per year, but this is from a low base, and the market value in 2003 was estimated at US$ 3.7bn. Annual consumption of drugs per head was estimated at US$ 4 in 2000, significantly below the US$ 11 recorded in Thailand and Malaysia. Use of public (and private) health services is low, but a WHO report found that it was not only the prices of services and drugs that accounted for the low level of use, but also travel time and cost as well as time lost from other productive activities. Medicines are expensive relative to average incomes. There is still a buoyant market in traditional medicines, which are cheaper and readily available. Overall, the huge currency devaluation and subsequent rise in drug prices has led to a sharp fall in demand, both for prescription drugs and for over the counter products.

Government Policies On Drugs:

Indonesia can take pride in many of its achievements in pharmaceuticals policy and its management of the sector. It has a strong foundation for effective regulation of the safety and quality of medicines and has planned a program of activities to strengthen regulation of manufacture, product licensing and distribution.During the past ten years, the public finance and supply systems for pharmaceuticals have faced some major changes.

These include the decentralization of most public health services to district governments in 2001, establishment of the Askeskin/ Jamkesmas SHI scheme for the poor, the creation of Badan POM (the National Agency of Drug and Food Control) as an independent therapeutic goods regulatory agency and the introduction of competitive tendering for public procurement of medicines.

There have been changes to the regulations covering unbranded generic drug prices and the participation of foreign manufacturers in the national pharmaceutical market, while state-owned pharmaceutical manufacturers have been corporatized and partially privatized.

Drug Regulatory Authority:

At the central level, the regulatory authority for pharmaceuticals is the Directorate General of Drug and Food Control (DG DFC). Its main functions are to formulate policies and programs on drugs; to control production, distribution and utilization of drugs; and to supervise and control the supply of drugs for the public sector. In the private sector, DG DFC performs drugs registration, provides licenses for drugs imports and exports, controls drug promotion, monitors and supervises for implementation of Good Manufacturing Practices (GMP), assures the quality of drugs before and after in the market and monitors distribution of drugs. The Directorate General of Community Health Services coordinates with DG DFC to develop Standard Treatment Guidelines for primary health care.

The Indonesia Essential Drug List (EDL) is revised every three years. The revisions are a result of meetings and consultations organized by the Committee for Essential Drugs List Formulation and Revision appointed by the Minister of Health. The Indonesia EDL is stratified to reflect requirements at different levels such as hospital, primary health centers and village drug depots, while the WHO EDL is not stratified into different levels of health care. Compared to WHO EDL, the Indonesia EDL has fewer items.

Public hospitals and community health centers are obliged to use drugs on National Essential Drug List (NEDL). Use of drugs outside of the NEDL is not allowed in community health centers but is allowed in hospitals. This deviation must be approved by the hospital director and reported to the National Committee on the NEDL. Due to budget limitation the total value of these deviations should not be more than 25% by value. The private sector is not obliged to follow the NEDL. However, some private hospitals have started using the NEDL as a reference for developing their own hospital formulary.

Market size and characteristics

Indonesia has a fairly small but fast-growing pharmaceutical market, with an estimated value of USD 6.05 billion in 2010. The pharmaceutical market is projected to grow at a compound annual growth rate of 11.3%, reaching a value of USD 11.08 billion by 2015. It is expected that the market will further grow as current drug consumption per capital is relatively lower than neighbouring countries at USD 17.8 in 2010, hence there likely will be more increases in health spending in the future.

Due to a large population size and relatively strong production base, Indonesia has the potential to be a lucrative pharmaceutical market. The country has a huge generic drugs sector, which is likely to see consolidation as larger companies seek to maximize profits through acquisition of smaller domestic companies. However, it is noteworthy that part of the generics market is made up of counterfeit drugs. Over-the-counter (OTC) segment has also shown steady growth in recent years, attributed to increased self-medication and accessibility to more affordable drugs.

Majority of the local pharmaceutical companies achieved better sales growth in 2010, supported by improved macro-economic conditions and stable raw material import prices. The leading players include PT Kalbe Farma Tbk, PT Merck Tbk, and PT Kimia Farma Tbk.

Around 70% of the market volume is controlled by 35 foreign manufacturers including the world's giants Pfizer, Roche, Aventis, Novartis and Mead Johnson and local pharmaceutical companies, especially small- and medium-sized operations, face immense competitive pressures. Local manufacturers are currently unable to compete with foreign companies due to the lack of investment and research resources for inventing new medicine. Local companies can only copy the foreign companies and sell at lower prices by buying the formula and changing the name of the drugs.

To invent one new product, a multinational manufacturer can spend US$ 350 – US$ 400 million. The annual budget allocated for research can reach US$ 2.5 billion, which is higher than the Indonesian

market value. Local manufactures are a bit lifted in sales by their ability to export the cheap, copied drugs to other poor or developing countries such as Myanmar, Vietnam, Laos, Cambodia in Asia, and Nigeria and Uganda in Africa. However, the value is still small, around US$80 million per year, and mostly non-prescription drugs. Around 95% of raw material for the industry is imported, which makes the timing of import clearance very important for a company to run efficiently and compete with others, foreign or domestic. Moreover, the local industry is also threatened by cheaper, smuggled and fake products which have continued to pour into the country since 1998, usually aided and abetted by paid off officials.

RecommendationsThe new entrant to the Indonesian marketplace could initially choose to either export finishedproducts through established channels, thereby minimizing resource commitments to the market. A scale up could then follow with either setting up a pharmaceutical plant fed through raw materials produced abroad (in a captive plant or procured from third party suppliers) or by establishing a basic ingredient plant that feeds the domestic industry and markets outside of Indonesia.

Production capacity:

Pharmaceutical factories in Indonesia are "formulation" factories since most basic (active) ingredients are imported. So far the country has produced a limited quantity and few types of basic (active) ingredients.

GOVERNAMENT SUPPORT AND EXPENDETURE:

Physicians – 3 per 10000Nurse and medic – 20 per 10,000Hospital beds – 6 per 10000Total expenditure on health as a percentage of GDP -2.4%General government expenditure on health as a % of total expenditure on health -51.8%Private expenditure on health as a percentage of total expenditure on health – 48.2%Social security expend on health as a % of general government expenditure on health – 13.7% Per capita total expenditure on health (PPP $) – US $29 (Data - 2010)

The Indonesian Government has substantially increased investment in health over the last decade, mainly through demand-side financing of social health insurance. Health Policy Initiative (HPI) began work in Indonesia in May 2006.  The project provided technical assistance to address policy challenges to ensure the successful implementation of prevention, outreach, testing, care, and treatment services.  In addition, the project provided technical assistance to strengthen the capacity of the National AIDS Commission (NAC) to respond to the HIV epidemic through improved planning and resource allocation.

Top 10 Pharmaceutical Companies:

1). PT Kalbe Farma2). PT Bio Farma 3). Kimia Pharma

4). PT Sido Muncul5). Combiphar PT6). Sanofi-Aventis7). Pfizer8). Novartis9). GlaxoSmithKline (GSK)10). Bayer

ASTHMA IN INDONESIA:

The death rate of asthma and other diseases are represented in a graphical form:In Indonesia the death rate is high due to the coronary heart disease.

Coronary

heart

disease

Influenza

& pneumonia

Stroke

Lung d

isease

Tuberc

ulosis

Diabete

s mell

itus

Road tr

affic a

cciden

ts

Hypert

ensio

n

Lung c

ancer

Low birt

h weig

ht

Asthma (

21st positi

on)

0

50,000

100,000

150,000

200,000

250,000

300,000

Population in number affected by disease

Populatoin in number

SOURCE : DATA FROM WHO REPORTS

DEMOGRAPHICS OF DISEASES IN INDONESIA:

S.no Disease Population in numbers

% of total deaths death rate/100,000

1 Coronary heart disease 243,048 17.05 150.772 Influenza & pneumonia 171,323 12.02 100.58

3 Stroke 138,268 9.70 90.01

4 Lung disease 82,463 5.79 53.01(poor)

5 Tuberculosis 69,154 4.85 31.92

6 Diabetes mellitus 48,294 3.39 29.45

7 Road traffic accidents 48,074 3.37 22.60

8 Hypertension 43,805 3.07 27.80

9 Lung cancer 35,185 2.47 20.51

10 Low birth weight 34,655 2.43

11 Asthma (21st position) 14,624 1.03 8.25

According to the latest WHO data published in April 2011 Asthma Deaths in Indonesia reached 14,624 or 1.03% of total deaths. The age adjusted Death Rate is 8.25 per 100,000 of population ranks Indonesia 69 in the world.

Death % Rate Rank14624 1.03 8.25 69

Economic Report:

The below mentioned data is given according to the statistics of WHO 2011

Labour force by Occupation:Agriculture : 41 %Industry : 19 %Service : 40 %

Unemployment : 7.1 %

Economic 2011 2010 2009

GDP (US $ billion nominal) 822.63 706.73 538.45

% Real Growth 6.6 5.8 4.4

% Inflation 4.2 4.4 4.6

Per capita (US $ PPP) 4,666 4200 3900

Demographic 2011 2010 2009

Population 245,613,043 237,560,000 229,960,000

% Growth Rate 1.07 1.07 1.0

% Under 15 years 27.7 27.04 27.36

% 15 – 64 years 66.2 67.41 67.17

% 65 years 6.1 5.55 5.47

Pharmaceutical Market 2011 2010 2009

Value at retail price (US $ billions) 4.4 4 3.63

% Growth rate 10 10 10

Respiratory drug market(US $ mn) 221 170 155

Health expenditure 2011 2010 2009

Total (US $ billions) 20 17 13

% Government 53.9 52.2 51.82

% Private 46.1 47.8 48.18

% GDP 2.4 2.4 2.36

Per capita (US $PPP) 121 110 99

Source: According to the data of WHO

STATISTICS:GDP (nominal) - US $ 845.680 billion (2011 EST)Gross national per capita income – US $ 4666GDP Service - 37.6% of GDPGDP Agriculture - 15.3% of GDPGDP Manufacturing - 47.1% of GDPLabour force: 120 million

SWOT Analysis: (investors)

Strengths:

Indonesia being the 4 largest populated countries had high supply of low cost labour. Indonesian policies of dismantling monopoly and liberalization regulation policies to

attract more FDI’s. Pharmaceutical industry has been recording double digit growth rate over the years

making country most attractive destination. Wide distribution network of 11,000+ pharmacies.

Weakness:

Low disposable income of large section of the population. No private insurance and No reimbursement policy. Smuggling of goods takes place which is head wind to the government. Indonesian government policies are complex, with excessive bureaucracy and

unqualified human resource and poor infrastructure created unhealthy environment for investments.

Lack of health care policy and low health care expenditure among south east nations.

Opportunity:

Privatization of many state owned enterprises in respective to attract more private investment.

Relied on API imports. About 90% of API’s are being imported into the country because of the fact of lack of proper manufacturing facilities.

Removal of pharmaceutical industry from negative investment list. Trade liberalization among association of ASEAN countries. Indonesia is one of the leading exporters of palm oil and thermal coal.

Threats:

High currency fluctuations lead Indonesia as Asia’s one of the riskier destination. Trade agreements across ASEAN countries like china poses threat of entering FDI. Policy regulations of 75 % cap of investment and should need local partners for

manufacturing goods. Well established local industry, with domestic market accounts for 70% of production. High competition exists.