SERVICE WITH CHARACTER TO CREAT CUSTOMER VALUE
IN INDONESIA PHARMACEUTICAL INDUSTRY PART 2
Moch
INDONESIA SURVEY SUMMARY AND KEY
ECONOMIC STATISTICS
Asia Pacific/Indonesia Equity Research Consumer Discretionary / Consu...
INDONESIA CONSUMER SURVEY
Asia Pacific/Indonesia Equity Research Consumer Discretionary / Consumer Staples
KEY THEMES FROM INDONESIA CONSUMER
•Indonesians are the second most confident people after Brazilians,
with 64% of respond...
The evolving Indonesian consumer | Mc Kinsey November 2013
INDONESIA’S PROPOSED ROAD MAP TO
UNIVERSAL HEALTH COVERAGE
• The Indonesian government is committed to
introducing univers...
INCREASING TREND OF HEALTH EXPENDITURE
AS A PERCENTAGE OF GDP
Asia Pacific/Indonesia Equity Research Consumer Discretionar...
ACCESS TO STATE HEALTHCARE DECLINING
Asia Pacific/Indonesia Equity Research Consumer Discretionary / Consumer Staples
HEALTH INSURANCE COVERAGE IN INDONESIA,
BY PROGRAMME, 2011
SOUTHEAST ASIAN ECONOMIC OUTLOOK 2013: WITH PERSPECTIVES ON CHI...
HEALTHCARE SECTOR
Asia Pacific/Indonesia Equity Research Consumer Discretionary / Consumer Staples
HOW MUCH EXTRA WOULD YOU BE WILLING TO PAY
FOR AN INTERNATIONAL MEDICINE BRAND, RATHER
THAN A LOCALLY
PRODUCED PRODUCT?
As...
HEALTH INSURANCE PROGRAMMES IN
INDONESIA
Source: OECD Development Centre’s compilation based on ILO Social Security Depart...
HEALTH INSURANCE COVERAGE IN INDONESIA,
2012
Source: Republic of Indonesia 2012. Road Map toward National Health Insurance...
ELEMENTS OF INDONESIA’S NATIONAL HEALTH
INSURANCE SYSTEM
Source: Republic of Indonesia 2012. Road Map toward National Heal...
INDONESIA’S HEALTHCARE SECTOR
http://www.gbgindonesia.com/en/services/article/2013/indonesia_s_healthcare_sector.php
Expan...
THE EVOLVING INDONESIAN CONSUMER
The consuming
class—55 million
urban and 15 million
rural Indonesians—
are the most
comme...
CUSTOMER BEHAVIOR IN INDONESIA – 9
TRENDS
Marketeers Dinner Seminar|Customer Insight Tools | Feb 27-29 2012
Service with character to creat customer value in indonesia pharmaceutical industry part 2
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Service with character to creat customer value in indonesia pharmaceutical industry part 2

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  • Since 2005, there is a government-funded healthcare scheme operating for the poor—Jamkesmas—which provides drugs from the Essential Drug List (EDL). There is also ahealth insurance scheme, Askes, which reimburses drugs from the broader DaftarPlafonHargaObat (DPHO). Prices are not the same under each programme, and manufacturersof branded drugs can now price their products only up to 3x the price of molecules whichare listed on the EDL.Doctors dominate the medicine-brand decision-making in Indonesia, while the patient onlydecides 18% of the consumption by self. Poly pharmacy is popular with multiple scriptsfrom doctors and high sales of antibiotics. Hospitals earn fees from dispensing and doctorsalso receive financial incentives for prescribing.
  • Only a small number of people expect to spend more on medicine in 2013, according toour survey. Our survey also found that people in the middle income group are willing topay more for international brands of medicineThe top 15 corporations account for around 55% of the market and multinationals accountfor around 33% of sales, slightly lower than five years ago due to growth in the localgenerics industry, part of which is state-owned.
  • Expansion of health insuranceIn the past, private health insurance was viewed as a luxury enjoyed by the top tier incomeearners (See An Overview of Indonesia’s Health Insurance Sector), yet greater awareness ofhealth and the rise of non-communicable diseases in cities is seeing a change in thisattitude. At the same time, the promised expansion of public coverage empowers tens ofmillions of low-income Indonesians to receive health benefits they could otherwise notafford, thus massively expanding the health market customer base. Law No. 40/2004 onNational Social Security (SJSN) and Law No. 24/2011 on Social SecurityProviders (BPJS)mandate that universal healthcare coverage be phased in from 2014 onwards. The lawseffectively extend coverage to all those Indonesians who are not currently insured byprivate insurers or the patchwork of existing public programmes, which is more than a thirdof the totalpopulation (IMF).Public healthcare brings opportunities for private providersCapacity constraints, however, could cause delays in the implementation of these plans.With many public hospitals and health centres already running at high occupancy andstruggling to find enough qualified doctors, nurses and other staff, it is hard to see howthey would cope with the extra burden. The universal health insurance policy aims toafford every Indonesian comprehensive albeit basic care so the government will need toinvest heavily in public hospitals to make good on its promises to the newly insured.Private healthcare providers may have limited interest in serving these patients, since theirstate insurance scheme will only go so far in allowing for costly procedures. Thegovernment reportedly plans to spend only 15,500 RP per month on insurance for lowincomebeneficiaries, a figure that experts have called too low to cover treatments likecancer therapy or heart surgery. That said, many patients will demand faster treatment,more modern equipment, or fancier hospital rooms than public insurance will provide. Therun on basic services will lead to crowdedness and may drive some customers upmarket insearch of more personal and dedicated care. National health insurance should thereforepose no threat to higher-margin premium healthcare, financed out-of-pocket or throughprivate insurance; quite the contrary, in fact.Hospitals and equipmentThe combined force of political and economic factors driving demand in the healthcaresector follows decades of underinvestment, which leaves lots of room for growth. Per-capitaspending on healthcare in Indonesia lags behind other emerging economies, including thePhilippines. Total expenditure in Indonesia according to the World Health Organization(WHO) amounted to 2.7% of GDP in 2011, which is among the lowest in the world andcompares to 3.9% inIndia, 4.1% in the Philippines and more than 8% in South Africa andBrazil. Due to the lack of investment in the past, existing facilities now need to be upgradedor replaced, while new ones need to be added on a grand scale. The need for additionalhospitals and health centres is particularly pressing outside of Java and the main urbancentres, since many of the newly insured citizens reside in the less industrial regions.While the universal insurance policy creates obvious demand for affordable inpatienttreatment, attractive business opportunities also wait to be unlocked in the upper end of themarket. An estimated 1.2 million Indonesians fly to Singapore, Malaysia and elsewhereevery year for high-quality healthcare (Ministry of Tourism & Creative Economy). With aneye on this high-margin market, Siloam International Hospitals, the country’s biggestprivate hospital operator, in September 2013 confirmed plans to build dozens of newhospitals within five years.The anticipated hospital building boom naturally opens up opportunities for suppliers ofequipment from hospital beds to patient monitoring systems. To date, up to 97% ofIndonesia’s medical equipment demand is being met by imports equating to $493.3 millionUSD in 2011 (Espicom). While local Indonesian manufacturers have secured a positionwithin basic medical goods such as hospital furniture and bandages, foreign suppliers arerelied upon for more sophisticated medical and surgical instruments such as medical lasersand diagnostic equipment. The rise of non-communicable diseases is also spurring demandfor more advanced treatments such as hemodialysis equipment and cancer therapiesincluding High Intensity Focused Ultrasound and Radio Immunotherapy.Medical equipment suppliers within these areas are advised to cooperate with localIndonesian distributors to take advantage of their nationwide marketing networks as wellas overcoming import licensing obstacles. In December 2012, the Ministry of Healthintroduced e-Regalkes or the Medical Device Registration and Household Health Suppliesplatform to streamline the process of licensing medical devices in Indonesia howeverchallenges still remain. Crucial to success in the Indonesian medical equipment sector willbe the ability to offer affordability as state health providers seek to control costs in the faceof booming demand from the introduction of the universal social security system.Generic drugs in high demandThe government must seek to keep costs of universal healthcare within budget limits and itcan be expected to act accordingly in choosing medication covered by the nationalprogramme. This should provide highly attractive growth opportunities for producers ofgeneric prescription drugs (See Opportunities in the Pharmaceutical Sector). Whileconsumers may prefer branded drugs to generic ones, for the government price andquantity will be the order of the day when it comes to supplying millions of new marketentrants. The urge to source large quantities of low-cost drugs puts pressure on thegovernment to erode patent protection in some cases, which is perceived as a threat byglobal pharmaceutical firms. However, it can be assumed that the universal healthcarepolicy will create additional demand for medicine in the lower-end market rather thansubstitution of brand-name products with genericones as most of the new patients werepreviously unable to afford expensive medicines.Quality control will be crucial for the development of Indonesia’s generic drug industrywhich still sources most ingredients from abroad. Demand for branded products shouldcontinue to grow strongly, particularly for over-the-counter items as many consumers viewbrands as a guarantor of quality. Indonesian pharmaceutical companies should be receptiveto foreign equity participation and joint ventures including research as they prepare forintensified competition within the ASEAN Economic Community. Such alliances allowforeign companies to tap into established distribution networks of local firms.Staffing challenge in itself an opportunityThe shortage in qualified professionals is one of the greatest obstacles to the growth ofIndonesia’s healthcare sector. WHO data for the 2005-2012 period shows that the countryonly has 2 physicians per 10,000 people, compared to 6.5 in India and 12 in neighboringMalaysia. The problem is largely of Indonesia’s own making as the law sets highlyrestrictive conditions for foreign doctors to practice in Indonesia. The government mayeventually need to soften its policy somewhat to enable public and private healthcareproviders to staff new facilities and operate sophisticated equipment. Investors, in themeantime, could turn the human resource shortage into an opportunity for professionaltraining, possibly in liaison with local universities (See Partnership & InvestmentOpportunities in Education).
  • “Deals help justify unnecessary consumption”“Faster product adoption leads to shorter lifecycle”“Instant and experiential are no longer oxymoron”“Idealism is natural counterbalance to consumerism”“Local is the new sexy”“I connect, therefore I am”“Good life makes you have something to lose”“Making choices feels good”“My lifestyle doesn’t mean I’m not in shape (denial mode)”
  • Service with character to creat customer value in indonesia pharmaceutical industry part 2

    1. 1. SERVICE WITH CHARACTER TO CREAT CUSTOMER VALUE IN INDONESIA PHARMACEUTICAL INDUSTRY PART 2 Moch
    2. 2. INDONESIA SURVEY SUMMARY AND KEY ECONOMIC STATISTICS Asia Pacific/Indonesia Equity Research Consumer Discretionary / Consumer Staples
    3. 3. INDONESIA CONSUMER SURVEY Asia Pacific/Indonesia Equity Research Consumer Discretionary / Consumer Staples
    4. 4. KEY THEMES FROM INDONESIA CONSUMER •Indonesians are the second most confident people after Brazilians, with 64% of respondents expecting a better income outlook over the next 12 months and 40% expecting a better personal finace outlook over the next six months Confidence and optimism continue to remain robust •This year, more respondents said that their income has increased in the past 12 months. Despite that, they expect to get a higher income in the next 12 months. We view this in line with the increase in minimum wages in 2014 Higher income growth and expecting further hike •This year spending on discretionary items increased more than that on essentials Shift towards higher discretionary spending continues •We found that indonesians prefer local brands for essential items. However, appetite for foreign brands is higher for discretionary items such as fashion apparel and cosmetics, especially among high income earners Consumer preferences lean towards local brands for essentials Asia Pacific/Indonesia Equity Research Consumer Discretionary / Consumer Staples
    5. 5. The evolving Indonesian consumer | Mc Kinsey November 2013
    6. 6. INDONESIA’S PROPOSED ROAD MAP TO UNIVERSAL HEALTH COVERAGE • The Indonesian government is committed to introducing universal health coverage (UHC) by 2019 to cover a projected population of 257.5 million • Currently, around 63 per cent of the population, or 151.5 million people, are covered by some form of health insurance. • Universal health coverage (UHC) AusAID KNOWLEDGE HUBS FOR HEALTH, Number 33 July 2013
    7. 7. INCREASING TREND OF HEALTH EXPENDITURE AS A PERCENTAGE OF GDP Asia Pacific/Indonesia Equity Research Consumer Discretionary / Consumer Staples
    8. 8. ACCESS TO STATE HEALTHCARE DECLINING Asia Pacific/Indonesia Equity Research Consumer Discretionary / Consumer Staples
    9. 9. HEALTH INSURANCE COVERAGE IN INDONESIA, BY PROGRAMME, 2011 SOUTHEAST ASIAN ECONOMIC OUTLOOK 2013: WITH PERSPECTIVES ON CHINA AND INDIA © OECD 2013
    10. 10. HEALTHCARE SECTOR Asia Pacific/Indonesia Equity Research Consumer Discretionary / Consumer Staples
    11. 11. HOW MUCH EXTRA WOULD YOU BE WILLING TO PAY FOR AN INTERNATIONAL MEDICINE BRAND, RATHER THAN A LOCALLY PRODUCED PRODUCT? Asia Pacific/Indonesia Equity Research Consumer Discretionary / Consumer Staples
    12. 12. HEALTH INSURANCE PROGRAMMES IN INDONESIA Source: OECD Development Centre’s compilation based on ILO Social Security Department, www.ilo.org/dyn/ ilossi/ssimain.schemes?p_lang=en&p_geoaid=360; Widjaja and Simanjuntak (2010); OECD, 2010a.
    13. 13. HEALTH INSURANCE COVERAGE IN INDONESIA, 2012 Source: Republic of Indonesia 2012. Road Map toward National Health Insurance, 2012-2019 * These recipients are expected to increase from 76.4 million to 86.4 million in 2013 as part of the transition to universal coverage (Faizal 2013)
    14. 14. ELEMENTS OF INDONESIA’S NATIONAL HEALTH INSURANCE SYSTEM Source: Republic of Indonesia 2012. Road Map toward National Health Insurance, 2012-2019
    15. 15. INDONESIA’S HEALTHCARE SECTOR http://www.gbgindonesia.com/en/services/article/2013/indonesia_s_healthcare_sector.php Expansion of health insurance Public healthcare brings opportunities for private providers Hospitals and equipment Generic drugs in high demand Staffing challenge in itself an opportunity
    16. 16. THE EVOLVING INDONESIAN CONSUMER The consuming class—55 million urban and 15 million rural Indonesians— are the most commercially attractive segment Indonesian cites are at different levels of consumerism driven by the ability and propensity to consumer While traditional retail channels dominate, modern retail continues to gain ground Indonesians strongly prefer and trust local brands, and the Consuming class is driving growth in new emerging categories http://csi.mckinsey.com/Home/Knowledge_by_region/Asia/Rest_of_Asia/Indonesian_consumer_2013.aspx
    17. 17. CUSTOMER BEHAVIOR IN INDONESIA – 9 TRENDS Marketeers Dinner Seminar|Customer Insight Tools | Feb 27-29 2012
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