Indonesia Pharmaceuticals 2015 INDONESIA PHARMACEUTICALS 2015

Manufacturing | Regulatory Framework | Research and Development Export | Distribution | Economy Dear Readers,

As a chief economy in the Association of South East Asian Nations (ASEAN), Indonesia holds exciting potential and excellent opportunities for pharmaceuticals production and health care infrastructure development. The pharmaceuticals industry was a major driver of the nation’s 5.8% GDP growth in 2014, when the industry grew by 7% and reached a total value of $6 billion. It is expected to grow 12% in 2015.

The investment landscape of Indonesia has grown at rapid pace in recent years, inviting both domestic and multinational players to gain from this growing market. When the market opened to multinationals in the 1960s, capital investment targeted both research and development initiatives and infrastructure development. Today, opportunities exist across the industry’s value chain, from manufacturing, raw materials, services, and exports to imports of finished dosages and distribution through partnerships.

The election of the President Joko Widodo in 2014 will have a positive impact on the health care industry. The Indonesian government is already planning to increase its spending on the industry in the 2015 financial year. A financially stable environment is sure to improve health care through the pharmaceuticals industry and is an integral part of Indonesia’s economic and social development. While the existing infrastructure provides a solid foundation for continued business growth, Jokowi’s government has also implemented Jaminan Kesehatan Nasional (JKN), Indonesia’s program of universal health care coverage.

The excitement and dynamism that we encountered during our 11 weeks in Indonesia was palpable, and we are delighted to present to readers an in-depth account of the investment opportunities in the country’s pharmaceuticals sector. By listening to the voices and business activities of private companies, government, and associations in the following pages, you will get a sense not only of the trends and dynamics on the ground but the spirit of optimism that pervades all levels of the value chain.

Finally, we would like to thank all of our interviewees and the companies, associations, and individuals who were so helpful to us during our stay and made our time in Indonesia an unforgettable experience.

Vanessa Acuna Chapela Project Director

Neha Premjee Journalist

Bryce Stevenson Journalist Dear Readers,

Vanessa Acuna Chapela Project Director

Neha Premjee Journalist

Bryce Stevenson Journalist CONTENTS Exclusive Interviews Leading industry and government figures from Indonesia’s pharmaceuticals industry discuss market trends and opportunities, as well as strategies for the future.

10, 11, 20, 30, Poised for Prominence: Beyond the Laboratory: The Indonesian Pharmaceuticals Supply Chain Dynamics, Equipment, 32, 42, 52, and Industry and Distribution more

8. Introducing Indonesia: A Brief Political 50. Supplying the Mainstream: and Economic Overview Opportunities within Indonesia’s Editorial 10. Interview with Ministry of Health, Service Sector Analysis 52. Interview with Tigaka Distrindo Perkasa Republic of Indonesia Global Business Reports’ journalists provide (TDP) 11. Interview with National Board unique insights into all aspects of the 54. Interview with Ekacitta Dian Persada Indonesian Pharmaceutical Association pharmaceuticals value chain by working on 55. Interview with GaiaScience Indonesia (GP. Farmasi Indonesia) the ground for weeks and meeting face to

56. Interview with Tetra Pak Stainless Medan 12. Opportunities Abound in Indonesia’s face with industry leaders. Pharmaceutical Landscape Equipment, Indonesia 58. Interview with BSN Medical Indonesia 60. The Distribution of Indonesian Palembang New Governance, Changing Pharmaceuticals: Navigating a Complex 12, 18, 24, 36, Ujungpandang

Jakarta Regulations Geodemographic Semarang Bandung 63. Interview with Merapi Utama Pharma 46, 50, 60 Surabaya 18. Indonesia’s Regulatory Framework: 64. Interview with Anugerah Argon Medica Expanded Access to Health Care and a 65. Interview with Anugerah Pharmindo Focus on Continuous Improvement Lestari (APL) INVESTMENT IN INDONESIAN PHARMACEUTICALS 20. Interview with National Agency for Drug QuantitativeSource: Indonesia Investment Coordinating Board, 2014 Data and Food Control (BPOM) Into the Future FDI ($ MILLIONS) DDI ($ MILLIONS) TOTAL 21. and Maps Ernst & Young Indonesia (EY) 240 Maps and quantitative data highlight and 220 68. Future Outlook clarify the key trends in the circumpolar Market Composition and 70. Company Index 200 region180 in the six individual jurisdictions 71. Credits Production Units: analyzed160 in this report.

Indonesian Players Today 140

120 24. Multinational Penetration Among a 100 Strong Suite of Indonesian Players: 8,80 9, 12, 13, 14, 60 The Factors Enabling Multinational 40 25, 61

Companies to Thrive 20 Interview with Novo Nordisk Indonesia 26. 2010 2011 2012 2013Thru Q3 2014

27. Interview with Sanofi Group Indonesia PALAU ISLANDS THAILAND

28. Interview with DSM Nutritional PHILIPPINES Products Indonesia Indonesia MALAYSIA BRUNEI 30. Interview with Genero Pharmaceuticals ACEH 32. Interview with ACG Indonesia Indonesia is the fourth Medanlargest country by Pacic Ocean population in the world and home to great 33. Interview with GE Healthcare Life MALAYSIA SUMATERA diversity. GBR introducesUTARA readers to this Sciences RIAU KALIMANTAN TIMUR 34. Interview with Menjangan Sakti, Mensa dynamic and increasingly global jurisdiction. SULAWESI UTARA

Group KALIMANTAN BARAT SUMATERA BARAT Interview with Kimia Farma KALIMANTAN TENGAH SULAWESI TENGAH 35. JAMBI SULAWESI MALUKU SELATAN 36. The Evolution of Pharmaceutical Palembang SUMATERA KALIMANTAN SELATAN SULAWESI Manufacturing in Indonesia: 1966 – SELATAN TENGGARA 8-9 BENGKULU IRIAN JAYA Present Ujungpandang LAMPUNG JAKARTA 39. Interview with Pharos RAYA PAPUA Jakarta NEW GUINEA 40. Interview with Interbat JAWA BARAT Semarang Bandung JAWA MALUKU TENGAH Surabaya 42. Interview with Soho Global Health This research has been conducted by Vanessa Acuna Chapela, JAWA TIMUR NUSA TENGGARA BARAT YOGYAKARTA Interview with Actavis Indonesia Neha Premjee, and Bryce Stevenson BALI 43. Edited by John V. Bowlus 44. Interview with Sunthi Sepuri Graphic design by Gonzalo Da Cunha Future NUSA TENGGARA TIMUR East Timor 45. Interview with Combiphar A Global Business Reports Publication Outlook Indian Ocean 46. An Unsaturated Market: Exploring For updated industry news from our on-the-ground teams GBR’s journalists highlight three future Barriers to Entry for New Players around the world, please visit our website at gbreports.com, subscribe to our newsletter by signing up to our VIP list trends that will shape the Indonesia AUSTRALIA 4 7. Interview with Chemco Prima Mandiri through our website, or follow us on Twitter: @GBReports pharmaceuticals industry in the coming INDONESIA AT A GLANCE Source: CIA World Factbook

years Population: 253,609,643 (July 2014 est.) Capital: Jakarta Chief of State: President Joko Widodo (takes ofce 20 October 2014) Religions: Muslim 87.2%; Christian 7%; Roman Catholic 2.9%; Hindu 1.7%; other, including Buddhist and Confucian, 0.9%; unspecied 0.4% (2010 est.) GDP (ofcial exchange rate): $867.5 billion (2013 est.) GDP – Real Growth Rate: 5.3% (2013 est.) GDP per Capita: $5,200 (2013 est.) Economic Sector Breakdown: Agriculture: 14.3%; 68 Industry: 46.6%; Services: 39.1% (2013 est.) Exports: $178.9 billion (2013 est.): Oil and Gas, Electrical Appliances, Plywood, Textiles, Rubber Imports: $178.6 billion (2013 est.): Machinery and Equipment, Chemicals, Fuels, Foodstuffs. Major International Trade Partners: China, Japan, Singapore, South Korea, United States, Malaysia, India, Thailand INDONESIA PHARMACEUTICALS 2015 $867.5 billion 5.3% $5,200 GDP GDP GDP PER CAPITA Ofﬁcial Exchange Rate 2013 Real Growth Rate 2013 2013

Source: CIA World Factbook Source: CIA World Factbook Source: CIA World Factbook CONTENTS Exclusive Interviews Leading industry and government figures from Indonesia’s pharmaceuticals industry discuss market trends and opportunities, as well as strategies for the future.

10, 11, 20, 30, Poised for Prominence: Beyond the Laboratory: The Indonesian Pharmaceuticals Supply Chain Dynamics, Equipment, 32, 42, 52, and Industry and Distribution more

Indonesian Players Today 140

120 24. Multinational Penetration Among a 100 Strong Suite of Indonesian Players: 8,80 9, 12, 13, 14, 60 The Factors Enabling Multinational 40 25, 61

Companies to Thrive 20 Interview with Novo Nordisk Indonesia 26. 2010 2011 2012 2013Thru Q3 2014

27. Interview with Sanofi Group Indonesia PALAU ISLANDS THAILAND

Source: CIA World Factbook Source: CIA World Factbook Source: CIA World Factbook Poised for Prominence: The Indonesian Pharmaceuticals Industry

“The story of Indonesia’s pharmaceutical industry dates back to 1966, when the government opened the market to multinationals...Today, the industry’s rules are increasingly more stringent so as to comply with international standards. Of the roughly 200 pharmaceutical companies with operations in Indonesia, 90 percent will be able to survive implementation of newer regulations. When compared to countries such as India or China, where 50 percent of companies are lost when new regulations are implemented, this is significant.”

- Dr. Johannes Setijono, Chairman, National Board Indonesian Pharmaceutical Association (GP. Farmasi Indonesia)

Image: Genero Poised for Prominence: The Indonesian Pharmaceuticals Industry

- Dr. Johannes Setijono, Chairman, National Board Indonesian Pharmaceutical Association (GP. Farmasi Indonesia)

Image: Genero PALAU ISLANDS THAILAND

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MALAYSIA BRUNEI ACEH Introducing Medan Pacic Ocean Indonesia MALAYSIA SUMATERA UTARA RIAU KALIMANTAN TIMUR SULAWESI UTARA

A Brief Political and Economic Overview KALIMANTAN BARAT SUMATERA BARAT KALIMANTAN TENGAH SULAWESI TENGAH JAMBI SULAWESI MALUKU SELATAN Palembang SUMATERA KALIMANTAN SELATAN SULAWESI SELATAN TENGGARA BENGKULU IRIAN JAYA Ujungpandang LAMPUNG JAKARTA RAYA PAPUA Jakarta NEW GUINEA JAWA BARAT Semarang Bandung JAWA MALUKU TENGAH JAWA Surabaya TIMUR NUSA TENGGARA BARAT YOGYAKARTA BALI

NUSA TENGGARA TIMUR East Timor

Indian Ocean

AUSTRALIA

2014 marked a major political transition the army like his electoral rival, Prabowo appointment, as he had lead in some potential for growth: 90% of raw mate- Despite Yudhoyono’s authoritarian rule, INDONESIA AT A GLANCE for Indonesia, as the country elected a Subianto, which further adds to his cre- polls by as much as 30% at one point. rials are imported. Unlike energy, pro- the country instituted a program of rapid Source: CIA World Factbook new president, Joko Widodo. Susilo dentials as a potentially transformative The former governor of Jakarta, Widodo ducing raw materials is something that decentralization, and one of the chief Bambang Yudhoyono, a former army leader. In this respect, the country’s was especially popular with urban and Indonesia’s growing and dynamic econ- frustrations of companies is that local Population: 253,609,643 (July 2014 est.) Capital: Jakarta officer, had won Indonesia’s first direct non-violent transition from Yudhoyono young constituents during the campaign omy could begin to tackle on its own. governments interpret and apply laws Chief of State: President Joko Widodo (takes ofce 20 presidential elections in 2004 and was to Widodo is a victory for Indonesia’s fu- and promised to fight corruption and to Indonesia now faces a pressing need to differently. The new government has October 2014) reelected in a landslide in 2009. Yudhoy- ture, regardless of political stripes. harness education and technology to increase energy generation capacity (see since taken steps to centralize authority Religions: Muslim 87.2%; Christian 7%; Roman Catholic 2.9%; Hindu 1.7%; other, including Buddhist ono is considered to have ruled effec- However, Widodo’s campaign magic will build a better future for Indonesia, but Global Business Reports’ November in Jakarta once again, and Widodo’s fo- and Confucian, 0.9%; unspecied 0.4% (2010 est.) tively and authoritatively, but was barred likely fade after he is sworn into office ushering in this vision will be challenging 2014 Industry Explorations on the power cus on education and technology could GDP (ofcial exchange rate): $867.5 billion (2013 est.) GDP – Real Growth Rate: 5.3% (2013 est.) from standing for office again in 2014. in October 2014 and begins to face the to execute. and mining industries in Indonesia). Pow- streamline and clarify the country’s reg- GDP per Capita: $5,200 (2013 est.) The leadership change may also bring far more difficult balancing act of gov- Going forward, Indonesia is set to grow ering remote, rural communities that are ulatory regime and encourage more re- Economic Sector Breakdown: Agriculture: 14.3%; about a new style of leadership than the erning. His party, the Indonesian Demo- demographically and economically, and off the grid presents will go hand in hand search-intensive pharmaceuticals man- Industry: 46.6%; Services: 39.1% (2013 est.) Exports: $178.9 billion (2013 est.): Oil and Gas, top-down approach of the past ten years. cratic Party-Struggle (PDI-P), holds only all Indonesians are set to be covered with the country’s economy growth and ufacturers. The reforms will certainly Electrical Appliances, Plywood, Textiles, Rubber During the campaign, Widodo endeared 37% of parliament, while the opposition by the national health care insurance the prospects for the pharmaceuticals create a more informed citizenry, who Imports: $178.6 billion (2013 est.): Machinery and himself to ordinary citizens by being ac- party of Subianto controls a majority. program, while more citizens are climb- industry. can push the pharmaceuticals indus- Equipment, Chemicals, Fuels, Foodstuffs. Major International Trade Partners: China, Japan, cessible and eager to listen to their sto- Moreover, Widodo’s 53% victory in the ing the ranks into the middle and upper The second major hurdle is distributing try to recreate safer and more efficient Singapore, South Korea, United States, Malaysia, India, ries and views. Widodo is also not from presidential election was actually a dis- classes every year, all of which will cre- pharmaceuticals to all corners of the ar- drugs. Thailand ate a more dynamic and valuable sector. chipelago. Indonesia is by nature a dis- By all measures, the Indonesia pharma- However, historical and structural chal- parate grouping of peoples owing to its ceuticals sector offers investors a bright lenges remain. Indonesia has a historic geography, and, in the past, centraliza- outlook, as the broader economy is per- $867.5 reliance on commodities and natural tion has produced the greatest economic forming admirably. History and structural resources, which dates back to its colo- welfare for its citizens, at least according constraints will not disappear overnight, 5.3% nial experience under the Dutch and its to those in Jakarta. In such a country, but for those willing to brave the consid- $5,200 billion relationship with Royal Dutch Shell in infrastructure is key, but, according to erable challenges and partner with the GDP GDP the nineteenth and first half of the twen- the World Economic Forum, Indonesia country’s strong local companies, the GDP PER CAPITA Ofﬁcial Exchange Rate 2013 Real Growth Rate 2013 tieth centuries, and this dynamic limits ranked 82nd in quality of overall infra- rewards are already palpable and could 2013 Source: CIA World Factbook Source: CIA World Factbook the country’s pharmaceuticals sector’s structure in 2013. be enormous in the long-term. • Source: CIA World Factbook

INDONESIA PHARMACEUTICALS 2015 - 8 - Industry Explorations Industry Explorations - 9 - INDONESIA PHARMACEUTICALS 2015 PALAU ISLANDS THAILAND

EDITORIAL Global Business Reports Global Business Reports PHILIPPINES EDITORIAL

MALAYSIA BRUNEI ACEH Introducing Medan Pacic Ocean Indonesia MALAYSIA SUMATERA UTARA RIAU KALIMANTAN TIMUR SULAWESI UTARA

NUSA TENGGARA TIMUR East Timor

Indian Ocean

AUSTRALIA

INDONESIA PHARMACEUTICALS 2015 - 8 - Industry Explorations Industry Explorations - 9 - INDONESIA PHARMACEUTICALS 2015 INTERVIEW Global Business Reports Global Business Reports INTERVIEW

Can you walk us through the evolution implementer or executor. We need the maceutical companies with operations dominate the bulk of Indonesia’s $6 bil- Dr. Maura Linda of the pharmaceutical sector in Indone- industry to be viable, so that it can pro- Dr. Johannes in Indonesia, 90 percent will be able to lion pharmaceutical industry. Out of In- sia? duce medicines; quality products should survive implementation of newer regula- donesia’s 210 manufacturers, 40 to 50 Sitanggang The industry started a long time ago. be the focus here. However, companies Setijono tions. When compared to countries such control 80 percent of the market. The Our strength in producing medicines need to be thinking about invention and as India or China, where 50 percent of remaining 160 or so medium and small- is growing and growing. For formula- innovation as well. We are trying to cre- companies are lost when new regulations sized companies command 20 percent. tions, our local companies are covering ate incentives, like tax deductions, for are implemented, this is significant. Most Indonesian manufacturers are cur- about 90% of the market; however, for those who would like to develop APIs rently operating at capacity. To account Director General of Pharmaceutical raw materials, we have a weak struc- and raw materials. At least we are not Chairman, National Board What is the mix of multinational and for this, companies have anticipated de- Services and Medical Devices ture, which we need to be willing to 100% dependent on imports. If that Indonesian domestic companies in Indonesia? mand and steadily built their infrastructure Ministry of Health, transform into something stronger. We were the case, someday we could have Pharmaceutical Domestic companies claim roughly 70 over the last two to three years to meet Republic of Indonesia need more research-based companies a shortfall of medicines. To protect Association percent market share in Indonesia, which the industry’s growth potential. Indonesia because without innovation, there is no against this, we have to develop the in- (GP. Farmasi Indonesia) is one of the few countries in Asia to have has planned ahead for growth and is well development. Rather than just manufac- ternal capabilities. this strong of a domestic presence. Multi- equipped to handle increases in activity. turing and formulating, they can start to national companies have had success in develop their own products. Today, more than 90% of APIs and Indonesia’s larger cities, but in more rural Manufacturers seem to be well po- raw materials are imported; how do areas, domestic companies drive the mar- sitioned to capitalize on Indonesia’s Within the four pillars for pharmaceu- you see this figure changing? Is it ket. The remoteness of rural Indonesia growing pharmaceutical sector. How well ticals, can you describe how the Min- economically feasible for companies and the country’s diversity of languages prepared are other stakeholders, such as istry of Health promotes the industry? to begin manufacturing their own raw have proven to be difficult factors for distributors and retailers? For access, we have our mandate in materials? multinationals to navigate. Additionally, Indonesia has many small pharmaceutical the law that says that the government At the moment, they think it is not eco- domestic companies dominate the mar- distributors that have been able to sur- is responsible for access to medicines, nomically feasible, but there are three ket for over-the-counter (OTC) products. vive, historically, due to relationships with especially essential medical services. selections to think about. One is mole- 40 percent of Indonesia’s pharmaceutical specific regional governments and hospi- We also have national insurance and cule selection, which we actually have a market is OTC, whereas in other countries tals. The distribution segment of the phar- health care, which has a huge effect lot of here in Indonesia. The second is this figure would be 10 to 15 percent. maceutical industry will need to change on the country. For the public sector, economic growth, so probably we will direction in order to be successful with all it is more about primary health care. In see the network of pharmacies con- What is the competitive landscape for of the changes currently underway in the Indonesia, we have provinces and dis- tinue to grow, as well as the consump- multinationals in Indonesia? industry. GP Farmasi helps in this capac- tricts, and for a long time we have been tion of medicines. If we have the raw Please provide a brief overview to GP Most of the world’s large-scale, multina- ity, as it arranges symposiums that coordi- putting pharmaceuticals warehouses in materials available in Indonesia and the Farmasi and the role that it plays in tional companies are already in Indonesia. nate how manufacturers, distributors, and each district; so, the infrastructure is al- right economic conditions, then why not Indonesia’s pharmaceutical industry. There is high demand from multinationals retailers should address these changes. What is the Ministry of Health’s role in ready there for distribution in the public try to produce the raw materials? This is GP Farmasi is an association of stakehold- that are medium and small-sized in scope Retailers need to change their business supporting the development of Indone- sector. For the private sector, of course, a situation where the economy of scale ers within Indonesia’s pharmaceutical in- to enter, as they look to acquire domestic models as well. There are around 20,000 sia’s pharmaceutical sector? we have the factories, the distributors, will make it viable. dustry. Our membership includes around companies and enter the market. Conse- licensed pharmacies in Indonesia, most of We have four aims in the pharmaceutical and the pharmacies. 200 manufacturers, distributors, and re- quentially, valuations of Indonesian manu- which are small, specialized storefronts sector. The first is access to medicine, For the second pillar, regulations and What do you think are the greatest tailers, mostly Indonesian companies, but facturing companies have increased sub- that focus on prescription sales, with little which means affordability, but Indone- controls, the ministry is supervising and challenges facing Indonesia’s phar- also subsidiaries of multinational compa- stantially. attention given to the OTC market. Mov- sia is also geographically fairly large, facilitating for the pharmaceuticals in- maceutical sector, and how can the nies. The association serves as a coordi- ing forward, Indonesian retailers need with many islands, so it also means dustry in Indonesia. We have the role to Ministry of Health provide solutions? nating body for the industry and a forum What do this second-tier multinationals to evolve away from specialization and equal distribution. The second pillar is develop the industry and good manufac- The biggest challenge is to transform to maintain discourse on current events need to be aware of when entering the become larger-scale stores with greater regulations and controls of medicines— turing practices (GMP), but for the guid- the mindset from that of a trader to that and future strategies for Indonesian phar- Indonesian market? product offerings. ensuring the safety, efficacy, and quality ance and operational aspects, we hand of an inventor and innovator. If it is very maceuticals. When multinationals want to enter the of pharmaceuticals. We have the Na- it off to the head of the national agen- easy to trade, but, in a time of global market, the first thing they have to do is Indonesia’s pharmaceutical industry is tional Agency for Drug and Food Con- cies. After that, we do trainings and con- competition, companies must think From 2007 to 2013 Indonesia’s pharma- go to the Investment Coordinating Board. expected to grow substantially. How trol (BPOM) to oversee this. The third sultations on things like how to increase about innovations. Maybe these are ceutical sector grew by 85%. Could you Following this, they have to secure a optimistic are you about these expecta- is rational use: maintaining professional production of raw materials. Our big not blockbusters, but something that please this evolution? number of other permissions from the tions? standards of use, avoiding the abuse or focus is to facilitate the transformation moves slowly but certainly. Companies The story of Indonesia’s pharmaceutical Minister of Health and Indonesian FDA. I am highly optimistic about the future of misuse of medicines. The fourth is via- of the industry to research-based com- have to think about how to transform industry dates back to 1966, when the The maximum allowed ownership of a Indonesia's pharmaceutical industry. The bility. If there is not a viable pharmaceu- panies. their model from only manufacturing to government opened the market to multi- multinational in Indonesia is 75 percent, new government's first move was tar- ticals industry, there will be problems Rational use is about professional stan- more research-based and developing nationals, which initiated the growth that while Indonesian partners must control geted at health care and there is already in the access to medicines. Our role is dards and consistent training. For this, their own products. Indonesia’s phar- drives the industry today. In the 1980s, the remaining stake. Multinationals must a law mandating that health care spend- very important because pharmaceuti- we really have to work together with maceutical sector is capable of this, the government slowly advanced regula- identify appropriate Indonesian partners in ing increase to 5 percent of government cals is not like other commodities. It has the professional associations to develop and the Ministry of Health is committed tions, allowing companies ample time to order to succeed. spending. However, the government has an economic, technological and people guidance, after which we follow up with to overseeing the safety, efficacy, and adapt to newer regulations. Today, the not definitively noted how the country will aspect, and access to medicine is sort monitoring and evaluation. quality of medicines as the industry de- industry’s rules are increasingly more What is the overall market breakdown for get there. Still, growth will continue to be of human right. For these reasons, it is The fourth pillar, viability, is not very velops. • stringent so as to comply with interna- Indonesian pharmaceuticals? strong and likely even stronger than cur- a national interest and government-led. easy because we are a regulator, not an tional standards. Of the roughly 200 phar- Like in most countries, large companies rent predictions. •

INDONESIA PHARMACEUTICALS 2015 - 10 - Industry Explorations Industry Explorations - 11 - INDONESIA PHARMACEUTICALS 2015 INTERVIEW Global Business Reports Global Business Reports INTERVIEW

INDONESIA PHARMACEUTICALS 2015 - 10 - Industry Explorations Industry Explorations - 11 - INDONESIA PHARMACEUTICALS 2015 EDITORIAL Global Business Reports Global Business Reports EDITORIAL

I am highly optimistic about the future of Indonesia's pharmaceutical industry. Opportunities Abound in “The new government's first move in office was targeted at healthcare and there is already a law mandating that healthcare spending needs to increase to 5% of Indonesia’s Pharmaceutical government spending going forward. The government has stated this but has not definitively noted how the country will get there. For this reason, pharmaceutical Landscape growth will continue to be strong and likely even stronger than current predictions.

- Dr. Johannes Setijono, Chairman, National Board Indonesian Pharmaceutical Association (GP. Farmasi Indonesia)

Often underappreciated for its immen- Badan Pengawas Obat dan Makanan The election of President Jokowi brings government’s funds would be directed is apparent that President Jokowi is a program of universal healthcare cover”- sity, Indonesia has approximately 250 (BPOM), Indonesia’s National Agency refreshing appeal to the topic of In- at the revitalization of healthcare spe- leader with healthcare at the vanguard age. Enacted in 2014, the goal of JKN million people, which makes it the for Drug and Food Control, within the donesian healthcare, and consequently cific infrastructure, such as hospitals, of his agenda. is to merge Indonesia’s preexisting world’s fourth most populous country. landscape of Indonesian pharmaceu- pharmaceuticals. One of Jokowi’s first but this wave of capital would certainly As the government seeks to improve social health insurance programs un- Indonesia also plays an outsized role ticals “95 percent of Indonesia’s drug moves in office was to denounce na- have a ripple effect on Indonesia’s mar- its healthcare system, a critical aspect der a single-payer umbrella, ultimately in the region’s economic activity, as volume comes from domestic com- tional healthcare deficiencies and pro- ket for pharmaceuticals. Key concerns of its development will be improving extending healthcare coverage to the its economy is the largest in the As- panies, while the remaining five per- claim that his government would double remain regarding how the government accessibility. Driving this initiative is entire population. Rollout of JKN is ex- sociation of South East Asian Nations. cent is multinational. Additionally, 75 its current expenditure on healthcare will afford its newfound healthcare ex- the recent implementation of Jaminan pected to take five years, scaling cov- Indonesia may be classified as a low- percent of the industry’s value comes by 2018. Under this edict, most of the penditures, but uncertainties aside, it Kesehatan Nasional (JKN), Indonesia’s erage from 122 million people in 2014 er-middle income country, but it offers from domestic companies and 25 per- vast potential in terms of commercial cent comes from multinationals.” opportunity, particularly in pharmaceu- Statistics such as these shed light on INVESTMENT IN INDONESIAN PHARMACEUTICALS ticals. From 2007 to 2013, Indonesia’s the markets in which each of these Source: Indonesia Investment Coordinating Board, 2014 pharmaceutical industry grew by 85 groups competes: domestic compa- percent, including 7% in 2014 alone, nies are primarily engaged in the vol- “ FDI ($ MILLIONS) DDI ($ MILLIONS) TOTAL and is now valued at $6 billion. Growth ume business of generic drugs, while is forecasted to rise to 12% in 2015 multinationals concentrate on high- and to continue through 2018. As In- value innovative drugs. Domestic com- BPOM welcomes investment into 240 donesia’s market for pharmaceuticals panies have had success in the mar- Indonesia’s pharmaceutical industry. expands and deepens, domestic and ket for generics and over-the-counter Indonesia’s business climate for 220 multinational players are positioning drugs (OTCs) alike, but the next phase pharmaceuticals is conducive to growth themselves to capitalize on emerging of their evolution will involve climbing and BPOM is committed to ensuring 200 opportunities. the value-chain and building their port- that quality medicines are produced for The composition of Indonesia’s phar- folio of value-added pharmaceuticals. the Indonesian people. With the launch 180 maceutical industry has evolved con- Multinationals, on the other hand, must of universal health coverage, it will be siderably over the last fifty years. A learn to compete in an industry that is important for products to be affordably 160 key milestone to the industry’s devel- inundated with generics, or risk pricing priced. The challenge for the industry is opment was the opening of its market themselves out of the market. While to create affordable medicines that do 140 to multinationals in the mid-1960s, the composition of Indonesia’s phar- not sacrifice quality. an event which propelled its growth maceutical industry is evolving, so are 120 through capital infusions targeted at the market conditions that will dictate both research and development initia- the future of the industry. 100 tives and infrastructure investment. The 2014 election of President Joko While the early years of Indonesia’s Widodo will have a positive impact on - Roy Sparringa, PhD., 80 pharmaceutical history were dominated Indonesia’s market for pharmaceuti- Chairman, by multinationals, domestic companies cals. Relative to other nations, the In- National Agency for Drug have today emerged as the industry’s donesian government has historically and Food Control (BPOM), 60 controlling stakeholders. Indonesia’s lacked in its commitment to its health- Republic of Indonesia pharmaceutical industry is comprised care sector. In 2013, the government 40 of approximately 200 pharmaceutical spent just 3 percent of total GDP on manufacturers, of which 70 percent healthcare. In comparison, during the 20 are domestic companies and 30 per- same year, neighboring ASEAN coun- cent are multinational companies. Ac- try Vietnam spent 6.6 percent, while 2010 2011 2012 2013Thru Q3 2014 cording to Roy Sparringa, Chairman of the United States spent 17.9 percent. ” INDONESIA PHARMACEUTICALS 2015 - 12 - Industry Explorations Industry Explorations - 13 - INDONESIA PHARMACEUTICALS 2015 EDITORIAL Global Business Reports Global Business Reports EDITORIAL

- Dr. Johannes Setijono, Chairman, National Board Indonesian Pharmaceutical Association (GP. Farmasi Indonesia)

Image: Menjangan Sakti, Mensa Group

TOTAL HEALTHCARE EXPENDITURE to the entire forecasted population of forecasts, it will continue to flourish many pharmaceutical manufacturers

Source: BMI 257.5 million in 2019. A vast increase with strong growth rates through 2017. that previously focused solely on pre- in access to healthcare would suggest This has had a palpable effect on the de- scription drugs are beginning to enter INDONESIAN RUPIAH, TRILLIONS * Forecasted a bright future for Indonesia’s pharma- velopment of Indonesia’s middle-class. the OTC market. ceutical industry. Once JKN is fully im- In 2003, 38 percent of Indonesia’s Significant changes are underway 400 plemented, experts within the industry population was considered to be mid- that will transform one of the world’s posit that 19 percent of total healthcare dle class or higher socioeconomic sta- largest markets for pharmaceuticals, Growth of: 13.9% 350 expenditure will be attributed to phar- tus; in 2010, this figure increased to and many companies, domestic and maceuticals. In particular, demand will 57 percent. With nearly seven million multinational, are looking to capitalize surge for low-cost generics, as Badan Indonesians newly achieving middle on its budding opportunities. According 300 Penyelenggara Jaminan Sosial (BPJS), class or higher socioeconomic status to Johannes Setijono, Chairman of GP the organization charged with adminis- each year, the consumption patterns of Farmasi Indonesia, an important asso-

250 tering JKN, has mandated that 92 per- Indonesia’s population are changing in ciation of stakeholders within Indone- cent of drugs on the Essential Drugs significant ways. With more money in sia’s pharmaceutical industry, many List will be of this type. This mandate their pockets, Indonesians are becom- Indonesian manufacturers are already 200 bodes particularly well for domestic ing more health conscious, a trend that operating at capacity. While it may take companies, as low-cost generics are is of particular interest to pharmaceu- years to invest in the infrastructure 150 their primary area of specialization. tical companies. Evidence of changing necessary for pharmaceutical man- In addition to constructive policy, In- consumption habits can be found in ufacturing, Setijono is confident that

100 donesia’s pharmaceutical industry ben- the increased activity of Indonesia’s the industry “is well equipped to han- efits from strong economic growth, market for OTCs. In 2014, OTCs ac- dle increases in activity.” If this holds which has contributed to a burgeoning, counted for approximately 40 percent true, Indonesia may emerge as one of 50 health-conscious, middle class. In 2014 of Indonesia’s pharmaceutical market; the world’s most dynamic markets for Indonesia’s GDP grew at a rate of 5.1 in 2015, this figure is expected to in- pharmaceuticals. •

2008 2009 2010 2011 2012 20132014* 2015* 2016* percent, and according to World Bank crease to 50 percent. Consequently,

INDONESIA PHARMACEUTICALS 2015 - 14 - Industry Explorations Industry Explorations - 15 - INDONESIA PHARMACEUTICALS 2015 EDITORIAL Global Business Reports Global Business Reports EDITORIAL

Image: Menjangan Sakti, Mensa Group

TOTAL HEALTHCARE EXPENDITURE to the entire forecasted population of forecasts, it will continue to flourish many pharmaceutical manufacturers

2008 2009 2010 2011 2012 20132014* 2015* 2016* percent, and according to World Bank crease to 50 percent. Consequently,

INDONESIA PHARMACEUTICALS 2015 - 14 - Industry Explorations Industry Explorations - 15 - INDONESIA PHARMACEUTICALS 2015 New Governance, Changing Regulations

“The Indonesian government needs to continue to focus on the quality of the industry’s products, as this will be very important to further development of the health care sector. Consideration should also be given to expediting the current drug registration process in order to increase the portfolio of drugs that are available on the market. Finally, anti-corruption needs to continue to be a focus for regulators of the industry, ensuring that domestic and multinational companies play by the same set of rules.”

- Andreas Halim Djamwari, Former President Director, Actavis Indonesia

Image: Interbat New Governance, Changing Regulations

- Andreas Halim Djamwari, Former President Director, Actavis Indonesia

Image: Interbat EDITORIAL Global Business Reports

Indonesia’s Regulatory Framework

Expanded Access to Health Care and a Focus on Continuous Improvement

The Indonesian government’s renewed comments that “in the coming years commitment to its health care sector, it is forecasted that 80 to 81 million coupled with the National Agency for new people will have their health subsi- Drug and Food Control’s (BPOM) drive dized by the government. The market is “ for continuous improvement within the growing larger and so are the opportuni- In the coming years it is forecasted industry, provides a promising outlook ties for distribution companies.” that 80 to 81 million new people will for the future of Indonesian pharmaceu- As JKN encourages growth within have their health subsidized by the ticals. Indonesia’s market for pharmaceuti- government. The market is growing Upon taking office in 2014, President cals, BPOM is taking steps to ensure larger and so are the opportunities for Joko Widodo announced that one of that improved access to health care is distribution companies. his first initiatives would be to double achieved in a responsible way. BPOM the government’s health care expen- has two objectives within the pharma- diture by 2019. In order to bridge the ceutical industry: “to protect Indone- - Richard Prayogo, country’s existing health care gap, the sian public health and to increase the Associate Business Unit Manager, government instituted a program of uni- industry’s competitiveness on a global Anugerah Pharmindo Lestari (APL) versal health care, Jaminan Kesehatan scale”, says Dr. Roy Sparringa, chair- Nasional (JKN). Implemented in 2014, man of BPOM. Under this dual focus, the goal of JKN is to extend health care BPOM strives to promote a transparent coverage to the entire population of In- regulatory environment for pharma- donesia under a 5-year rollout plan. ceuticals and adheres to an agenda of As Indonesia’s population is forecasted risk-based drug control, ensuring that to reach 257.5 million by 2019, the ex- only high-quality pharmaceuticals are is not yet approved in Indonesia,” and pansion of access to health care creates brought to market. In order to enforce generic drugs, in which the active sub- a landscape of vast opportunity for phar- its presence within the industry, BPOM stance has been approved in Indone- maceutical companies. Of particular rel- oversees rigorous pre-market and sia. The drug registration process and evance will be the market for generic post-market control activities; a process its subsequent timeline vary according drugs, as the organization charged with which drives continuous improvement to drug types/categories. The shortest administering JKN, Badan Penyeleng- within the industry. Providing adequate timeline for drug registration in Indone- Image: Genero Pharmaceuticals gara Jaminan Sosial (BPJS), has man- oversight to Indonesia’s pharmaceuti- sia is 100 working days, which applies dated that 92 percent of drugs on the cal industry requires significant man- among others to essential generic ternatively, the longest approval period sian pharmaceutical regulations are not Essential Drugs List will be generics. power, and due to contemporary mar- drugs and drugs that target national is for innovative drugs, which has had as stringent as their counterparts in the Commenting on the opportunities that ket trends, BPOM intends to grow its health programs. The next timeline the effect of stifling their development U.S. or other western countries; how- JKN will afford Indonesia’s pharmaceu- workforce by 10 percent in 2015. is 150 working days, which applies to within the market. ever, they are consistently being devel- “ Indonesian pharmaceutical regulations Although the timeframe for approvals oped and becoming stronger.” tical industry, Dr. Johannes Setijono Despite BPOM’s efforts to create a branded generics. The longest timeline, are not as stringent as their counterparts may seem burdensome to pharmaceu- As Indonesia’s pharmaceutical industry believes that “pharmaceutical growth transparent regulatory environment, 300 working days, applies to new drugs in the U.S. or other western countries; tical manufacturers, it has had a mea- continues to develop alongside demand will continue to be strong, and likely will navigating the pharmaceutical indus- as they require extensive evaluation however, they are consistently being sured impact on improving the quality of trends, it will be imperative for manu- be even stronger than current predic- try’s regulatory framework is inherently before issuance of marketing authoriza- developed and becoming stronger. tions.” Other industry stakeholders are difficult due to the lengthy approval tion. BPOM’s evaluation of pharmaceu- pharmaceuticals produced by the indus- facturers to navigate evolving regula- equally optimistic about the market’s process required for bringing products ticals is based upon evidence of the ef- try. Consequently, in the years to come tion in a cost-effective way, bringing it is expected that BPOM will continue products to market that are affordably growth potential. On this topic, Richard to market. Dr. Sparringa describes ficacy, safety, and quality of the drug.” - Amien Sunaryadi, Partner, to advance the stringency of its regula- priced while not sacrificing quality; this Prayogo, associate business unit man- BPOM’s approval process for pharma- Under the drug approval process, Ernst & Young Indonesia (EY) ager of Anugerah Pharmindo Lestari ceuticals as follows: “There are two generics are afforded the shortest pe- tion for the pharmaceutical industry. Ac- will be the key for manufacturers that (APL), one of Indonesia’s leading phar- categories of drugs in Indonesia: new riod of review, which bodes well for im- cording to Amien Sunaryadi, partner at wish to remain competitive in the mar- maceutical distribution companies, drugs, in which the active substance minent demand trends in this field. Al- Ernst & Young Indonesia (EY), “Indone- ket. • INDONESIA PHARMACEUTICALS 2015 - 18 - Industry Explorations Industry Explorations - 19 - INDONESIA PHARMACEUTICALS” 2015 EDITORIAL Global Business Reports

Indonesia’s Regulatory Framework

Expanded Access to Health Care and a Focus on Continuous Improvement

donesian pharmaceutical products should drugs, in which the active substance has als look to enter the Indonesian market, compare to other countries? Roy be uncompromisingly safe, of high qual- been approved in Indonesia. The drug regis- Amien they can do so by investing directly in the Indonesian pharmaceutical regulations ity, and effective. BPOM enforces this tration process and its subsequent timeline country or by acquiring existing domestic are not as stringent as their counterparts Sparringa, PhD. edict through meticulous pre-market and vary according to drug types/categories. Sunaryadi companies. If they elect to do so through in the United States or other western post-market control activities and seeks to The shortest timeline for drug registration acquisition, the financial and human re- countries; however, they are consistently strengthen Indonesia’s regulatory system in Indonesia is 100 working days, which source position of the acquired company being developed and becoming stronger. by focusing on a policy of risk-based drug applies among other to essential generic may be unclear; our transaction advisory Compliance follows this same trend. The control. Additionally, cost-compliance is a drugs and drugs that target national health services are able to help elucidate this position of Ernst & Young is to support Chairman major consideration for BPOM’s activity, as programs. The next timeline is 150 working Partner, Fraud Investigation and process. E&Y is knowledgeable about the industry as a whole and to make it National Agency for our goal is to advance the industry while days, which applies to branded generics. Dispute Services employment regulations and compliance more compliant. As the industry adopts Drug and Food Control bringing companies alongside its develop- The longest timeline, 300 working days, Ernst & Young Indonesia measures and provides quality services higher levels of compliancy, regulators (BPOM), Republic of ment. applies to new drugs as they require ex- (EY) along all of these areas. will be able to increase standards, and Indonesia tensive evaluation before issuance of mar- the industry will ultimately benefit as its What is included in BPOM’s pre-market keting authorization. BPOM’s evaluation of What are some case studies of the advi- standards evolve to meet international and post-market control activities? pharmaceuticals is based upon evidence of sory services E&Y provides to its clients levels. BPOM’s pre-market evaluation focuses on the efficacy, safety, quality of the drug. All in the pharmaceutical sector? transparency, timelines, and quality stan- registrations must provide comprehensive Most of E&Y’s experience in the pharma- How does Indonesia’s regulatory playing dard. Uncertainty is not conducive to indus- information and data to prove the quality, ceutical sector stems from working with field for pharmaceuticals differ for multi- try activity, so creating a transparent envi- safety and efficacy of the drugs meet the multinational companies, but we also national and domestic companies? ronment is an ongoing objective. BPOM standard and requirement, otherwise the provide advisory services to domestic The regulatory playing field is imbalanced establishes specific timelines for the regis- drug registration will be rejected. manufacturers and distributors. There are because multinational companies must tration process of different drug types and many regulations tied to the pharmaceu- comply with FCPA and other international categories. While transparency and clear What are current approval levels for drug tical industry. For instance, it is prohibited regulations, while domestic companies timelines are significant, quality assurance applications? to offer bribes in exchange for the promo- are not required to do so. Indonesia does remains a paramount concern and focus of The roughly estimation of approval rating tion of pharmaceutical products. This is have anti-corruption laws that are as BPOM’s overall activity. Post-market eval- for drugs in Indonesia is 85 percent. If a one area in which we provide guidance. strong as FCPA, but enforcement levels uation is increasing in importance as well drug is rejected, there is an appeal mech- Specifically within the FIDS division, we are much weaker. However, this does given the global era. BPOM inspects the in- anisms provided for applicant to convey have used our investigative tools to iden- not necessarily benefit local companies. BPOM is a governmental organization dustry’s entire value chain, monitoring the their argument and clarification towards Ernst & Young (E&Y) is a well-estab- tify strange expenditures for some of From a perspective of compliance, busi- committed to the control of Indonesia’s operations of companies who are involved the rational of rejection. lished international name for business our pharmaceutical clients. Accounting nesspeople often view compliant com- drug and food industries. How does in the development, production, laboratory advisory services. Please provide a brief records are often not documented with panies as better companies, preferring BPOM fit into Indonesia’s governmental testing, distribution, and retail of pharma- The global market for drug registration overview of E&Y’s work in the Indone- enough detail, so our team audits these higher cost and higher quality to the al- network and what is its role in the phar- ceuticals to ensure the compliance to GCP, is quite complex, with different countries sian pharmaceutical sector. cases and looks for informational discrep- ternative. Consequently, business people maceutical industry? GMP and GDP. often having unique regulatory require- E&Y offers a variety of services to Indone- ancies. Inefficiencies, such as accounting of this mindset will choose multinational BPOM was formerly under the jurisdiction ments. What does this mean for Indone- sia’s pharmaceutical sector. E&Y’s Fraud discrepancies, drive up the final cost of companies over domestic companies, as of the Ministry of Health of the Republic There are over 200 manufacturers in sian companies targeting export markets? Investigation and Dispute Services (FIDS) our clients’ products. E&Y addresses they are often more compliant. of Indonesia. However, since 2001, based Indonesia’s pharmaceutical industry. What Indonesia’s population is 250 million and division offers investigational services to inefficiencies through thorough investi- on the Presidential Decree No. 103, it be- is the breakdown of companies and their the total population of ASEAN is 600 mil- monitor fraudulent internal and external gation and by doing so reduces unneces- As you mentioned before, regulations came an independent National Agency for activities? lion. Opportunities abound in both domes- activity, by using computer forensics and sary costs for clients. are complex in Indonesia’s pharma- Drug and Food Control, which is known in Indonesia’s pharmaceutical industry is tic and export markets; but the question data analytics as tools to assess harmful ceutical industry. How important will Indonesia as Badan Pengawas Obat dan composed of 70% domestic companies is how manufacturers meet regulatory re- trends. E&Y’s FIDS division also offers Indonesia’s pharmaceutical industry compliance be to the future growth of Makanan (BPOM), and reports directly to and 30% multinational companies. Within quirements. There are working groups try- preventative services, such as fraud risk is growing at a tremendous rate. How the sector? the President of Indonesia. BPOM works this landscape, 95% of Indonesia’s drug ing to establish collaborative standards, but management and assessment. For this closely is E&Y monitoring developments It is apparent that the Indonesian gov- in close coordination with the Ministry of volume comes from domestic companies, for now, drug regulation is still monitored aspect of the business E&Y assesses the within the sector? ernment wants to increase healthcare Health in national public health system. In while the remaining 5% is multinational. on a country-to-country basis. probability of fraud and develops maps The pharmaceutical industry is important access for its population. Additionally, the context of pharmaceuticals, BPOM has Additionally, 75% of the industry’s value that characterize the hierarchy of risk that to E&Y, and we are actively seeking to purchasing power is increasing across two principal objectives: (1) to protect In- comes from domestic companies and 25% In closing, do you have any final message companies face. Based upon our analy- increase our operations in the sector. the board for the Indonesian population. donesian public health and (2) to increase comes from multinationals. for our readers? ses, we are then able to advise clients Pharmaceutical regulations are very com- This is an important trend for the pharma- the industry’s competitiveness on a global One of BPOM’s greatest responsibilities BPOM welcomes investment into Indone- on preventative measure they can take plex and compliance within the indus- ceutical industry because as the purchas- scale. BPOM is staffed by approximately is managing Indonesia’s drug registration sia’s pharmaceutical industry. Indonesia’s to mitigate risks and improve their busi- try is quite demanding. For this reason, ing power of Indonesian consumers in- 4,000 employees, and expected to grow process. Please provide an overview of the business climate for pharmaceuticals is ness. many companies can benefit from E&Y’s creases, so will their consciousness. This by 10 percent in 2015. process and its associated timelines. conducive to growth, and BPOM is com- Another large part of E&Y’s work in the services. E&Y is an independent party will have the effect of increasing demand Before any drug is marketed in Indonesia, mitted to ensuring that quality medicines pharmaceutical sector is in regulatory that provides companies with advisory for compliant products. This is good for How does BPOM achieve its goal of it must be approved by BPOM through In- are produced for the Indonesian people. compliance. E&Y reviews compliance services, helping them navigate the phar- multinational companies that are looking protecting the Indonesian public and donesia’s drug registration process. There With the launch of universal health cover- with both corporate regulations and the maceutical industry’s complex regulatory to invest in Indonesia, and E&Y has the increasing the pharmaceutical industry’s are two categories of drugs in Indonesia: age, the challenge for the industry will be Foreign Corrupt Practices Act (FCPA) to framework. international name and local knowledge overall competitiveness? new drugs, in which the active substance is to create affordable medicines that do not ensure that clients are operating in accor- to help these companies succeed in In- BPOM operates on the principal that In- not yet approved in Indonesia, and generic sacrifice quality. • dance with the law. When multination- How does Indonesia’s regulatory climate donesia’s pharmaceutical sector. •

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INDONESIA PHARMACEUTICALS 2015 - 20 - Industry Explorations Industry Explorations - 21 - INDONESIA PHARMACEUTICALS 2015 Market Composition and Production Units: Indonesian Players Today

“Imedco is a company that we recently took over in May 2014. We are in the process of fully renovating and transforming Imedco, both in terms of its facilities and operations. We are making a new layout of the production facility and are replacing all the machinery, water systems and air handling. Essentially, we are giving the company a complete face-lift so that we can improve upon the quality of our existing products and also add new products that we are in the process of developing. We have further developed a new research and development laboratory.”

- Suryanto, President Director, Imedco

Image: Genero Market Composition and Production Units: Indonesian Players Today

- Suryanto, President Director, Imedco

Image: Genero EDITORIAL Global Business Reports Global Business Reports EDITORIAL

Image: Combiphar Multinational Penetration Among a Strong Suite of Indonesian Players

The Factors Enabling Multinational Companies to Thrive

VALUE OF INDONESIAN PHARMACEUTICAL MARKET

Source: BMI

INDONESIAN RUPIAH, TRILLIONS * Forecasted A distinguishing factor of Indonesia’s and forecast growth trends and the director at Novo Nordisk said: “We

400 pharmaceuticals landscape is the dom- high potential these offer. Indonesia’sCAGR: 13.1% know that among the world’s top ten 350 inance of domestic companies over pharmaceuticals sector has expanded diabetic countries, Indonesia ranks at 300 multinational corporations (MNCs). In- by 85% from 2007 to 2013 (Pacific number 7.” 250 donesia is the only ASEAN economy Bridge Medical) and received another Demand in the market is driven not 200 to feature its strength and develop- boost from the rollout of general na- only by a need for drugs but also for 150 ment through an exceptionally high tional health insurance beginning in information as the illness is becom- 100

50 percentage of local manufacturers. 2014. Haeri Roh-Schmidt, general ing common among the masses. Eric

2008 2009 2010 Domestic2011 firms in 201the2 private sector20132 manager014* of prominent2015* multinational2016* Ng, president director of Sanofi Group account for 70% of the industry’s total DSM Nutritional Products Indonesia, Indonesia, said: “Over the next 10 activity, and supply 95% of drug vol- said: “Pharmaceutical companies are years Indonesia will become one of umes, whereas only the remaining 5% recognizing Indonesia as a promising the world’s top-five countries in terms INVESTMENT IN INDONESIAN PHARMACEUTICALSare supplied by producing MNCs. country with consistent double-digit of diabetes patient’s numbers,PRESCRIPTION and VS. MARKET VALUE DISTRIBUTION such as those developed by DSM con- Source: Indonesia Investment Coordinating Board, 2014 Despite the weakening presence of growth. Although Indonesia is com- Sanofi is well positioned OVER-THE-COUNTERto address DRUGS IN INDONESIA tribute more to the preventive health Source: BMI Source: BMI MNCs over the years, key segments plex and difficult, with diverse needs growing public demand for this kind of care side rather than in the form of tra- inFDI the ($ MILLIONS) industry remainDDI ($ MILLIONS)in which a handTOTAL- and a challenging infrastructure, it is treatment.” ditional pharmaceuticals. By providing “ ful of multinationals continue to be also a very exciting place to be with micronutrient supplements to a pop- market leaders. First, due to changing vastly growing pharmaceuticals and ulation that needs healthful products, We understand that there are three 240 health care conditions within the coun- health care companies.” we are simultaneously aiding in solv- to four gaps such as awareness, 220 try, a severe need for new products, MNCs have found the regulatory ing the problem of micronutrient defi- doctors’ education, capacity building 200 such as diabetes medication or nutri- framework in favor of local Indonesian ciencies, an important priority for DSM and access. We target these issues by 180 “ tional products, has arisen and MNCs companies a strong barrier against Nutritional Products.” finding ways in which we can increase 160 diabetes awareness in the country 140 are poised to meet it. Second, MNCs their commercial success, rendering it Another distinguishing feature of the Pharmaceutical companies are and implement programs to educate 120 bring high quality drugs priced com- hard for a newly entering multinational multinational firms that have been able recognizing Indonesia as a promising and train doctors. Given the lack of 100 petitively due to cost cutting manu- to outshine local firms as preference to reap the benefits of Indonesia’s country with consistent double-digit endocrinologists, we take a particular 80 facturing across several nations. Third, through subsidies and tax structure is growth curve lies in their sophisti- growth. Although Indonesia is complex interest and assume responsibility 60 these companies tend to possess a clearly given to the local. Hari Nurcahyo cated approach to innovation. Bringing 40 and difficult, with diverse needs and towards providing this education. strong infrastructure for research and said: “Being a multinational company, CAGR new products into the market is vital 20 a challenging infrastructure, it is also development, which has spearheaded we need to be wary of mass products Prescription 61.5% 11.23% Multinationals 25% in order to better define their place. 2010 2011 them to cater to the2012 market with high- because2013T preference will be hrugiven Q3 2014 to a very exciting place to be Over-the-Counterwith vastly 38.5% 6.09% Local 75% Sandeep Gaikwad, president director value innovative drugs. While domes- local manufacturers if the product can growing pharmaceuticals and health of ACG Indonesia, said: “ACG ploughs - Sandeep Sur, tic companies dominate the market for be created domestically.” care companies. A second, high-innovation division back heavily into R&D, and this is evi- President Director, low cost generic drugs, multinational The solution for a multinational to driven by MNCs is nutrition and dent by the fact that today we hold 38 Novo Nordisk Indonesia players have taken over high-demand, survive in this market lies in product micronutrient supplements. As In- patents.” specialized segments and pharmaceu- differentiation at a competitive price. donesian consumers become health The outlook for MNCs looking to en- ticals services ranging from capsule A cardinal industry segment where - Haeri Roh-Schmidt, conscious, demand has increased ter Indonesia seems promising given provision to instrumentation and pack- multinational conglomerates have General Manager, for preventive health care. Haeri Roh- the growth curve, but the likelihood aging. provided differentiated drugs is in di- DSM Nutritional Products Indonesia Schmidt, general manager, DSM Nu- for commercial survival is higher for From the perspective of MNCs, de- abetes care. Global pharmaceutical gi- tritional Products Indonesia, said: “In businesses whose foremost compe- spite the fact that the regulatory frame- ants such as Sanofi and Novo Nordisk, terms of its needs, Indonesia pos- tency lies in supplying a niche market work is designed in favor of empower- the largest insulin manufacturing com- sesses a unique dichotomy. On the or high-innovation non-generic type knowledge about existing products” ing Indonesian companies, these firms pany in the world, have established one hand, there is obesity and over-nu- patented products. There is space in through higher standards of research have chosen Indonesia as an invest- themselves as market leaders within trition, but on the other hand there is the market for companies committed and development as market demands ment destination due to the recent this space. Sandeep Sur, president malnutrition. Dietary supplements to bringing new products or increased develop. •

INDONESIA PHARMACEUTICALS 2015 - 24 - Industry Explorations” Industry Explorations - 25 - INDONESIA PHARMACEUTICALS 2015 EDITORIAL Global Business Reports Global Business Reports EDITORIAL

Image: Combiphar Multinational Penetration Among a Strong Suite of Indonesian Players

The Factors Enabling Multinational Companies to Thrive

VALUE OF INDONESIAN PHARMACEUTICAL MARKET

Source: BMI

INDONESIAN RUPIAH, TRILLIONS * Forecasted A distinguishing factor of Indonesia’s and forecast growth trends and the director at Novo Nordisk said: “We

50 percentage of local manufacturers. 2014. Haeri Roh-Schmidt, general ing common among the masses. Eric

INDONESIA PHARMACEUTICALS 2015 - 24 - Industry Explorations” Industry Explorations - 25 - INDONESIA PHARMACEUTICALS 2015 INTERVIEW Global Business Reports Global Business Reports INTERVIEW

region, we have identified eight coun- importance due to the misconceptions diabetes, vaccines, and consumer health The Indonesian government has stated Sandeep tries where our investments are ahead surrounding the disease. This can be Eric care. that it wants to double health care of the curve, which has been the case overcome with proper education. We Globally, Sanofi is a leading provider in spending over the next five years. How Sur for three years. Our success comes have been working with the ministry Ng the treatment of diabetes. Our products will it execute this vision? from the fact that we look at gaps in as well in order to ensure the spread include a variety of insulin, both innova- The proposed increases in health care the country. We know that among the of knowledge, and make recommenda- tive and low-cost alternatives, as well as spending will be good for Indonesia. world’s top 10 diabetic countries, In- tions about steps that need to be taken. oral tablets. Additionally, as a value-added While not every dollar will be spent on donesia ranks number seven. service, we provide regular support to ex- medication – medicines typically account President Director Given that the government is likely President Director perts within the industry through training for less than 10% of these funds – the Novo Nordisk Indonesia Could you elaborate on these gaps? taking steps to reduce the incidence of Sanofi Group Indonesia initiatives. In the future we would like to government will likely spend the majority What is it that you see in the market diabetes, will this not reduce your need explore the application of diagnostic kits of its health care budget on much needed and what steps are you taking to ad- within the country? for diabetes in Indonesia. Over the next health care infrastructure. The develop- dress your observations? Despite efforts taken to reduce its inci- 10 years, Indonesia will become one of ment of primary health care systems and We understand that there are three to dence, the prevalence of diabetes is in- the world’s top-five countries in the num- doctors will be key features to the plan’s four gaps such as awareness, doctors’ creasing. This is not because we are not ber of diabetes patients, and Sanofi is execution. education, capacity building and access. doing enough, but due to the changing well positioned to address growing public We target these issues by finding ways social dynamic. As people are growing demand for this kind of treatment. Sanofi What will Sanofi’s role be in bridging in which we can increase diabetes richer, a sedentary lifestyle and poor is also a world-leader in the production of Indonesia’s health care gap? awareness in the country and imple- eating habits have taken over. People vaccines: pediatric vaccines; flu vaccines, Sanofi could play a large role in educat- ment programs to educate and train enjoy rich foods in excess, which is for which Sanofi is the largest producer ing physicians, in a similar way to the doctors. Given the lack of endocrinolo- increasing the number of diabetics. in the world; rabies vaccines, for which services that we currently provide for gists, we take a particular interest and Furthermore, in terms of our need, the Sanofi is the largest provider in Indonesia; diabetes. Sanofi will also focus on devel- assume responsibility towards provid- diagnosis of diabetes itself will increase and, in the next couple of years, Sanofi will oping innovative medicines in Indonesia, ing this education. once the government’s universal health launch a vaccine for dengue fever, which as we benefit from Sanofi’s global R&D We work closely and actively with the care system is fully implemented. In will be the first of its kind in the world. network. However, the government Ministry of Health, policymakers, as- fact, we will be able to diagnose more Almost half of the world’s population is needs to establish an environment where sociations and the hospital association people that have diabetes and address at risk for contracting dengue fever, so innovative medicines are encouraged. In in the country. We are collaborating the cure accordingly. Sanofi is very excited about bringing this doing so, Sanofi could work with the gov- with the regional government, where innovative product to market. Finally, con- ernment to create innovative solutions Can you give a brief background of we have a leadership forum at the re- Do you have a closing message for our Sanofi is a European-based pharmaceu- sumer health care is important to Sanofi, that would bring better long-term solu- Novo Nordisk and why you chose to gional and national levels and invite all readers? tical company with one of the largest as it is one of the world’s top-five produc- tions to Indonesia’s health care system. come to Indonesia? stakeholders for consensus building on Novo Nordisk is a leading multinational reaches in the world. Please describe ers of over-the counter (OTC) products. Additionally, Sanofi would like to further Novo Nordisk is the largest diabetes how diabetes should be treated and in diabetes care. My final message is the evolution of its presence in Indone- In Indonesia this segment is not yet fully its impact in Indonesia by partnering with care company and the largest manufac- handled. Since the illness is an impor- that Novo Nordisk is here to stay. Given sia. developed, so OTCs will be a key growth local companies. No such partnerships turer of insulin in the world. I was the tant civic and health care priority for the our nature as a socially responsible com- Sanofi was one of the first multinational market going forward. currently exist, but we are considering country manager for Novo Nordisk in government, we utilize a top to bottom pany, we will continue working closely pharmaceutical companies to set up op- this avenue, as collaboration has the po- Bangladesh in 2007, when I was moved approach engaging stakeholders at ev- with the government, who we have had erations in Indonesia back in the 1950s, With the implementation of BPJS, mas- tential to bring greater value to the people in order to strengthen our presence ery level and playing our role as a re- an excellent experience with. In future, and in 1972, we began our manufacturing sive changes are underway in Indone- of Indonesia. and enhance business success. The sponsible medicine provider in the field. we anticipate utilizing our diverse port- operations. In the context of our parent sia’s pharmaceutical sector. How does company saw tremendous potential in Defeating diabetes is not only our busi- folio of products for the betterment of company’s overall operations, Sanofi In- Sanofi develop growth strategies and It is forecasted that demand for pharma- Indonesia, as it is the fourth most popu- ness; it is our passion. This reflects in the country. We have invested heavily donesia is a full-scale subsidiary: we have adapt its business model to account for ceuticals in Indonesia will grow substan- lous country in the world. It was difficult our activities and engagements. In fact, in R&D, and this has benefitted us. We business units dedicated to manufactur- changes within the market? tially. What developments need to occur when I first arrived, as Novo Nordisk we were awarded the Frost and Sulli- look forward to introducing new prod- ing, pharmaceutical operations, vaccines, The last five years have been relatively within the industry? was not performing well. I had to dis- van Award for Best Corporate Social ucts and continuing with our programs and consumer health care. Overall, we stable, but recent market developments Indonesia’s pharmaceutical industry has mantle numerous systems and push Responsibility last year. The company in order to improve the diabetes sce- have around 800 employees in Indone- have presented significant changes to huge potential, but its health care sector is our growth. I am proud that our com- found that Novo Nordisk is employing a nario in Indonesia. • sia, and based upon our activity, we are the industry as a whole. Given Indone- not yet fully developed. There are factors pounded annual growth rate (CAGR) is comprehensive approach in its focus in placed as one of Indonesia’s leading sia’s evolving climate for pharmaceuti- that could assist its development, such as now 35%, and we are one of the fastest defeating diabetes. We are working in multinational pharmaceutical companies. cals, Sanofi’s strategic drivers will remain heightened levels of foreign investment, growing affiliates in our region. both rural and urban areas to reach ev- the same, but we will also remain open but overarching regulation is deterring ery corner of Indonesia and spread our What product area does Sanofi consider to addressing the needs of the market. this. In the long-term, Indonesian phar- Has your growth been due to a change initiatives as widely as possible. its specialty in Indonesia? Sanofi looks at how the market could maceutical manufacturers will need to as- in business strategy or correlated with Being a multinational company, Sanofi evolve, while making sure that we have sess how they can climb the value-chain the market’s growth in diabetes? Among the various steps that Novo holds an advantage from a product per- products available to support the public and diversify away from generics and into In a way, the market has helped us Nordisk is taking to combat diabetes, spective, having world-class quality sector. For instance, if BPJS requires innovative products. This directly links grow. Indonesia has a population of which is most significant? standards. Overall, Sanofi’s activity in In- massive amounts of insulin for the treat- to Indonesia’s regulatory environment: 250 million, out of which seven million Creating awareness and patient edu- donesia is diverse and spans various ther- ment of diabetes, Sanofi wants to be BPOM should have mechanisms in place people are diabetic. The market is grow- cation are the most important. In In- apeutic areas. There are three key busi- there and will be ready to support the that encourage R&D and its byproduct, ing, but we are growing faster. In this donesia, patient education is of utmost ness drivers to our presence in Indonesia: government. innovative products. •

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businesses? pride in knowing the components that go Haeri Companies are recognizing Indonesia as into our products. We are research-driven, a promising country with consistent dou- constantly striving to understand the Roh-Schmidt ble-digit growth. Although Indonesia is health benefits both a clinical level and complex and difficult, with diverse needs chemical components of our ingredients. and challenging infrastructure, it is also a Our service sets us apart. We might be very exciting place to be, with growing a bit more expensive, but ultimately pro- pharmaceuticals and health care compa- vide quality in product development, ser- General Manager nies. vice and information to pharmaceuticals DSM Nutritional In terms of its needs, Indonesia pos- companies. Products Indonesia sesses a unique dichotomy. On the one hand, there is obesity and over-nutrition, What is the scope for a multinational like but on the other hand there is malnutri- DSM and what are your plans for the tion. Dietary supplements such as those future? developed by DSM contribute more to We have noticed the government’s focus the preventive healthcare side rather than on health improvement, and likewise In- in the form of traditional pharmaceuticals. donesia’s consumers are waking up to By providing micronutrient supplements take ownership of their health. There is a to a population that needs healthful scope for us because our aim is not only The future products, we are simultaneously aiding to address symptoms but also provide nu- in solving the problem of micronutrient trition in a preventive sense. We provide deficiencies, an important priority for naturally sourced ingredients that can be DSM Nutritional Products. Our motto is readily developed. As we are focused of nutrition “Bright Science, Brighter Living,” and as on development, there is a place for us a socially responsible corporation we like as leaders in innovation as well. For ex- to play a role in creating Brighter Living ample, folic acid deficiency is a prevalent through contributions in nutrition for gen- problem, and the World Health Organiza- erations to come. tion has also recognized this. However, Welcome to our state-of-the-art Asia Pacific adding folate to foods does not address Could you tell us about DSM’s presence DSM Nutritional Products caters to the the problem because ultimately it boils Nutrition Innovation Centre in Singapore. in Indonesia and its various business population’s health care needs through a down to how well the body metabolizes divisions? diverse product line. Please tell us about it. It does not matter how much one con- Inaugurated March 2015 DSM is one of the world’s largest and some of your products within the realm sumes; if their genetic background does most comprehensive ingredient company of nutrition and their role. not allow for effective use of folate, the covering life science as well chemicals We are the most comprehensive ingredi- benefits will be limited. Methyltetrahy- Revolutionizing product development in food, beverage, dairy and supplements businesses. It is a diversified company, ent company supporting this industry. We drafolate is a compound that we can offer though end-to-end co-innovation. within which DSM Nutritional Products is have a diversified vitamin portfolio, both to allow improved metabolism of folate the largest division of the DSM business fat-soluble and water soluble, carotenoids where consumers can benefit from the Contact your DSM representative for a demonstration and to book a visit. as a whole. The business has sales of and beta-carotene, a wide range of nu- effects. Continuing to innovate around more than €4 billion and a long tradition traceuticals and lipids such as unsaturated ingredients is how DSM makes a differ- of innovation that benefits people and the fatty acids and omega 3s. We are the only ence – we possess the corporate infra- planet. The company is a leading supplier micro nutrition company that has exper- structure, a dedicated vision and assigned covering human health, animal health and tise in all the aforementioned categories. expertise around the science of the ingre- personal care industries. dient. I represent the human nutrition and health In addition to your product line, what are aspect, which is particularly significant your areas of expertise and core compe- What is your final message to our read- from the food, dietary supplement and tencies? Who are your key clients? ers? pharmaceutical ingredient perspective. Our expertise lies in our manufacturing, As a company, we have collected ex- We are structured geographically through traceability and accessibility that make it pertise globally that our customers can regional offices. Asia Pacific (APAC) is possible for pharmaceuticals companies benefit from. We add value. In terms of For more information, please contact: DSM Nutritional Products Indonesia, the largest, covering everything east of to use our ingredients with confidence. the growth story, we are excited to be Russia up to Oceania, excluding China. We provide to dietary supplement com- a part of Indonesia’s development and Arkadia Office Park Tower B 10th Floor, JL Let Jend TB Simatupang Kav 88, Jakarta 12520 APAC comprises of the ASEAN countries, panies located in various parts of Indone- improved consciousness towards pre- T +62 21 7883 3456. e-mail: [email protected] Japan, New Zealand and is headquartered sia such as Jakarta and Bandung and our ventive healthcare. We are committed to www.dsm.com/human-nutrition in Singapore. operations are spread throughout the in- bringing affordable nutrition that is easily dustry. accessible and distributed. We will con- Why has DSM Nutritional Products Clients recognize us as a quality player. tinue to strive, and continue to partner chosen Indonesia as a destination for its Being an ingredient company, we take with companies that share our vision. •

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Alfons Sindupranata

Managing Director Genero Pharmaceuticals is part of operation is unique to Genero in In- to Arya Noble Group’s specialization Genero’s business. What other growth to attract global customers. In order to Genero Pharmaceuticals Arya Noble Group. Please provide an donesia. Indonesia has many CDMOs in dermatology products, this is also avenues has Genero identified? compete on the global stage we plan to overview of Arya Noble’s activity and engaged in the cosmetic industry, but the core competency of Genero’s de- Genero is uniquely positioned, as it is allocate resources towards developing describe the role that Genero plays none of these companies are GMP velopment efforts and consequently Indonesia’s only full-fledged pharma- the research aspect of our business. within its network. certified. On the other hand, almost most of Genero’s solutions fall under ceutical CDMO. Toll manufacturing Furthermore, we will seek to enhance Arya Noble Group consists of three all of Indonesia’s pharmaceutical com- the category of cosmeceutical. Most exists in Indonesia, but this type of our human capital capabilities so we companies in its healthcare arm: Pt. panies are GMP certified, but none of- of Genero’s innovative products are activity is unable to compete with our are prepared to handle further growth. Erha Clinic Indonesia, Pt. Genero fer exclusive CDMO services to their developed by the team of Dr. Ronny services. Indonesia lags behind other Pharmaceuticals, and Pt. Pharmacore customers. The only avenue through Handoko, who is responsible for countries in terms of CDMO devel- In closing, do you have any comments Labortories. Erha was the first to be which they offer CDMO services is pre-formulation, research, and development, so opportunities are bright. on Indonesia’s pharmaceutical indus- conceived and is focused on clinical- through toll-manufacturing, and this is opment activities. Dr. Ronny is one of Furthermore, labor costs are quite try and the role that Genero will play? ly-based dermatology. At its inception solely with their idle capacity. This is Indonesia’s leading dermatologists and low so there is ample opportunity for Industry benefits from companies that in 1999, Indonesian dermatology was where Genero has found unique posi- has a good vision for product develop- multinationals to leverage market con- focus on their core competencies. broken into two categories: beauty tioning in the market. ment and healthcare solutions for cus- ditions and our unique services to man- Specialization elevates markets and clinics and physicians practicing der- tomers. Under his guidance, derma- ufacture their products with us. One enhances business competitiveness. matology. Erha pioneered a new dy- What is the breakdown of Genero’s tology remains Genero’s competitive of Genero’s largest objectives in the Once Indonesia’s pharmaceutical in- namic for the dermatology sector, manufacturing facilities and customer strength for product development. next five years will be to take our oper- dustry goes in this direction, Genero combining these disparate segments base? ations global. Under this timeframe we will be well positioned, as it knows how in hybrid clinics. The business model Genero has two manufacturing facili- Research will be a key growth area for hope to become a regional player and to leverage its core competencies. • was successful and 65 branches ties located in Cikarang, both of which were established. The following year, are GMP certified. Additionally, we in 2000, Genero was established as have plans to build another facility in an upstream provider to support Erha 2015 in order to satisfy forecasts of in its growth. Based upon Genero’s increases in business growth. Genero growth prospects, Pharmacore was does not manufacture its own products established thereafter, its focus being and each of its customers is treated on the sales and marketing of ethical with equal importance. As CDMO op- products, while not being limited solely erations are a relatively new stance for to dermatological solutions. Arya Noble Genero, the majority of our operations Group is not like most integrated com- are still attributed to the production of panies, as its three healthcare compa- Erha’s and Pharmacore’s products, but nies are distinct units each with its own the external customers’ portion are expertise. growing significantly from time to time. Genero is committed to excellence in Genero was founded to support the quality standards, which is apparent growth of Erha in the dermatology in the portfolio of companies we work sector. What is the company’s focus with. In terms of product specializa- today? tion, our facilities are most renowned Genero’s activity can be divided into for manufacturing semi-solid products, two categories: manufacturing and but we also have strong capabilities for R&D. In 2010 Genero experienced liquid and solid products. a significant milestone in its history, switching its focus to become In- What are Genero’s activities in re- donesia’s first independent Contract search and development (R&D) and in Development and Manufacturing Or- the formulation process? ganization (CDMO). This business In terms of R&D, Genero is more fo- model exists in other countries, where cused on the development or formu- CDMOs have very strong R&D capabil- lation of products. Research is not ities and the capacity to manufacture currently a strong point, but is a strate- customers’ brands, but this type of gic growth area. That being said, due

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Alfons Sindupranata

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two-tier framework where information HK: There are a few other factors that pen. Our goals are therefore, two-fold. GE’s laurels for being a global leader Sandeep can potentially get lost in the middle. define ACG as a unique, leading multi- Olivier One: Be the driver of this change and in research and development. We service our clients directly, which national. Several pharmaceuticals com- accelerate this transition and in the This nomination was a recognition of Gaikwad & is why we are present in Indonesia, in panies from the Far East, China and Eu- Loelliot process, enable the local players to the entire GE Healthcare Life Sciences addition to Brazil, China, Europe, and rope dominate the industry. Europeans come up to speed in the field of pro- team passion to support its broad and Harsha Kolluru other global markets. This has helped are strong in their provision of technol- tein sciences, take on the challenges worldwide customers to produce life SG: Regional Manager us connect with our clients more effec- ogy and cutting edge research, but we and drive self-sufficiencies around vac- saving products. By developing inno- HK: Sales Manager tively and support and provide services have been able to catch up to them in cines, plasma etc. vative manufacturing Solutions such ACG Indonesia to them promptly. this respect while retaining our com- GM Enterprise Solutions Two: Partner with the local institutions as KUBio and Flexfactory, GE has been petitive costs. India is known for being GE Healthcare Life and help develop the human capital leading the industry to more efficiency What is your core business, and which a competitive, low cost manufacturer, Sciences by people up-skilling in the protein and speed to reach its goals. segments of the market do you cater not because the quality is low, but be- sciences and cell therapy areas. For to? cause of the volume of production, ef- Bio-Pharmaceutical growth to hap- What are the key challenges and op- SG: Our core business is catering to ficiency, and pace of the industry in the pen at Indonesia, qualified people are portunities of your existing market? the pharmaceuticals, food, and cos- country. We have been able to retain needed to run research labs and manu- There are many more opportunities metics segments. Within the pharma- this competitive price while keeping facturing plants. than challenges simply due to the fact ceuticals realm, we supply empty hard up with European providers in terms less than 10% of emerging market gelatins capsules, packaging films, ma- of technology. Our healthy combina- What are the key products and ser- populations have access to Vaccines, chines right from fluid bed granulation, tion brings us recognition and power vices provided to the Indonesian mar- Insulin and other key products like tablet coaters, tablet press, capsule as a brand and allows us to cater to all ket, and what is GE’s market share? Monoclonal antibodies. Our mission fillers, blister packing, cartoning, shrink needs across the market. At GE Life Sciences, we work in 4 is to change that. We will overcome wrapping, and case packers. We also broad areas: challenges such as lack of expertise by provide formulation assistance and What is your future plan for ACG in Research Tools: We provide expertise supplying adequate training and solu- regulatory support to our clients. We Indonesia? and tools for basic research of cells and tions to the right organizations. provide comprehensive solutions and SG: Our immediate plan is to continue biomolecules, as well as tools for drug direct support in servicing the industry. growing our presence in Southeast discovery and cell therapy research. What are your outlook and future Asian markets, and we anticipate set- Discovery and Development: plans, both for GE Healthcare in South You partner with your clients at every ting up an additional facility in Thailand Wide selection of technologies, so- East Asia and Indonesia specifically? step by offering services across the this year. Our directors are visionary lutions and services for researchers We are going to witness big growth ACG is a powerful multinational with value chain. Which segment of the and have guided our presence across GE is a renowned international involved in therapeutic and diagnostic in South East Asia overall including presence in several countries. Why did chain is most promising, or most de- world markets. In Indonesia, we see business force across a diversity of development. Our key brands in this Indonesia. Growth will be driven by in- you come to Indonesia, and could you manded by the Indonesian market? a stable economy and expect growth industries. Could you tell us about include Whatman range and Biacore. creased activities by established play- tell us about your operations? SG: Our core products for the In- through several prospects. Our prod- its involvement in pharmaceuticals, Bioprocessing: ers in Singapore and indigenous com- SG: Our presence in Indonesia’s mar- donesian market are gelatin capsules, ucts have applications beyond phar- particularly in South East Asia? From process development in our ad- panies coming up outside Singapore. ket dates back to 2001. We entered films. From the equipment end, this maceuticals, in food and cosmetics as GE Healthcare Life Sciences is involved vanced Fast Trak Labs to full-scale Outside Singapore, the bio-pharma- the market at an opportune time, when means capsule fillers and packaging well, and we look forward to catering in the manufacturing of more than bio-manufacturing, we can help you ceutical growth will be from vaccines, it was recovering from financial crisis. machines. Today, we are the leading to customers outside the industry. 90% of marketed Biopharmaceutical reduce costs and improve productivity. plasma, biosimilars and monoclonal Our team had done its research, and we global supplier of secondary packag- HK: We have tilled the soil and sown product in the world via its equipment, We have end to end capabilities in Up- antibodies. identified Indonesia as a key market. ing machine to the Indonesian market. the seeds as far as investment in In- cell culture media and chromatography stream and Single-Use, Downstream We are working to ensure that we are After the crisis, the industry was strug- The capsules business began well ini- donesia is concerned. We understand resins. With its Enterprise Solutions and provide Integrated Solutions in- at the forefront of this growth – by gling to find resources due to the deval- tially, then slowed a few years ago, that benefits come in the long-term that enable customer to build their own cluding KuBio and Flexfactory for set- having world-class expertise, training uation of the currency. We entered the and now is starting to re-establish it- and are now at a point where we are Biopharma manufacturing capabilities, ting up manufacturing plants. and supply chain infrastructure to be market with our products, which had self. As we have grown gradually over ready to reap the benefits of our work. GE is particularly active in Asia and Quality Testing: based in Singapore. Overall, it is a very right technology at an affordable price. the years, we have been consistent in We see the drivers for growth such as South East Asia in particular. The aim Quality is important; our tools and tech- exciting time for us here in South East What distinguishes us is our business building our brand. We offer a full bas- a large population and increasing de- is to help local manufacturing of life niques are used widely in Forensics Asia. • strategy. Unlike other players that en- ket of products and serve as solutions mand and are confident for our com- saving products such as Vaccines, In- and HID Tools by agencies across the ter a market through a distributor, we providers for customers. We have ex- pany’s future in Indonesia. We have sulin and Monoclonal Antibodies. GE is world. started our own subsidiary company in pertise across different segments and the right set of products, the proper collaborating with different local actors Indonesia has traditionally been a ge- Indonesia. Although ACG’s key manu- understand the chemistry of empty approach and global expertise. We to make this happening. nomics oriented Life Sciences mar- facturing base is in India, which, along capsule, the filler, and processing ma- are hoping that the fastest growth will ket thus far. As a proteomics player, with a factory in Croatia, produces chines. We know how a formulation come in the next five years. • Could you tell us about GE Health- our share is close to 10%. But in the over 60 billion capsules annually, we will behave in capsule filler or tablet care’s operational goals specifically proteins segment, we have a market have fifteen companies today, each of press and can therefore provide all- within Indonesia? share of about 30%. which supplies its own product range. round expertise. During the production Indonesia today is still primarily a ge- Few companies today invest in placing cycle, we are here as a one stop so- nomics market that is in the process of Congratulations on the award you employees within different markets, lutions shop, with direct service within making transition to be a proteomics recently won by Bioprocess Interna- but with ACG there is no agent inter- the country, whenever the customer market – this is when the Bio Pharma- tional for ‘Excellence in Leadership’. facing the customer. We do not have a faces a challenge. ceutical development will really hap- Please share the details of this and

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sition today as managing director of raw products on the market. During the com- facility underway. We also have three pri- are going to collaborate with Korean and Jonathan materials of Menjangan Sakti. pany’s early years, it focused primarily on Dr. Rusdi mary subsidiaries: Pt. Kimia Farma Apotek, Japanese companies to establish unique As my background is not in pharmacy, I sourcing raw materials from American which is our retail branch that consists of facilities in East Java that will be dedicated Sudharta learned many of the industry’s technical and European principals. Our portfolio Rosman 612 pharmacies and in addition oversees to the production of raw materials. We aspects from the training that I received has since expanded to include more than our subsidiary Pt. Kimia Farma Diagnostic; will have one facility for raw materials and early in my career. This development 150 suppliers from around the world: Pt. Kimia Farma Trading & Distribution, excipients, and another that will produce helped shape my knowledge base, which about 45% are American and European, which is comprised of 45 distribution facili- intravenous solutions. In the future, other allows me to have technical discussions while the remaining 55% are Chinese ties throughout Indonesia; and Pt. Sinkona Indonesian companies will likely seek for- Managing Director on pharmaceutical ingredients with doc- and Indian. Mensa Group has a very com- President Director Indonesia Lestari, which is Indonesia’s eign partnership in developing their own Menjangan Sakti, tors, pharmacists, researchers, and other prehensive portfolio of product offerings, Kimia Farma sole producer of quinine salt and its deriv- raw materials, but currently, the market is Mensa Group specialists within the field. which it considers a key organizational atives. quite open. strength. Within Indonesia, Mensa Group Mensa Group is a longstanding giant provides the most complete supply of Kimia Farma’s operations span the entire Indonesia’s health care sector is expected within Indonesia’s pharmaceutical sec- raw materials for the pharmaceutical in- value chain of Indonesia’s pharmaceutical to grow at a tremendous pace. What tor. How has the company transformed dustry. sector. What is included in your portfolio steps have Kimia Farma and the industry since its inception? of product offerings? been taking to prepare? My father, Jimmy Sudharta, founded What does the competitive landscape Kimia Farma’s product profile is composed Over the last three years Kimia Farma has Mensa Group in 1975. The company’s ini- look like for suppliers of raw materials? of 60% generic products and 40% propri- placed emphasis on developing its down- tial focus was as a trader of raw materials In recent years, the Indonesian gov- etary products. Almost all of our generics stream infrastructure by opening around for the pharmaceutical industry. Mensa ernment has concentrated its efforts are prescription products. The majority of 100 new retail pharmacies each year. As a Group excelled and quickly became the on promoting best practices within the our proprietaries are OTC and herbal prod- general comment on the industry’s overall preferred raw materials agent for many pharmaceutical industry. This means that ucts. Within these product groups, we of- preparation, many manufacturing compa- pharmaceutical manufacturers in Indone- manufacturers should adhere to good fer solutions that encompass all of the ma- nies have begun to produce more generic sia. Throughout the 1980s, Mensa group manufacturing practices (GMP) and dis- jor therapeutic areas. Kimia Farma has had products. Branded prescription products acquired a number of companies, such tributors to good distribution practices its most success in the areas of generic are decreasing while the market for gener- as Otto Pharmaceuticals and Landson, (GDP), as GMP companies are only as ef- and herbal products. ics is increasing, which will have the effect which helped establish it as a vertically in- fective as the GDP companies that serve In terms of products, Kimia Farma is the of making more products accessible. tegrated company. By 1986 we acquired them. only producer of HIV medication in In- a distribution leg for our business and donesia. Additionally, as Kimia Farma has What challenges does the Indonesian Menjangan Sakti is an important sub- were able to grow through horizontal in- The implementation of national health- Please provide a brief overview of Kimia a unique relationship with the government pharmaceutical sector face? sidiary of Mensa Group, responsible for tegration. Diversification across business care reforms will have a substantial Farma and its operations in Indonesia. as a state-owned enterprise, it is enforced If a company wants to export its products, the raw materials aspect of its business. units has led to Mensa Group’s current impact on Indonesia’s pharmaceutical Kimia Farma’s presence in the Indonesian by presidential decree that Kimia Farma its facilities have to achieve a very high Please describe the evolution of your position as one of Indonesia’s preemi- sector. How does Mensa group look to pharmaceutical industry dates back to is the sole company able to produce nar- standard of quality, but the capital invest- career up until your current position as nent pharmaceutical companies. navigate this changing environment? 1870, when the company was established cotics in Indonesia. ment required to achieve these standards the company’s Managing Director. To assess the landscape of opportunities by the Dutch. In 1968 the company was With regard to facilities, Kimia Farma is the is very high. Relative to the Americas and I began my career in the pharmaceutical What is the current focus of Mensa in Indonesia, it is important to assess nationalized and became Kimia Farma, a only pharmaceutical company in Indonesia Europe, the Indonesian education system sector 11 years ago as a medical sales Group’s operations? the country’s demographics. Indonesia state-owned pharmaceutical company. In to have a pharmaceutical grade salt man- lags. This is reflected in the country’s lower representative. Everyone in the industry Mensa Group is uniquely positioned, as has the highest cost of distribution in the 2001, Kimia Farma experienced further ufacturing facility. Other Indonesian com- levels of technical proficiency in pharma- should understand the granular details it has four pillars to our business: distri- world. Mensa Group’s core competency evolution and was placed on the Jakarta panies do not have the technology and ceuticals. Research organizations such as of the business; accordingly, entering bution, raw materials, and two manufac- is as a bridge: we have the capabilities to Stock Exchange and the Surabaya Stock knowledge to open this type of factory and LIPI, the Indonesian Institute of Sciences, the industry in this capacity provided the turing facilities. Each business unit is of distribute a range of finished products, Exchange. Today, the Indonesian govern- on a price basis – in this market – other and BPPT, the Indonesian Agency for the best possible foundation and ultimate equal importance to overall operations, from pharmaceuticals to medical devices, ment maintains control of 90% of Kimia companies cannot compete with China Assessment and Application of Technol- launching point for my career. After ex- which helps diversify our activity and pro- to the entirety of Indonesia’s population, Farma, while the remaining 10% is owned and India. ogy, do a very good job, though. tensive training, I worked my way up the motes sustainability. We are constantly meeting the demands of Indonesia’s privately. ranks and became a business develop- developing our business model; recently, national health care program. Mensa What is your growth strategy? Indonesia’s new government has taken ment manager. Later on, due to a series we merged into the digital space, enter- Group’s first growth position is to help Where is the majority of Kimia Farma’s Kimia Farma will seek to diversify and strides to promote the pharmaceutical of unforeseen industry-wide corporate ing online pharmacy markets and engag- channelize low-cost medicines. Its sec- activity concentrated in the pharmaceuti- evolve away from being considered solely sector. What factors can further encour- jostling, I was offered the position of gen- ing in social media platforms for doctors. ond overarching focus stems from its pro- cal sector? a pharmaceutical company to being con- age the sector’s development? eral manager of commercial operations duction capabilities. Quality is the most Kimia Farma operates primarily in the In- sidered a full-service health care company. The government of President Jokowi is for Landson. During my tenure at Land- The raw materials sector formed the ba- important standard for our products and donesian market, which accounts for 96% Kimia Farma will focus on developing its going to be a positive force on the indus- son, the company performed well within sis for Mensa Group’s creation 40 years is never sacrificed. We have undertaken of our activity. The remaining 4% of the activity in the cosmetics and raw materials try. The government’s commitment to in- IMS rankings, improving its position by ago. How does this pillar stand today? significant investment to ensure that our company’s activity comes from Malaysia, markets. crease health care expenditure will benefit 10 spots and having two consecutive Mensa Group has diversified its raw ma- facilities are advanced and competitive Vietnam, and Myanmar. The cosmetics market is attractive as its the pharmaceutical industry as well as the years of 40 percent growth. We had a terials business to include APIs, food, globally. The third growth area is in raw Kimia Farma is a vertically integrated phar- margins are much higher than generics, Indonesian economy as a whole. Indone- very talented team, and this success ben- cosmetic, feed, and materials for other materials. With the implementation of maceutical company. We are an operating and there is less competition. Kimia Farma sia’s pharmaceutical sector is open for ex- efited my career substantially and led to industrial areas. Today, Mensa Group BPJS, the industry will require more raw holding company that manages five man- sees an opportunity 96% of raw materials pansion, and the new government’s poli- my next position as commercial head of boasts a profile of over 5,000 products in materials, and we are ready to help ac- ufacturing facilities in Indonesia, with the for this market, including excipients, be- cies will be beneficial to the overall health pharmaceuticals, and ultimately to my po- raw materials, with even more finished commodate this growth. • construction of another manufacturing ing imported into Indonesia. This year, we of the industry. •

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INDONESIA PHARMACEUTICALS 2015 - 34 - Industry Explorations Industry Explorations - 35 - INDONESIA PHARMACEUTICALS 2015 VALUE OF INDONESIAN PHARMACEUTICAL MARKET

Source: BMI

INDONESIAN RUPIAH, TRILLIONS * Forecasted

400 CAGR: 13.1% 350

300

250

200

150

100

50 EDITORIAL 2008 2009 Global Business201 Reports0 2011 2012 Global Business201 Reports32014* 2015* 2016* EDITORIAL

Image: Interbat

INVESTMENT IN INDONESIAN PHARMACEUTICALS PRESCRIPTION VS. MARKET VALUE DISTRIBUTION government worked in close collaboration majority of Indonesia’s $6 billion phar- Source: Indonesia Investment Coordinating Board, 2014 OVER-THE-COUNTER DRUGS IN INDONESIA The Evolution of with industry leaders to implement stan- maceutical industry is controlled by a Source: BMI Source: BMI dards at a measured pace, bolstering the handful of large manufacturers. Accord- FDI ($ MILLIONS) DDI ($ MILLIONS) TOTAL Pharmaceutical quality standards of the industry’s manu- ingly, statistics suggest that 80 percent factured products, while ensuring limited of Indonesia’s pharmaceutical market Manufacturing alienation amongst manufacturers. is controlled by 40 percent of the indus- 240 The collaborative evolution of Indonesia’s try’s manufacturers, which leaves smaller in Indonesia 220 regulatory framework has propagated an players200 to pursue more niche areas within

environment conducive to the develop- the180 market. ment of the industry’s manufacturing ca- But160 interestingly, while the development pabilities. According to Dr. Johannes Seti- phase140 of Indonesia’s pharmaceutical in- 1966 - Present jono, Chairman of GP Farmasi Indonesia, dustry120 was overseen by multinationals, nearly 90 percent of Indonesia’s pharma- its100 more recent transformation has been 80 ceutical manufacturers are currently able driven by domestic manufacturers. The 60 The evolution of Indonesian pharmaceuti- to endure increases in the industry’s reg- current composition of Indonesia’s phar- 40 CAGR cal manufacturing is marked by fifty years ulatory requirements. As a point of com- maceutical20 industry starkly contrasts its of development and transformation. The parison, nearly 50 percent of China and initial formation of fifty years prior: to- Prescription 61.5% 11.23% Multinationals 25% 2010 2011 2012 2013Thru Q3 2014 Over-the-Counter 38.5% 6.09% Local 75% initial driving force behind the sector’s India’s pharmaceutical manufacturers day, the presence of multinationals has development was the liberalization of its have been pushed out of the market due greatly weakened; as 70 percent of the markets in 1966, which afforded multi- to regulatory advancement. industry’s total activity is now controlled of Indonesia’s pharmaceutical indus- national pharmaceutical manufacturers Quality standards continue to play a crit- by domestic companies. According to Dr. try; a trend which is expected to persist the opportunity to establish a presence ical role in the development of Indone- Johannes Setijono, “Indonesia is one of given the recent implementation of JKN within the country. Despite federal man- sia’s pharmaceutical industry. Testament the only countries in Asia to have this reforms. Enacted in 2014, the goal of dates that required multinationals to to the industry’s commitment to quality strong of a domestic presence.” JKN is to extend healthcare coverage to share ownership with local partners, a is found in the fact that over 80 percent Over the years there have been two the entirety of Indonesia’s population by burst of momentum was given to the de- of its manufacturers currently operate overarching factors that have triggered 2019. velopment of Indonesia’s pharmaceutical in accordance with Good Manufactur- this shift in the industry’s dynamics: “In- Once JKN is fully implemented, it is pre- manufacturing sector, which attracted ing Practices (GMP). Dr. Roy Sparringa, donesian companies have proven that dicted that 19 percent of total healthcare a host of well-known multinational play- Chairman of Indonesia’s National Agency they have a better understanding of the their often extensive R&D capabilities, and also antibiotics.” As a result of expenditure will be attributed to pharma- ers eager to capitalize on the market’s for Drug and Food Control (BPOM), has domestic pharmaceuticals market” and multinational manufacturers have sus- fine-tuning its product line with the needs ceuticals. The rollout of JKN has man- nascent potential. Today, many of the stated that an emphasis on GMP certifi- “Indonesian manufacturing expertise has tained a commanding presence in the of local consumers, Interbat’s drugs have dated formation of an Essential Drugs world’s largest multinational pharma- cation “increases the industry’s ability to improved,” said Andreas Halim Djamwari, market for innovative drugs. Describing enjoyed strong reception in the domestic List, which in an effort to promote acces- ceutical manufacturers, such as Actavis, be compliant” and consequently eases President Director of Actavis Indonesia. the market’s composition, Dr. Sparringa market. sibility, is comprised of 92 percent generic Bayer, Merck, Pfizer, and Sanofi, maintain the approval process required for manu- The rise in preeminence of domestic states: “95 percent of Indonesia’s drug Other factors, such as “the remoteness drugs. Consequently, current market con- significant operations in Indonesia. facturing pharmaceutical products. manufacturers stems from their special- volume comes from domestic compa- of rural Indonesia and the country’s di- ditions bode particularly well for domestic The early years of Indonesia’s pharma- Typifying the industry’s dedication to ization in generic drugs, which represents nies, while the remaining five percent versity of languages have proven to be manufacturers as demand for innovative ceutical industry were largely dominated quality standards is Interbat, a manufac- the largest segment of Indonesia’s phar- is multinational. Additionally, 75 percent difficult factors for multinationals to nav- drugs is expected to decline, while the by the presence of multinationals. In the turer that currently possesses 15 differ- maceutical market. Alternatively, due to of the industry’s value comes from do- igate,” says Dr. Setijono. Again, benefit- market for generic drugs is on the rise. early 1970s, foreign interests accounted ent GMP certifications for both sterile mestic companies and 25 percent comes ting from familiarity with the local market, Commenting on the reforms, Dr. Andre for nearly 80 percent of the industry’s and non-sterile facilities. While manu- from multinationals.” Consequently, domestic manufacturers have leveraged Lembong, President Director of Pharos, total activity, while domestic companies facturers have taken great strides to im- while domestic manufacturers corner the their knowledge to achieve expansive re- Indonesia’s fourth largest pharmaceutical claimed the remaining minority stake. At prove the quality of their products, Dr. market for low-cost generic drugs, multi- gional market penetration within Indone- company, stated: “Domestic companies 95 percent of Indonesia’s drug volume this time an increasing number of multi- Sparringa notes: “In the future BPOM “ national manufacturers concentrate their sia. On the contrary, multinationals have will continue to thrive in the generics mar- comes from domestic companies, nationals entered the Indonesian market, would like the entire industry to achieve efforts on the market for high-value inno- been confronted with significant chal- ket.” while the remaining five percent is bringing with them both expertise and current-GMP certification.” In doing so, vative drugs. lenges in penetrating Indonesia’s more multinational. Additionally, 75 percent capital, elements which proved critical for the industry will continue to develop its An essential ingredient to the success of rural areas and have instead established Continued Evolution: OTC Products of the industry’s value comes from the development of Indonesia’s pharma- capabilities towards the level of interna- domestic manufacturers has been their their toehold in Indonesia’s larger cities. domestic companies and 25 percent ceutical industry. tional standards. inherent knowledge of local market con- Local knowledge of this form has played Despite heightened demand for generic comes from multinationals. Another driving force behind the devel- As Indonesia’s pharmaceutical industry ditions. Domestic manufacturers such a significant role in defining the success drugs, Dr. Andre Lembong predicts that opment of Indonesia’s pharmaceutical in- has evolved through the arrival of multi- as Interbat, who has developed its line of domestic manufacturers as they con- the number of pharmaceutical manufac- dustry has been the steady implementa- nationals, the progressive implementa- of products to directly correlate with the tinue to transform the dynamics of In- turers in Indonesia could decrease by - Dr. Roy Sparringa, tion of its regulatory standards. Beginning tion of regulation, and the development needs of Indonesian epidemiology, ex- donesia’s pharmaceutical industry. as much as two-thirds given enhanced Chairman of Indonesia’s National in the 1980s, the Indonesian government of heightened quality standards, its stake- emplify this characteristic. According to Another driving force for the ascendance competition within the market. Derrick Agency for Drug and Food Control initiated a campaign to advance its phar- holders have grown to include a robust Derrick Budi Sukamto, Vice President of of domestic manufacturers in Indone- Budi Sukamto of Interbat also foresees (BPOM) maceutical industry’s regulatory climate; collection of over 200 pharmaceutical Interbat, its products have a therapeutic sia’s pharmaceutical industry has been increased competition in the market for its ultimate goal being to elevate regu- manufacturers. Furthermore, similar to “focus on metabolic and degenerative their development of expertise in the generic drugs, especially given significant lation towards international standards. prevailing trends in other pharmaceuti- drugs, respiratory diseases, anti-ulcer- production of generic drugs. The market price pressures imposed by the govern- Throughout this process the Indonesian cal industries across the world, the vast ates, dermatology, cardiovascular drugs, for generic drugs is the largest segment ment, which cuts ever deeper into the

INDONESIA PHARMACEUTICALS 2015 - 36 - Industry Explorations” Industry Explorations - 37 - INDONESIA PHARMACEUTICALS 2015 VALUE OF INDONESIAN PHARMACEUTICAL MARKET

Source: BMI

INDONESIAN RUPIAH, TRILLIONS * Forecasted

400 CAGR: 13.1% 350

300

250

200

150

100

50 EDITORIAL 2008 2009 Global Business201 Reports0 2011 2012 Global Business201 Reports32014* 2015* 2016* EDITORIAL

Image: Interbat

INDONESIA PHARMACEUTICALS 2015 - 36 - Industry Explorations” Industry Explorations - 37 - INDONESIA PHARMACEUTICALS 2015 EDITORIAL Global Business Reports Global Business Reports INTERVIEW

already low-margins of generic drugs. velopment of herbal products.” This is all a range of products. Is there a particular Due to current market conditions, many part of Interbat’s strategy of expanding its Dr. Andre Arief product that can be called its specialization? manufacturers are currently seeking to di- portfolio of value-added product offerings. Indonesia lags behind other countries versify their range of product offerings by Another manufacturer that is expand- “ Lembong Pharos’ products cover all key therapeutic in terms of CDMO development, so developing other product areas, such as ing its product line is Actavis Indonesia, opportunities in Indonesia are quite areas and are not concentrated within any over-the-counter (OTC) products. whose parent company, Actavis, recently bright. particular product segment or focus. Many Indonesia’s OTC market offers vast po- undertook several strategic acquisitions, of the products that we manufacture come tential to manufacturers. In other coun- including Forest Laboratories and Warner from licensing arrangements with foreign Chairman tries, OTCs typically account for 10 to 15 Chillcott. The acquisition of these compa- - Alfons Sindupranata, companies, or are generics that we cre- Pharos percent of a pharmaceutical market’s to- nies will allow Actavis to expand into the Managing Director, ated. Pharos is committed to business de- tal value; in Indonesia, this figure amounts market for branded pharmaceuticals, and Genero Pharmaceuticals velopment, which shows in our emerging to 40 percent. Despite the strength of the according to Andreas Halim Djamwari, it product lines: we have roughly 1,000 new OTC market’s existing stature, forecasts will afford Actavis Indonesia the oppor- products in the pipeline and aim to bring predict that in 2015 this market will grow tunity to better service the needs of its around 60 new products to market each to encompass 50 percent of the Indone- customers in Indonesia by offering them year. Roughly 70% of our products are sian pharmaceutical market’s total value. a broader portfolio of health solutions. engaged in the cosmetic industry, but OTCs, while the remaining 30 percent are The OTC market is a particularly attractive Sanofi Indonesia also plans to continue none of these companies are GMP-cer”- ethical. We are focused principally on the diversification strategy for manufactur- its development of innovative medicines tified. On the other hand, almost all of domestic market, with only a small portion ers given enhanced price pressures on in Indonesia by leveraging the global R&D Indonesia’s pharmaceutical companies of our activity being dedicated to export generic drugs, as margins are higher for network of its parent company. are GMP-certified, but none offer exclu- markets in Cambodia. OTCs and manufacturers are able to cut sive CDMO services to their customers. out the middleman and advertise their Meeting Production Forecasts The only avenue through which they offer Diversification into OTCs has been one of products directly to end-consumers. One CDMO services is through toll-manufac- Pharos’ keys to growth. What other areas company that has big plans for engaging A theme of increasing importance for turing, and this is solely with their idle have you identified? the OTC market is Pharos. According to manufacturers in the coming years will capacity.” One area that we have identified is the Dr. Andre Lembong, “in recent years the be investment in production capacity. Consequently, the greatest shortcoming market for consumer health care products: OTC market has been a powerful driver Indonesia’s pharmaceutical industry has of Indonesia’s existing CDMO sector is competition is weaker in this market, regu- of growth for Pharos’ business” and go- enjoyed 85 percent growth between that there is a limited selection of GMP lations are less stringent, and margins are ing forward it “will continue to allocate re- the years of 2007 and 2013, and it is ex- certified companies who offer these ex- more attractive. Areas such as diagnostics sources to this area and hopefully double pected to continue growing at an annual clusive services to the pharmaceutical in- and medical devices also pose solid oppor- product sales in the coming years.” Dr. rate of 12.5 percent through 2018. Strong dustry. Recognizing a need for exclusive tunities for future growth. Andre Lembong describes that the con- growth trends have placed an immense CDMO services within Indonesia’s phar- Pharos is one of Indonesia’s longest sumer healthcare market is attractive to amount of pressure on manufacturers to maceutical industry, Genero has made a standing pharmaceutical companies. Universal health care and the enactment manufacturers such as Pharos as “com- expand their production capacities. Ac- concerted effort to enter the market as Please walk us through the evolution of of BPJS reforms will have a significant petition is weaker in this market, regula- cording to Dr. Johannes Setijono “most Indonesia’s first independent CDMO fo- the company from its creation to today. effect on Indonesia’s industry. What major tions are less stringent, and margins are Indonesian manufacturers are currently cused on pharmaceuticals. Independent My father founded Pharos in 1971; its mis- developments do you foresee? more attractive.” Sanofi Indonesia has operating at capacity.” While many man- CDMOs offer a striking value-proposi- sion was to achieve GMP certification and Indonesia’s pharmaceutical sector will also commented on the importance of ufacturers have preemptively invested in tion to the pharmaceutical industry, as partner with multinational companies in change significantly. Domestic companies this market going forward as it is one of infrastructure over the last several years their structure promotes unbiased oper- the production of pharmaceuticals. At the will continue to thrive in generics, while the world’s leading producers of OTCs. in anticipation of demand trends, many ations. Describing this dynamic, Alfons time, there was legislation that required multinational companies will reestablish others still lack the necessary capacity Sindupranata states: “Genero does not multinational pharmaceutical companies their toehold as producers of more expen- Continued Evolution: Value-Added to meet future forecasts of heightened manufacture its own products,” which to partner with domestic companies for sive products. There are now roughly 150 Products production. In order to compensate for means “each of its customers is treated the manufacturing in Indonesia, which pharmaceutical manufacturers, but this internal production deficiencies, Contract with equal importance.” Genero’s ser- propelled the initial phases of Pharos’ figure will shrink to from 50 and 100 com- While many manufacturers are diversi- Development and Manufacturing Orga- vices have been well received within the growth. In the 1990s, we determined that panies due to the competition sparked by fying into the market for OTCs, others nizations (CDMOs) have emerged as an market, as they already have two GMP there was ample commercial opportunity BPJS. BPJS will also affect retail outlets, are investing heavily into R&D and infra- attractive resource for manufacturers certified manufacturing facilities, with for developing and manufacturing our as generics will increase in prevalence, structure that will enable them to create seeking to expand their capacities. plans to build another site to account for own products. Throughout the course of but pharmacies are not incentivized to sell strong value-added products. In an effort CDMO activity offers budding potential increases in business growth. While CD- our history we have dealt principally with them. In terms of value, branded prod- to bolster its capabilities, Interbat is cur- in Indonesia due to strong production MOs will likely rise in prevalence within ethical products, but over the past decade ucts are much more lucrative than generic rently planning a $3 million investment for forecasts within the domestic pharma- Indonesia’s pharmaceutical industry, low- we expanded our focus to OTC products, substitutes, and many pharmacies have a new 3,000 square meter facility dedi- ceuticals market. According to Alfons costs of labor in Indonesia also provide which now constitutes the majority of our turn away from selling generics. BPJS cated to R&D. In addition to developing Sindupranata, Managing Director of Pt. an interesting market condition for multi- business in pharmaceuticals. Through this hospitals, on the other hand, are required its infrastructure, Interbat also actively Genero Pharmaceuticals, “Indonesia lags nationals seeking to take their manufac- evolution Pharos has emerged today as to carry only generics, so they will see a courts “international partnerships for behind other countries in terms of CDMO turing operations offshore. Accordingly, the fifth largest pharmaceutical company surge in volume. This will affect non-BPJS transfers of technology in manufacturing development, so opportunities in Indone- Genero seeks to increase its presence in Indonesia. hospitals, as their customers will switch to value-added generics, complex generic sia are quite bright.” Furthermore, he both regionally and globally in the coming BPJS hospitals that offer subsidized treat- formulations, and the formulation and de- explains: “Indonesia has many CDMOs years. • Pharos has diversified its focus to include ments. •

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Interbat has been an important player fying two new facilities for this purpose. we will develop our export network to Derrick Budi in Indonesia’s pharmaceutical sector include at least four new countries. In for quite some time. Please describe What product types and therapeutic five-years we hope to expand export ac- Sukamto some of the company’s key milestones areas does Interbat consider its spe- tivity so that it comprises 10 percent of that have shaped its current position in cialty? our overall product turnover. the market. Interbat’s core product competency is in Interbat was founded in 1948 by Mr. manufacturing premium quality branded In addition to export markets, what Djoko Sukamto as the sole distributor generics that are competitively priced in other areas have Interbat identified as Vice President in Indonesia for several well-known Eu- the market. We manufacture 148 differ- essential to growth? Interbat ropean pharmaceutical companies. In ent drug compositions, which are for- Interbat will continue to drive its core 1959 Interbat obtained its own produc- mulated into 243 unique products. The competencies in Indonesia, focusing tion permit, and consequently, became ethical market accounts for more than on its line of ethical products in order one of Indonesia’s first independent 95 percent of Interbat’s product portfo- to capitalize on increased demand from pharmaceutical manufacturers. In 1977 lio, while the remaining five percent is Indonesia’s national healthcare reforms. Interbat relocated its manufacturing attributed to OTCs, a market segment The OTC market is also ripe with oppor- site to a 20,000 square meter factory that is relatively new to the company. tunity, as it constitutes 40 percent of In- in Sidoarjo, which has since expanded The backbone of Interbat’s product line donesia’s pharmaceutical activity. Inter- and remains the domain of our current is focused on metabolic and degenera- bat is still relatively new to this segment manufacturing operations. In 1994 Inter- tive drugs, respiratory diseases, anti-ul- so we will continue to develop our ac- bat received its first GMP accreditation cerates, dermatology, cardiovascular tivity in this area. Value-added products by BPOM. Quality has continued to drugs, and also antibiotics, which have will also continue to be of importance be symbiotic to Interbat, as it currently been a focus for quite some time. These as we build our new R&D facility and holds 15 different GMP certifications for therapeutic focus areas directly corre- continue to align ourselves with interna- both sterile and non-sterile facilities. In late to Indonesian epidemiology, ensur- tional technology partnerships. We will 2000 Interbat began export operations ing that Interbat’s products have signifi- also enhance our efforts in the probiotic, in several African and South East Asian cant impact on the domestic market. nutraceutical, and herbal businesses. markets. Most recently, in 2011, Inter- bat implemented an enterprise resource There are over 200 pharmaceutical Indonesia’s healthcare sector is under- planning system which has helped manufacturers in Indonesia. What going a period of substantial transfor- streamline its logistics and enhance effi- differentiates Interbat from the compe- mation. Consequently, what are some ciencies. Through this evolution Interbat tition? of the greatest challenges and oppor- has emerged today as one of Indone- The Interbat logo symbolizes commit- tunities present in Indonesia’s pharma- sia’s top-five domestic pharmaceutical ment to quality. Interbat takes a quality ceutical market today? companies, employing roughly 1,800 by design approach, carefully analyzing Indonesia’s healthcare reforms pose people with its operations. APIs and raw materials before produc- new challenges and opportunities for tion to ensure that its products are of pharmaceutical companies. Fulfilling R&D and manufacturing are key com- the best possible quality. Interbat’s demand for generics will be one such ponents of Interbat’s operations. What commitment to quality is also embod- challenge as price pressures continue is the breakdown of Interbat’s activity in ied in our continuous investments to to be imposed by the government on these areas? strengthen our human resource, man- manufacturers. Furthermore, Indonesia Interbat currently employs 55 scientists ufacturing and information technology has a tremendous dependency on for- in its R&D department. In the coming capabilities. Lastly, all of these translate eign exchange rates: 95 percent of the years R&D will continue to be an em- into a comprehensive product list and raw materials for Indonesia’s pharma- phasis for Interbat, as we are in the a competitive workforce that maintains ceutical sector are imported. The com- midst of planning a USD $3 million in- good coverage of doctors and attains pounded effect of price pressures and vestment for a new 3,000 square meter their trust in our products. poor exchange rates pose difficulties for facility that will be dedicated to R&D. In pharmaceutical companies. That being addition to its own in-house expertise, Interbat focuses primarily on the said – despite myriad challenges – the Interbat also utilizes international part- domestic pharmaceutical market. outlook for pharmaceuticals in Indonesia nerships for transfers of technology in Looking forward, what will be the role remains very positive as the country has manufacturing value-added generics, of export markets for Interbat? immense untapped potential. Many op- complex generic formulations, and the Over the next five-years export markets portunities exist for companies that are formulation and development of herbal will be a key driver to Interbat’s growth. willing to invest in manufacturing, tech- products. Interbat’s manufacturing fa- Currently, less than five percent of our nology, and efficiency. Looking forward, cilities consist of 50,000 square meters product turnover comes from exports, it will be important for the pharmaceuti- of production space. Our manufacturing but this figure grew by 150 percent in cal sector to build drugs that are acces- activity will also increase in the coming 2014. Right now we export 56 of our sibly priced in order to satisfy national years as we are in the process of certi- products to seven countries; in 2015 demand. •

INDONESIA PHARMACEUTICALS 2015 - 40 - Industry Explorations Industry Explorations - 41 - INDONESIA PHARMACEUTICALS 2015 INTERVIEW Global Business Reports Global Business Reports INTERVIEW

What key elements are in place to call “MACs” (Middle Class and Affluent expertise has improved to acceptable and benefit in many ways from their ex- Rogelio C. reach the five-year goal of becoming a Consumers) will practically double be- Andreas Halim quality levels, and 2) Indonesian compa- pertise and wide reach. Historically, Ac- publicly listed company? tween 2012 and 2020, moving from 74 nies have proven that they have a better tavis Indonesia has been one of Actavis’ la O'Jr. (Cooey) First and foremost, we are vertically million people to 141, and will shift from Djamwari understanding of the domestic pharma- largest subsidiaries in the Asia-Pacific integrated, which is a fundamental 30% of the total population to 54%. This ceuticals market, this is particularly ap- region. Unfortunately, one of our most strength. Product development, manu- means adding eight to nine million peo- parent with over-the-counter products successful products, Somadril, was taken facturing, commercialization, and distri- ple every year to the modern consump- (OTCs). off of the Indonesian market by BPOM bution are a continuous process, and we tion cohort (the equivalent of a small (Indonesia’s national agency on drug President Director & are well positioned in that respect. We country) and represents an exceptionally Former President Director The market’s composition has evolved administration) this year due to cases Chief Executive Officer possess a strong and motivated man- attractive demographic background for a Actavis Indonesia considerably. How has this affected of misuse. This reduced 2014 sales and Soho Global Health agement team that is committed to the company geared to serve the increas- Actavis Indonesia’s operations? our share of regional sales. It is a difficult company’s future and combines local ingly sophisticated needs of this bur- Actavis Indonesia currently offers the situation to come to terms with, as the and international talent. SGH has also geoning consumer class. On the other market a wide range of products, mainly drug remains accepted in other markets, recently engaged in a strategic investor hand the challenges of infrastructure in prescription drugs but also OTCs. Actavis’ including the United States. partnership that will collaborate closely the country, traffic and other such prob- is a multinational company and is there- with us through this journey and trans- lems are typical of an emerging market fore subject to many regulations, which What is Actavis Indonesia’s growth strat- form the business through organic and and to be expected. Indonesia’s pharma- ensures that product quality levels are egy for the Indonesian market? inorganic growth. At present, the com- ceutical industry is also very fragmented very high. This also means that our cus- In terms of organic growth, Actavis In- pany’s product portfolio has a strong and competitive, with many strong local tomers can rely on us to deliver high qual- donesia reorganized its corporate struc- “natural” side to it, using evidence players, somewhat dissimilar with other ity products, but we may not necessarily ture in July 2014: the focus is now on based natural medicine as a unique dif- countries in the region. These compa- offer the lowest price. In recent years, our Business Unit Divisions. The reorganiza- ferentiating factor. We have a close part- nies have built over time formidable strategy has evolved, and we are focus- tion will have the effect of holding prod- nership with Soho Flordis International, franchises and brand equities, many of ing more on the prescription drugs. uct divisions accountable for profit and a global company based in Australia which are doctor promoted or have orig- Prescription drugs compose approxi- loss, and accordingly, will enable us to with a range of evidence-based natural inated from doctor prescriptions. These mately 95 percent of our product offer- concentrate our attention on products products that are marketed in different companies are reaping the benefits of ings, while OTCs constitute the remain- that have adequate growth potential. countries around the world. Soho Flordis these investments today and will con- ing 5 percent. We not only market our We will try to launch as many new prod- International has subsidiaries in Europe tinue to do so in the long-term. own products, but also serve as contract ucts as possible, but the existing approval and the United States, and we have the manufacturer for many large pharmaceu- process for new drugs in Indonesia can opportunity to build on their network and Do you have a final message for our Actavis Indonesia is a prominent man- tical companies in Indonesia. We are able be quite lengthy. We are also excited expertise in research and development readers? ufacturer in Indonesia. How has the to do this because Actavis’ manufacturing about expanding into branded/originator Can you provide a brief background of (R&D), as well as their sales and market- Apart from China and India, in this industry changed over the years? facilities are some of the best in Indone- pharmaceuticals through recent acquisi- the Soho Global Health (SGH)? ing platform to promote internationally part of the world, Indonesia probably Throughout its history, Actavis Indone- sia. The quality of our products is very tions of well known companies such as Soho Global Health was founded in the natural ingredients from Indonesia. presents the biggest opportunity over sia has operated under several different high and we are capable of exporting to Forest Laboratories, Warner Chilcott, and late 1940s. We started by first supplying the next five to ten years. The long-term names: Dumex, Alpharma and Actavis. markets with more stringent quality stan- now potentially Allergan. Actavis consid- injectable products to the market and What is the company’s potential for opportunities outweigh the short-term Even though Actavis was acquired by dards, such as those in Europe and Japan. ers acquisition to a key growth strategy. then diversified to other pharmaceutical international growth? challenges that some companies tend Watson Pharmaceuticals, the global It is mostly about finding Indonesian com- products, such as tablets and capsules, We first need to make sure that we max- to look at because it is what is current. company later took the name of Actavis. Actavis Indonesia operates in both panies who are the right fit. Many are will- and eventually began producing over- imize the business opportunities within But it is a question of the seeds that you Nomenclature aside, Actavis Indonesia domestic and external markets. What is ing to be sold, but often their capabilities the-counter (OTC) products. Our phar- Indonesia. It is definitely the key emerg- continue to plant today that will make was established in 1969 and was the first the proportion of products going to each are limited. maceutical and OTC business has now a ing market in ASEAN, given its current the difference tomorrow. • foreign pharmaceutical company to have of these areas? strong presence in the prescription and and growing demographics. However, manufacturing operations on the ground The majority of Actavis Indonesia’s prod- What are some important considerations consumer health space, complemented we have made selective investments in in Indonesia. uct volume, around 70 percent, is con- for the Indonesian pharmaceuticals by an established distribution business, ASEAN and have a strategy in place for In the early 1970s, Indonesia’s pharma- centrated in the domestic market. The industry moving forward? and broad manufacturing capabilities. In expansion. Having said that, because of ceutical industry was dominated by multi- remaining 30 percent is directed towards The Indonesian government needs to 2013, we entered into a strategic joint our close partnerships in Australia, the national companies: foreign interests external markets. Most of our exports continue to focus on the quality of the venture with Fresenius Kabi, a German United States and Europe, we are, in a accounted for about 80 percent of the are intra-company transactions, so we industry’s products, as this will be very global pharma player, with a vision to be- way, already global. industry’s market share, while domestic are solely focused on the manufacturing important to further development of the come one of the intravenous (IV) therapy companies had a minority stake of 20 of our products and not the marketing of health care sector. Consideration should drugs and infusion solutions leaders in What are some of the opportunities as percent in the industry. Between the late them to external markets. also be given to expediting the current Indonesia. Over the past five years, SGH well as challenges in the Indonesian 1970s and today, there was a significant drug registration process in order to in- has also ventured into other related ad- market? shift in the market’s composition: today, Actavis plc is a well-known global phar- crease the portfolio of drugs that are avail- jacent businesses, including multi-level Indonesia is unique and full of oppor- domestic companies command approxi- maceutical company with a worldwide able on the market. Finally, anti-corruption marketing of health supplements, med- tunity. Its population of 250 million is mately 72 percent of the industry’s mar- presence. What is your relationship with needs to continue to be a focus for reg- ical devices and equipment, among oth- substantial vis-à-vis its neighbors with a ket share, while multinationals control Actavis plc and the relative importance ulators of the industry, ensuring that do- ers. Currently, we are a privately owned fast growing middle class and a high and the remaining 28 percent. There are two of your operations in Indonesia? mestic and multinational companies play company with the long-term objective to increasing consumption base. In a 2013 important factors that have contributed to We have intensive communication with by the same set of rules. • be publicly listed. study, BCG estimated that what they this change: 1) Indonesian manufacturing Actavis’ regional and global operations

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three. Our product portfolio comprises turers. We are trying to expand our ex- Our target demographic is the middle their knowledge and simultaneously Heramina gynecology and family planning, neu- port market for our full line of products. Michael class, and we want to focus on young helping doctors who do not have the rological, psychiatric and weight man- We currently export to Vietnam, Cambo- to middle-aged women, as target in- time to answer all of their patients’ Dwisari agement drugs. We have observed an dia, Myanmar and Hong Kong. We are Wanandi fluencers who can also influence their questions. We have our specialists upward trend in the demand for weight targeting several countries and seeking families and surrounding communities. conduct classes on specific topics, management drugs, and since we are the international partnerships to help us. Our corporate social responsibility pro- such as degenerative diseases. Fur- only company that provides drugs in this gram focuses on healthy living educa- ther, we not only educate pharmacies area, we have an edge over other com- What is Sunthi Sepuri’s status with tion and women’s empowerment. We about our products, but also encourage President Director petitors in the industry. certifications and permissions? President Director work actively in educating the youth them to reach out to consumers and Sunthi Sepuri We have the International Organization Combiphar and women’s communities on life- build their customer base. The younger Can you elaborate on Sunthi Sepuri’s for Standardization (ISO) certification. style disease prevention. We empower generation is more responsive to digital partnership with Wyeth? We are not currently aiming for U.S. FDA marginalized women by providing them channels than conventional advertising We maintain an international partnership approval. Our strategic focus lies more with knowledge and skills in marketing means, thus creating a new platform to with Wyeth. As we are a reliable and within Asia, where markets are growing and finance as well as educating them communicate. Therefore, we have to strong local company, they approached rapidly, and there is scope for further on sustaining good health. This com- use digital channels more than mass us with their products for manufacturing pharmaceutical provision. mitment distinguishes Combiphar from media, especially because our products and distribution in the Indonesian market. its competitors, and shapes our percep- demand more than a few seconds to They were also aware that the market What are some bureaucratic conse- tion as a socially responsible consumer understand. Tapping the digital space here was bigger than in other countries. quences that Sunthi Sepuri faces in health care company. is the way to directly reach our con- We now manufacture and distribute Indonesia? sumers. drugs for Wyeth locally. Moving forward The government is trying to liberalize What business strategies are in place we see their partnership continuing. the market by promoting Indonesia as a to position Combiphar as a consumer What are some of the challenges in the member of a free trade area for manufac- health company? Indonesian market? Is it common for local Indonesian play- turers. Indonesia is a part of the ASEAN In the last three years, I have tried to We face regulatory challenges on an ers to use partnerships with interna- Free Trade Area (AFTA), the members tackle intergeneration challenges and ongoing basis, as registering new prod- tional players to better establish their of which include Brunei, Singapore, In- management challenges by adopting ucts is always a daunting process. Hu- position within the current market? donesia, Malaysia, Philippines, Vietnam, certain strategies. We have conducted man resources is also a tremendous Yes, this trend emerged around the Cambodia, Myanmar and Thailand. The consumer surveys and learned that our challenge, because doctors and phar- 1980s. There are several players within key benefit of AFTA is that it gives these patients perceived our company as old, macists sometimes convey the wrong Can you provide a brief background of the market that partner with international countries a competitive edge as a global Can you provide background on as a company meant to provide their information to consumers, and our Sunthi Sepuri? partners not only for financial backing, manufacturing base. It also makes In- Combiphar? parents’ medicines. This encouraged medical representatives do not make a Sunthi Sepuri was established in 1988 but also to raise the quality standards for donesia more attractive for foreign direct Combiphar was established in 1971 and us to give the company a face-lift by clear differentiation to sell generic prod- for the government project of family their product and gain a stronger position investment, as we do not incur any tariffs today stands with the mission of being a changing our logo and rebranding our ucts versus licensing products. Thus, planning in order to cater to the board of in the domestic market. conducting trade within the AFTA. leading consumer health care company packaging. In addition to consumer sur- simply pushing products is not an op- family planning. This marked our entry in Indonesia. I assumed my current po- veys, we have a corporate communication. Product education is key. Distrib- into the pharmaceuticals industry, after What are some of Sunthi Sepuri’s Do you have a message for the Indone- sition in 2011 and one of the biggest tions department, which sets us apart. utors are another challenge, as they which we expanded to manufacturing strengths that make the company wor- sian government? challenges at the time was determin- The first two years we had single-digit simply take orders from retailers and fill other products within pharmaceuticals. thy of strong international partnerships? The government will be implementing ing the direction in which we wanted growth, so we altered our distribution them, whereas we like to develop rela- However, our foremost and prime prod- Sunthi Sepuri is centered on family plan- the BPGS program, which will provide to take Combiphar. We are a medi- channels by reducing our supply to tionships with our retailers and instill an uct line still caters to family planning. ning. We have expanded the company us with a subsidy that will help boost our um-sized company, and I did not have a wholesalers and shifting our focus to understanding of our products. Training and have established a wide array of production capacity and put Indonesian background in pharmaceuticals. During building our brand. We have developed the sellers leads to more accurate con- How did Sunthi Sepuri move into the products to help our customers make manufacturers on the world map. The this time, the business was generic in our marketing team and created a sys- sumer knowledge. manufacturing business? the right choices. Our quality system also government should continue to imple- nature rather than differentiated. One tem to build our consumer database. In the 1980s, President Suharto was con- distinguishes us. We are eager to satisfy ment such programs. of our success stories was with our Our strategy is to create a demand for Where will Combiphar be in ten years? cerned about family planning, and we our customers and will always strive to cough syrup, following which we felt our products by distinguishing Com- Although we are a relatively small com- needed several pharmaceutical compa- provide the best by constantly perform- Where will Sunthi Sepuri be in ten that we could replicate success with biphar. The changes paid off. Despite pany in turnover, we do not allow our nies to help us manufacture products. In- ing quality improvements. We have won years? other health care products. Therefore, the difficult 2014 market environment, turnover to dictate our vision. We are donesia received a few awards from the awards and received certifications, such In ten years, Sunthi Sepuri will have ex- my vision was to transform Combiphar our performance was superior, and we an active, responsible company and United Nations for family planning, so we as the ISO certificate, the SGS interna- panded its research and development into a consumer health company and regained our market share. over the next decade, we plan to fur- were operating in a high demand market tional for customer satisfaction, and a to stem cells with the help of a local build our own niche brands. We wanted ther invest in our existing products and segment. We now have numerous man- certificate for continual improvement and university. Indonesia already has nine to diversify into more preventive areas How do you engage consumers? in the research and development of ufacturing companies. quality improvement system. hospitals that are conducting stem cell and educate consumers about making Health care is important to the Indone- new products. We hope to continue de- research, which the government is sup- healthy, informed choices. Our com- sian consumer. 65% of searches on veloping quality products, build a strong What is your competitive landscape like How does your pricing system compare ported through grants. Our company can pany emphasizes quality, which is why the Internet by people in Indonesia are brand name, and create value for a wide in the Indonesian market? to that of your competitors, and how contribute to this major step, while con- we were listed as the fifth most like- about health. 70% of these searches customer base by increasing our chan- In the regular market, our position is sec- does exporting play into this? tinuing our operations in family planning, able and reputable company in Indone- are by women, which demonstrate that nels of communication with the people ond for the pregnancy pill, so we hold Our pricing system for manufacturing is neurological, psychiatric and weight man- sia in 2013 by one of the leading local we are on the right track. We engage and educating communities through a a leading position as we are in the top complicated compared to other manufac- agement pharmaceuticals. • magazines and research companies. in educating patients, thus increasing community building approach. •

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INDONESIA PHARMACEUTICALS 2015 - 44 - Industry Explorations Industry Explorations - 45 - INDONESIA PHARMACEUTICALS 2015 EDITORIAL Global Business Reports Global Business Reports

growing market like pharmaceuticals An Unsaturated Agus Adiguna in Indonesia, but since we are new to the market, we have to work hard to Market Tanoto establish our reputation and deliver products effectively. Even though we are new, we prepare high standards for this pharmaceutical venture, including the preparation of good distribution Exploring Barriers to Entry for Managing Director process certification (CDOB) and ISO in New Players Chemco Prima Mandiri near future. The people and companies of Indonesia are already receiving products of great quality, but we want to distinguish ourselves by providing outstanding ser- Traditionally, barriers to entry have been vice. Establishing relations with our cus- high, including heavy financial investment tomers is our key strategy. We also plan to commence production and then com- to aggressively search for new products petition from both multinational players and seek out more suppliers so that we and long-standing, established domes- can offer a wide array of pharmaceu- tic companies who enjoy government tical products to our clients. Our chief support. Despite these challenges, a strategies thus involve product differ- number of corporations have navigated entiation and outstanding service to our Indonesia’s business landscape and customers. started new ventures as recently as last year. The growth rate has helped enable Who are your key clients and what is businesses to capitalize on its upward your target segment? curve. Indonesia’s pharmaceutical indus- Image: Menjangan Sakti, Mensa Group Our expertise lies in packaging and dis- try is valued at $6.5 billion and grew by ations in 2014 and faced the challenge of oto: “Since we are new to the market, we tribution, and our knowledge of food 85% from the span of 2007 to 2013. Last investment in infrastructure, research and have to work hard to establish our repu- ingredients can be applied to pharma- year alone, it saw a 12.5% annual growth development and production facilities. tation, by entering as big as possible and Chemco Prima Mandiri is primarily ceutical products, such as sweeteners, rate, a trend that is expected to continue Suryanto, president director of Imedco delivering products effectively.” a food, chemicals and cosmetics so we are mainly contributing to ingre- through 2018. Market research firm Frost said: “We are making a new layout of Ultimately, however, success in this mar- business. How did you get involved in dients, packaging and fragrance. Since & Sullivan in March 2013 predicted that the production facility and are replacing ket is mathematically likely. “We have pharmaceuticals? pharmaceuticals are new for Chemco, the nation’s healthcare market would all the machinery, water systems and air achieved 100% growth for our pharma- Chemco Prima Mandiri was established there is ample potential and promise for more than double in the span from 2012 handling.” ceutical division this year,” finishes Tan- in 2003. We started off in food ingredi- growth, and we hope to capture clients to 2018. The return on investment is a longer oto. • ents and cosmetic packagings. We are locally and internationally. For companies operating in related indus- process, depending on the time taken to a medium sized company with a strong tries of food, chemicals and packaging, begin production. As the trend in Indone- history in these product areas and saw Where is Indonesia headed with re- such as Chemco Prima Mandiri, it seems sia is evolving towards over-the-counter opportunity in distribution. We wanted spect to the pharmaceutical industry? as though penetrating the pharmaceuti- drugs (OTC), companies that have no to build a business-to-business model Pharmaceuticals is one of the top five cals industry has been relatively simple prior reputation naturally tend to take “ In terms of the kind of drug, we are a based on strong triangle partnerships “ready to go” sectors in Indonesia. In due to the converging market trends. the first step by starting out within this focused generic player. We produce between principles, Chemco and end 2013, the growth of the industry was Agus Adiguna Tanoto, managing director, space. Audrey Clarissa, managing direc- medicines such as paracetamol and users. We got involved in pharmaceuti- 13%. In 2014, it is expected to be be- Chemco Prima Mandiri, said: “I chose tor of Imedco, said: “In terms of the kind OTC drugs. To focus on generic cals because Indonesia is an emerging tween 14% and 15%. We hope that in pharmaceuticals as a promising industry, of drug, we are a focused generic player. production was a strategic decision, country, where the income and welfare 2015 it will grow more. People say that questioned what we could do for the in- We produce medicines such as paraceta- given that we are a relatively new of the people will rise, which will bring Indonesia will be entering a recession, dustry and how we could contribute, and mol and OTC drugs. To focus on generic company. The risk is relatively low, growth to the food and pharmaceutical business will decrease, the foreign ex- decided to venture into the pharmaceuti- production was a strategic decision, given and although we are starting out with sectors. We already have the food in- change market will be unstable, and cals market in 2013. We obtained our li- that we are a relatively new company. generics, in the future we may become gredients, and pharmaceuticals are the the country will suffer politically. Being cense and began distribution as recently The risk is relatively low, and although we more specialized in terms of the areas next logical step. We ventured into the a well-established company, Chemco as 2014. Since pharmaceuticals is a new are starting out with generics, in the fu- we cater to. market in 2013, obtained our license, has been in the situation twice before division for Chemco, there is ample po- ture we may become more specialized in and began distribution of active pharma- with the economy in recession. When tential and promise for growth, and we terms of the areas we cater to.” ceutical ingredients by the end of 2013. companies expect a recession, they are hope to capture clients locally and inter- Low profit margins in cost cutting are - Audrey Clarissa, discouraged from conducting business, nationally.” also a concern that new companies must Managing Director, Imedco What business strategies has Chemco but we see this as an opportunity to For companies that do not have a back- understand, while hoping to benefit from adopted in order to boost their phar- provide service. As a leader, I am trying ground in a related industry, there are the market growth. Establishing a reputa- maceutical division? to sustain the company’s 20% growth more obstacles. Imedco relaunched oper- tion is another concern, according to Tan- There is tremendous potential in a rate and increase it year by year. •

INDONESIA PHARMACEUTICALS 2015 - 46 - Industry Explorations” Industry Explorations - 47 - EDITORIAL Global Business Reports Global Business Reports

INDONESIA PHARMACEUTICALS 2015 - 46 - Industry Explorations” Industry Explorations - 47 - Beyond the Laboratory: Supply Chain Dynamics, Equipment, and Distribution.

“In terms of the pharmaceutical industry specifically, we provide instruments such as a computerized physical analyzer (texture analyzer) for various measurement of physical properties of granules, tablets, capsules, patches, liquids and semi- solids, for example rheology, caking tendency, compatibility, compressibility, adhesiveness, hardness, tensile, bloom strength, and so on. Our texture analyzer can be widely applied to perform various measurements of physical properties of product.”

- Hengky W, President Director, Robina Anugerah Abadi

Image: Menjangan Sakti, Mensa Group Beyond the Laboratory: Supply Chain Dynamics, Equipment, and Distribution.

- Hengky W, President Director, Robina Anugerah Abadi

Image: Menjangan Sakti, Mensa Group EDITORIAL Global Business Reports Global Business Reports EDITORIAL

in enforcing strict manufacturing prac- Supplying the Mainstream tices that have led to a number of In- donesian pharmaceutical companies being recognized internationally, as they are conforming to international standards of manufacturing and trace- Opportunities within Indonesia’s ability. The pharmaceutical industry is Service Sector going through consolidation as a result of the change in government policy to higher quality control and safety standards. There is a grey area between cosmetics and medicine. That grey Raw Materials area is increasing, and we are active in that area. We are effective in integrat- The pharmaceuticals industry in In- taining industry with a reduced de- suppliers of raw materials for pharma- ing such products, and in the future we donesia is serviced with raw materi- pendence on imports in the decade to ceuticals in Indonesia is quite small, see ourselves taking advantage of the als for finished dosage by a handful of come. consisting of around 10 to 15 leading converging market.” medium to large sized domestic com- A second challenge that companies companies.” panies. This subsector of the industry supplying raw materials face is in the Volatile exchange rates are a risk com- Scientific Laboratory and Equipment is primarily composed of roughly 10 to form of bureaucracy. Nugroho dis- panies are incurring through heavy de- 15 local firms, such as Ekacitta Dian cusses the challenges that Ekacitta pendence on imports. Dr. Stanley Ch. As Indonesian pharmaceuticals manu- Persada, Chemco Prima Mandiri and Budihardja, regional director, East Asia, facturers are moving into supplying the Tigaka Distrindo Perkasa (TDP). Many Pt. BSN Medical Indonesia, said: “More market with increasingly sophisticated are also involved in sectors such as than 90% of the medical devices used drugs, the demand for machinery, both food, chemicals and cosmetics. “ in Indonesia are imported. This is a for testing and for production, has Setiawan Nugroho, president of We focus on packaging solutions that significant challenge for Indonesia, as greatly increased. Lilyana Budihardjo, Ekacitta Dian Persada, said “Pharma- have the desiccant inside. Sanner it is neither healthy nor sustainable for the business development director for ceuticals represent the largest portion is attempting to eliminate its use of industry. Currently, even very simple GaiaScience, a leading provider of sci- of our business, as this is the highest bagged desiccants, as the regulations of medical devices are being imported.” entific and laboratory equipment, said: value sector we work in. Indonesia many countries are evolving to mandate In summary, given the demand gap “We have observed that the quality has around 170 Pharmaceutical manu- and risks, Indonesia must find ways to of the research that Indonesian com- “The initial efforts of Imas Asri Mulia that desiccants are unable to touch facturers, of which maybe 120 can be the product for fear of contamination. encourage businesses that supply raw panies are now doing has greatly im- concentrated on the idea that there considered active players in the mar- Desiccant packaging has been our focus materials, particularly with local manu- proved, exploring new methods such was a dearth of Asian pharmaceutical ket.” in Indonesia, but our current goal is to facturing. This can be done by reducing as those of stem cells technology. We machinery present in the Indonesian Indonesia is a net importer of pharma- expand our product offerings to the challenges in logistics and licensing observe trends and surges in demand market, with the majority of machinery ceutical raw materials and filling the Indonesian market to include Sanner’s and providing an improved infrastruc- for certain products, and as for our con- products available in the Indonesian production gap would require over- entire portfolio of packaging solutions. ture. tribution when we visit our customers, market at the time coming from Europe. coming several obstacles. One of the Our packaging solutions include we introduce new technologies and Taking advantage of this opportunity, most glaring challenges is the health standard products as well as customized Packaging provide solutions to them. This spurs Imas Asri Mulia worked with care infrastructure, which requires a products tailored to the specific needs discovery and innovation in itself.” Taiwanese machinery manufacturers tremendous amount of investment. of our customers. Like most developing economies, In- In order to cater to this demand, the to bring their products to market in Thomas Harsono, chief executive of- donesia faces two key obstacles: the market trend has been to import ma- Indonesia. Following success with ficer, Tigaka Distrindo Perkasa (TDP), need to build its infrastructure within chinery from European companies. this initiative, we sought to broaden said: “Given that Indonesia is a de- - Noviyan Permadi, Sales Manager, the health care segment and to raise Hengky W, president director of Robina our product portfolio and expanded veloping country, there are inherent Indonesia, Sanner Pharmaceutical & the standard and quality of hygiene ob- Anugerah Abadi, said: “Our principals our operations to include many more challenges such as a lack of efficient Medical Packaging Materials served in manufacturing processes. are based in several European coun- principals throughout the world. All infrastructure, a need for strengthen- Steps towards overcoming these chal- tries such as United Kingdom, Switzer- of the machinery that Imas Asri Mulia ing enforcement of existing laws, and lenges have been especially pertinent land and Germany, as well as in United distributes comes from abroad, as this government-driven incentives to make in the realm of packaging, with multi- States and China.” is what can have the greatest effect long-term investments in local API pro- national corporations (MNCs) dominat- In terms of the outlook, Hengky says within the Indonesian market. duction. So far, our feasibility studies ing the business landscape. Per Olof that he would like to see manufactur- show that it is still not yet financially faced in obtaining a license: “Whole”- Johansson, managing director of Tetra ers take greater risks. “There is prom- viable to produce raw materials within salers are required to have a license, Pak Stainless Equipment, said: “Driven ise for growth and potential for inno- - Jairus Audwin, Indonesia unless government incen- which has a duration of 2 years or 5 primarily by the health care reform, vation in Indonesia. I would like to see Sales Engineer, tives and support are increased.” years, and thereafter must be renewed the last two years have held a lot of the market become more ambitious; Imas Asri Mulia Only once the infrastructure and sup- for further operation. As it is difficult uncertainty about the future of health companies take risks in research, and ply needs are met will the economy to obtain a wholesalers (PBF Bahan care with the change of government. grow into leaders rather than follow- be able to build a strong and self-sus- Baku Farmasi) license, the market for The government has been effective ers.”• Image: Interbat INDONESIA PHARMACEUTICALS 2015 - 50 - Industry Explorations Industry Explorations - 51 - INDONESIA PHARMACEUTICALS” 2015 EDITORIAL Global Business Reports Global Business Reports EDITORIAL

in enforcing strict manufacturing prac- Supplying the Mainstream tices that have led to a number of In- donesian pharmaceutical companies being recognized internationally, as they are conforming to international standards of manufacturing and trace- Opportunities within Indonesia’s ability. The pharmaceutical industry is Service Sector going through consolidation as a result of the change in government policy to higher quality control and safety standards. There is a grey area between cosmetics and medicine. That grey Raw Materials area is increasing, and we are active in that area. We are effective in integrat- The pharmaceuticals industry in In- taining industry with a reduced de- suppliers of raw materials for pharma- ing such products, and in the future we donesia is serviced with raw materi- pendence on imports in the decade to ceuticals in Indonesia is quite small, see ourselves taking advantage of the als for finished dosage by a handful of come. consisting of around 10 to 15 leading converging market.” medium to large sized domestic com- A second challenge that companies companies.” panies. This subsector of the industry supplying raw materials face is in the Volatile exchange rates are a risk com- Scientific Laboratory and Equipment is primarily composed of roughly 10 to form of bureaucracy. Nugroho dis- panies are incurring through heavy de- 15 local firms, such as Ekacitta Dian cusses the challenges that Ekacitta pendence on imports. Dr. Stanley Ch. As Indonesian pharmaceuticals manu- Persada, Chemco Prima Mandiri and Budihardja, regional director, East Asia, facturers are moving into supplying the Tigaka Distrindo Perkasa (TDP). Many Pt. BSN Medical Indonesia, said: “More market with increasingly sophisticated are also involved in sectors such as than 90% of the medical devices used drugs, the demand for machinery, both food, chemicals and cosmetics. “ in Indonesia are imported. This is a for testing and for production, has Setiawan Nugroho, president of We focus on packaging solutions that significant challenge for Indonesia, as greatly increased. Lilyana Budihardjo, Ekacitta Dian Persada, said “Pharma- have the desiccant inside. Sanner it is neither healthy nor sustainable for the business development director for ceuticals represent the largest portion is attempting to eliminate its use of industry. Currently, even very simple GaiaScience, a leading provider of sci- of our business, as this is the highest bagged desiccants, as the regulations of medical devices are being imported.” entific and laboratory equipment, said: value sector we work in. Indonesia many countries are evolving to mandate In summary, given the demand gap “We have observed that the quality has around 170 Pharmaceutical manu- and risks, Indonesia must find ways to of the research that Indonesian com- “The initial efforts of Imas Asri Mulia that desiccants are unable to touch facturers, of which maybe 120 can be the product for fear of contamination. encourage businesses that supply raw panies are now doing has greatly im- concentrated on the idea that there considered active players in the mar- Desiccant packaging has been our focus materials, particularly with local manu- proved, exploring new methods such was a dearth of Asian pharmaceutical ket.” in Indonesia, but our current goal is to facturing. This can be done by reducing as those of stem cells technology. We machinery present in the Indonesian Indonesia is a net importer of pharma- expand our product offerings to the challenges in logistics and licensing observe trends and surges in demand market, with the majority of machinery ceutical raw materials and filling the Indonesian market to include Sanner’s and providing an improved infrastruc- for certain products, and as for our con- products available in the Indonesian production gap would require over- entire portfolio of packaging solutions. ture. tribution when we visit our customers, market at the time coming from Europe. coming several obstacles. One of the Our packaging solutions include we introduce new technologies and Taking advantage of this opportunity, most glaring challenges is the health standard products as well as customized Packaging provide solutions to them. This spurs Imas Asri Mulia worked with care infrastructure, which requires a products tailored to the specific needs discovery and innovation in itself.” Taiwanese machinery manufacturers tremendous amount of investment. of our customers. Like most developing economies, In- In order to cater to this demand, the to bring their products to market in Thomas Harsono, chief executive of- donesia faces two key obstacles: the market trend has been to import ma- Indonesia. Following success with ficer, Tigaka Distrindo Perkasa (TDP), need to build its infrastructure within chinery from European companies. this initiative, we sought to broaden said: “Given that Indonesia is a de- - Noviyan Permadi, Sales Manager, the health care segment and to raise Hengky W, president director of Robina our product portfolio and expanded veloping country, there are inherent Indonesia, Sanner Pharmaceutical & the standard and quality of hygiene ob- Anugerah Abadi, said: “Our principals our operations to include many more challenges such as a lack of efficient Medical Packaging Materials served in manufacturing processes. are based in several European coun- principals throughout the world. All infrastructure, a need for strengthen- Steps towards overcoming these chal- tries such as United Kingdom, Switzer- of the machinery that Imas Asri Mulia ing enforcement of existing laws, and lenges have been especially pertinent land and Germany, as well as in United distributes comes from abroad, as this government-driven incentives to make in the realm of packaging, with multi- States and China.” is what can have the greatest effect long-term investments in local API pro- national corporations (MNCs) dominat- In terms of the outlook, Hengky says within the Indonesian market. duction. So far, our feasibility studies ing the business landscape. Per Olof that he would like to see manufactur- show that it is still not yet financially faced in obtaining a license: “Whole”- Johansson, managing director of Tetra ers take greater risks. “There is prom- viable to produce raw materials within salers are required to have a license, Pak Stainless Equipment, said: “Driven ise for growth and potential for inno- - Jairus Audwin, Indonesia unless government incen- which has a duration of 2 years or 5 primarily by the health care reform, vation in Indonesia. I would like to see Sales Engineer, tives and support are increased.” years, and thereafter must be renewed the last two years have held a lot of the market become more ambitious; Imas Asri Mulia Only once the infrastructure and sup- for further operation. As it is difficult uncertainty about the future of health companies take risks in research, and ply needs are met will the economy to obtain a wholesalers (PBF Bahan care with the change of government. grow into leaders rather than follow- be able to build a strong and self-sus- Baku Farmasi) license, the market for The government has been effective ers.”• Image: Interbat INDONESIA PHARMACEUTICALS 2015 - 50 - Industry Explorations Industry Explorations - 51 - INDONESIA PHARMACEUTICALS” 2015 INTERVIEW Global Business Reports Global Business Reports

Can you provide a brief background of panies in Indonesia along with govern- ature-controlled environment following Thomas Ricky Tigaka Distrindo Perkasa (TDP)? mental support. good distribution practice regulations and Established in 2000, TDP is a company standards, with proper handling being a Harsono of Anugerah Corporation, an Indonesian What steps can the government take to key priority in our company. We also have group that primarily focuses on health care create a more proactive business envi- a lab in our warehouse to test the quality and wellness. TDP functions in distribu- ronment within Indonesia? of materials that we import, before we tion of raw materials for the pharmaceuti- Supply is very much dictated by the en- distribute the final products. We are al- cal market in Indonesia. We supply APIs tities that demand the product. People ways asking ourselves how TDP can do Chief Executive Officer and other specialty ingredients as well as want to pay the lowest price for high better. Tigaka Distrindo Perkasa innovative solutions. Our customers are quality. The responsibility falls to com- (TDP) wide ranged, from state-owned to big pri- panies like TDP to procure materials of Where do you envision that TDP will be vate pharmaceutical companies but medi- high quality at reasonable prices. How- in the next five years? um-sized pharmaceutical companies con- ever, there is always a conflict between TDP caters not only to the pharmaceutical tribute the biggest growth for TDP. Being the two wherein a premium product also industry, but also to the food, feed and in the business for almost 15 years, TDP comes with a high price tag. To maintain cosmetic & personal care and medical has built a diversified client base where a healthy balance, the government is on device markets. Currently, trends within we try to provide “beyond ingredients” the right track in enforcing a strict quality these industry groups are converging. I to our clients such as technical solutions, control on pharmaceutical products. envision that TDP will tap into this mar- business solutions or even partnerships. In terms of the more concrete steps ket and supply not only raw materials but that can be taken, several governments also ideas and solutions such as these. From where do you import your prod- pump back a substantial percentage of Our motto “beyond ingredients” summa- ucts? GDP into their health care systems, and rizes our fundamental value to go beyond The needs for Indonesian health care Indonesia should do the same. On the our core business and to go beyond our are vast, but affordability is an important government’s end, it can facilitate the call of duty to provide our customers with factor. Our portfolio consists of imports industry by allocating land, providing in- assurance of our products, services and mainly from India and China with comple- frastructural support such as water and support. We are in the process of creat- mentary products from European compa- electricity, and providing incentives and ing a business model where we hope to nies too. We try to obtain these materials subsidies to all stakeholders across the grow TDP with the aid of a fully functional at reasonable prices for high volumes, value chain. infrastructure, our loyal customers and while maintaining high quality standards. strong financial backing from founding Where does TDP stand in the market shareholders and partners. Will the Indonesian market, and TDP today? more specifically continue to be a net TDP is one of the leading companies in What is your final message about TDP importer of raw materials? the Indonesian pharmaceutical raw mate- and the Indonesian market? Although the Indonesian market for phar- rials market. For the last two years, we Indonesia has one of the richest bio-di- maceuticals may be growing overall, in have made major investments in people, versities in the world, but it takes vast terms of local raw materials, we have system and infrastructure. We rebuilt and resources to exploit the forests and the not yet seen sufficient progress within restructured TDP’s organization by focus- sea. We hope that when the world rec- the country. There is a gap in the market, ing on competent, caring and highly mo- ognizes this and comes to Indonesia to along with a prospect for much growth. tivated individuals. Building team-culture, invest in its natural resources. To paint Given that Indonesia is a developing tearing down bureaucracy and flattening a larger picture, we hope to see partner- country, there are inherent challenges organization structure fostered more ships and investments in API and raw ma- such as a lack of efficient infrastructure, open communication and transparency. terials-producing companies in Indonesia, a fast growing population, the need for We implemented the SAP ERP enterprise vitamin & mineral premixes which can strengthening enforcement of existing resource planning software to replace an benefit the average Indonesian citizen, laws, and government-driven incentives outdated and inefficient IT architecture and the development of herbal extraction to make long-term investments in local and to gain competitive advantage from and medicines by leveraging the vast nat- production of APIs. So far, our feasi- our peers. We moved our warehouse to ural resources that Indonesia can offer to bility studies show that it is still not yet the Lippo Cikarang industrial estate that the world. financially viable to produce raw materi- is located 30 kilometers east of Jakarta. The Indonesian pharmaceutical industry als within Indonesia, unless government Cikarang is home to many Japanese, is planning to invest more and more to incentives and support become more South Korean, Taiwanese and other become an “integrated industry” from attractive. Hence, we will continue to im- global manufacturing facilities as well as producing API, clinical trials, formula- port raw materials from other countries in close proximity to the new dry-port, fu- tions to sales and distribution. Therefore, that can produce them at a competitive ture seaport and airport. Infrastructure is TDP’s future role shall support this big price. In parallel, TDP will continue to the backbone of distribution. picture of strengthening the Indonesian seek and explore partnerships to be able We are committed to store our phar- pharmaceutical industry and contributing to establish raw material-producing com- maceutical materials well, in a temper- to Indonesian public health as a whole. •

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INDONESIA PHARMACEUTICALS 2015 - 52 - Industry Explorations Industry Explorations INTERVIEW Global Business Reports Global Business Reports INTERVIEW

are the largest portion of our business, the Indonesian government limits the tween Physics/ Nano technology with Biology and Chemistry, Dr. Setiawan as it is the highest value sector that we number of wholesalers that are allowed Lilyana Anti Aging, Cell Imaging etc. These keep us all excited to strive work in. to sell raw materials for pharmaceuti- for progress. Nugroho cals. Wholesalers are required to have a Budihardjo The majority of Indonesia’s Pharmaceu- license, which has duration of 2 years or What would be your message to those who form policies for tical manufacturers are concentrated 5 years, and thereafter must be renewed regulation? in Java. How does this shape your for further operation. As it is difficult to Regulations are made to ensure that manufacturers, distribu- distribution network? obtain a wholesalers (PBF Bahan Baku tors and consumers are safe. Safety is fundamental in pharma- President Director Ekacitta currently has seven branches – Farmasi) license, the market for suppli- Business Development Director ceuticals, as even one additional gram of active ingredients can Ekacitta Dian Persada provided with warehouses and employ- ers of raw materials for pharmaceuticals GaiaScience have severe repercussions. Regulations tend to control such ca- ees in each of these locations – spread in Indonesia is quite small, consisting of Indonesia sualties. It is reassuring to see that these standards are imple- throughout Indonesia. It is our intention around 10 to 15 leading Companies. mented amongst local Indonesian companies, thus ensuring a to open another branch in Medan, but high quality of products. Gaia Science always keeps equipment this has proven difficult yet so far as we Historically, how has Ekacitta performed well serviced and has eight people in our service engineering Please explain the evolution of Ekacitta have found that it is imperative to have in terms of growth and how does it look Gaia Science is heavily involved in servicing the pharmaceuti- team. from its inception in 1996 to today. local knowledge and the ability to daily to capitalize on opportunities going cals industry through equipment provision. Could you provide The idea of Ekacitta began two years communicate in local dialect hokian lan- forward? insight on how you service the industry in Indonesia? What is your vision for the pharmaceutical industry in Indone- prior to the company’s formation, when guage to be successful in this environ- Over the last five years Ekacitta has Our company focuses on distribution, primarily in scientific and sia? we were approached in 1994 by a group ment. grown tremendously: increasing busi- laboratory equipment. We have one division that deals with We all share a similar dream here in Indonesia. Our company of Hungarian business people who were ness six-fold over this duration. Ekacitta’s pharmaceutical equipment, vaccine production equipment, and vision is “Towards the Greener Earth and Better Quality of Life involved in producing raw materials for How many manufacturers utilize your philosophy for growth focuses on its ex- animal testing equipment. Our company is five years old, but Through Science and Technology.” We hope to see a functional pharmaceuticals. They were interested raw materials? isting Principals and products, while also we have a great extent of knowledge with pharmaceuticals and effective health care system, which will provide better qual- in entering directly into the Indonesian Indonesia has roughly 170 pharmaceuti- identifying demand trends and opportu- from our past experiences. We have a total of 33 staff mem- ity of life for all citizens. Right now we have to buy our own pharmaceutical market, and my tech- cal manufacturers, of which roughly 120 nities to grow with the market and ex- bers in Indonesia. health care insurance, but we hope that in the future the gov- nical background is as a pharmacist, so can be considered active players, and pand its product base. For instance, as a ernment will help cover at least the basics for the people, es- we partnered with them and after sev- Ekacitta works with roughly 100 of them. company, we are paying close attention Could you tell us about your international presence, and Gaia pecially poor people, employees, the elderly and children. Once eral years of planning, formed Ekacitta. What is the competitive landscape for to Indonesia’s health care reforms and Science’s specific operational plans in Indonesia? the system is in place, the demand for pharmaceutical products Today, Ekacitta supplies raw materials to wholesalers in Indonesia’s pharmaceu- the demand that it will create for spe- Our company has branches in Singapore, Malaysia and Myan- will only rise. • Indonesia’s pharmaceutical, cosmetic, tical sector? cific drugs. We have benefited from this mar, each of which has its own needs. Within Indonesia, lo- and food sectors. Our overall focus is on As a way of controlling the supply of strategy, having grown our business by cal pharmaceutical industries conduct a high level of research supplying raw materials to Indonesia’s materials flowing into Indonesia and to 15 to 20 percent this year and expect to and development (R&D) besides quality control, but for multi- health care sector, and pharmaceuticals regulate the Pharmaceutical industry, continue at this rate going forward. • nationals, they usually only conduct quality control. We have exclusively distributed instrument for 100% raw material Iden- tification (RMID) using Portable Raman and Portable NIR instruments. This is mandatory, as Indonesia is a member of PICS. We also have a full line of products for the industry, such as disintegration testers, hardness testers, dissolution testers, tap density testers, glassware washers, GMP autoclaves and particle size analyzers with single particle optical sensing (SPOS) for fulfilling USP 729 and USP 788. All our machines are imported from West Europe, the United States and Japan. We also supply plastic consumables, especially for microbiology testing, such as pipette and their tips, rodac plate, TC flask, centrifuge tube, cryotube, and petridishes. The equipment that we supply requires a high level of technical knowledge, so we also distribute it and provide extended services for it.

R&D remains an important priority for the industry. What is Gaia Science doing in terms of R&D? We have observed that the quality of the research that Indone- sian companies are now doing has greatly improved, exploring new methods such as those of stem cells technology. We observe trends and surges in demand for certain products, and as for our contribution when we visit our customers, we introduce new technologies and provide solutions to them. This spurs discovery and innovation in itself. New technologies keep coming, just like PCR (for DNA, RNA up to Protein level), Stem Cell, New Drug Discovery, synergy be-

INDONESIA PHARMACEUTICALS 2015 - 54 - Industry Explorations Industry Explorations - 55 - INDONESIA PHARMACEUTICALS 2015 INTERVIEW Global Business Reports Global Business Reports INTERVIEW

Per Olof Johansson

Managing Director Can you provide a brief background with the change of government. The uid pharmaceuticals. Today, there are the sub systems into one single sys- ing such products, and in the future we Tetra Pak Stainless of Tetra Pak? government has been effective in en- probably about 200. A good business tem creating an overview. see ourselves taking advantage of the Equipment, Indonesia Tetra Pak was founded by Ruben forcing strict manufacturing practices climate is essential for the manufactur- converging market. Rausing in Sweden 63 years ago. We that have led to a number of Indone- ing sector to expand and improve pro- Where will Tetra Pak Stainless Equip- are a privately owned, medium-sized sian pharmaceutical companies being ductivity. Several things are expected ment be in ten years? Do you have a final message for our multinational company with approxi- recognized internationally, as they are such as simplification and increased We are active internationally in cos- readers? mately 25,000 employees all over the conforming to international standards transparency of the regulations, im- metics, including hair care, skin care, Investors considering Indonesia should world. Our turnover last year was 11 of manufacturing and traceability. provement of cost competitiveness and oral care. Specifically within skin do so seriously, not only as a market to billion Euros, and we are active in al- Moreover, ASEAN Economic Commu- in the face of global competition, the care, we have observed that with our sell products but also to manufacture most every market in the world. Tetra nity (AEC) gives huge opportunities efficiency of logistics and delivery, as international customers, it is not only products and export. The country’s in- Pak started out as a packaging com- for the pharmaceutical industry as the well as enhanced connectivity and pro- the lotions and ointments, but also frastructure, logistics, and distribution pany, and came up with the idea that market becomes broader and open. ductivity of the major ports especially the active ingredients that attract cus- systems are improving consistently, milk could be distributed in an efficient near to the industrial sites. tomers. Several of our cosmetics cus- thereby improving the business cli- and safe way. During the 1990s, the Where is the pharmaceutical industry tomers now manufacture according mate. • company considered moving forward heading in the next five years? How competitive is the market? to pharmaceutical standards. On that from packaging, as Tetra Pak was well The per capita spending on health care Few companies provide complete front, there is a grey area between established in the industry. Tetra Pak is still relatively low in Indonesia, which production solutions like we do; we cosmetics and medicine. That grey then began to manufacture equipment implies that there is room for potential are unique in that regard. Only a small area is increasing, and we are active in to process milk, juice, ice cream and and growth. However, we must also number of companies can integrate all that area. We are effective in integrat- other foods. Equipment was originally face the reality – where is the money a small part of the company, but over going to come from? Much change will the years it has grown and currently be driven by the national health care contributes to 15% of overall turnover. reform, with the addition of clinics and Tetra Pak came to Indonesia with pack- hospitals. aging over 40 years ago. Back in 1984, Tetra Pak Stainless Equipment was How does Indonesia’s future affect formed as a joint venture, focusing Tetra Pak Stainless Equipment’s on manufacturing equipment for the growth as a business? Indonesian Dairy industry. We export We will retain our safety standards and 85% of what we produce. In Indone- quality of production. The more suc- sia, we sell equipment, sophisticated cess that Indonesian companies have automation control systems, and sev- in exporting, the greater needs for pro- eral other services. Within the pharma- duction capacity. I believe further de- ceutical industry, our specialty is mix- velopment of the infrastructure is key ing liquids and powders in a controlled in order to enable this. Obviously, if and hygienic way. Liquid medicine is companies intend to export they must thus our main focus in the pharmaceu- adhere to strict international manufac- tical industry in Indonesia. Our hygienic turing standards, this is also positive design expertise along with our skill in for the Indonesia market. integrating preexisting systems is how we add value to the industry. How has the business climate in Indonesia been for Tetra Pak Stainless How is Tetra Pak Stainless Equipment Equipment’s operations? performing within Indonesia? The pharmaceutical industries are go- We are focused on parenteral products ing through consolidation as a result and oral solutions. We have a reason- of the change in government policy able share of the market. Driven pri- to higher quality control and safety marily by the health care reform, the standards. When Tetra Pak Stainless last two years have held a lot of uncer- Equipment joined the industry, there tainty about the future of health care were about 300 manufacturers of liq-

INDONESIA PHARMACEUTICALS 2015 - 56 - Industry Explorations Industry Explorations - 57 - INDONESIA PHARMACEUTICALS 2015 INTERVIEW Global Business Reports Global Business Reports INTERVIEW

Per Olof Johansson

INDONESIA PHARMACEUTICALS 2015 - 56 - Industry Explorations Industry Explorations - 57 - INDONESIA PHARMACEUTICALS 2015 INTERVIEW Global Business Reports Global Business Reports INTERVIEW

Dr. Stanley Ch. Budihardja

Regional Director Please describe the evolution of BSN BSN focuses on two primary therapeutic market is ready for growth and that there available on the Indonesian market What growth prospects are present in Emerging Market, East Asia Medical’s presence in Indonesia. areas: wound care vascular and orthope- are certain hospitals and caregivers who today are imported. What implications Indonesia’s medical devices sector? BSN Medical Indonesia BSN Medical (BSN) was formed in 2001 dics. BSN offers a wide-range of prod- are receptive to the availability of high does this have for the development of In general, the market size for medical as a joint venture between Beiersdorf ucts to treat wounds, from simple prod- quality medical device products. With the sector? devices in Indonesia is growing signifi- and Smith & Nephew. BSN is a global ucts such as adhesive bandages, to very that said, continued education is essen- In general, more than 90 percent of the cantly. BSN expects to experience con- provider of medical devices, and its complex products that address advanced tial to developing consumer mindsets medical devices used in Indonesia are tinued growth across all of its product presence in Indonesia dates back to the wound management. BSN’s strength is for high quality products. imported. This is a significant challenge groups. Currently, BSN’s products are company’s inception. Initially, it was in the latter category, advanced wound Indonesia is a very price-sensitive mar- for Indonesia, as it is neither healthy nor present in 80 to 90 percent of Indone- very challenging for BSN to remain com- management. Within this segment we ket. Due to its high quality standards, sustainable for industry. Currently, even sia’s hospitals. While BSN’s presence is petitive in the Indonesian market as it offer products in areas such as com- BSN’s products are typically more ex- very simple medical device products are strong in the hospital channel, we would was unable to compete with the prod- pression therapy, for which BSN is the pensive than alternative medical device being imported. There are many medi- like to develop its position in pharmacies ucts of its parent companies. Conse- world’s largest provider of medical de- solutions. However, if one was to com- cal device trading companies in Indone- as well. As Indonesia’s middle-class quently, in BSN’s early years, its product vices, under the brand Jobst. Overall, pare therapeutic costs for the market, sia; primarily entrepreneurs in pursuit continues to grow, so will its consumer portfolio could be considered simple and in wound care vascular BSN offers over there is evidence that supports high of short-term results. Although it will conscience. Consumers are beginning commoditized. This all changed when 200 products and variants. BSN’s prod- quality products as being more effective require long-term investment, as returns to recognize and appreciate quality med- BSN was acquired by a private equity uct portfolio for orthopedics is also quite from a total cost perspective. Addition- would initially be slow, there is an oppor- ical device products, and in this respect, firm, Montagu, in 2006. At this point, comprehensive, as it includes products ally, higher quality products also benefit tunity in the market for the development BSN is well positioned to capture poten- growth within BSN’s product portfolio that address ailments from the acute customers in terms of comfortableness. of domestic medical device manufactur- tial growth. • increased immensely and it was able to phase to the rehabilitation phase. Some ing facilities. BSN considers this a po- further establish its global presence. In of BSN’s orthopedic products include The vast majority of medical devices tential growth strategy moving forward. 2012 BSN went through further change casts, braces, tapes, and straps. BSN’s in ownership, as it was acquired by an- mission is to not just sell products, but other private equity firm called EQT. To- rather therapeutic solutions. In line with day, Indonesia has emerged as one of this approach, BSN strives to close any BSN’s most successful regions world- gaps that may exist within its product wide. portfolio. For instance, if a patient has a diabetic food ulcer, BSN’s goal is to have BSN has teams dedicated worldwide a product for whatever may be required. to the R&D, manufacturing, sales, and marketing of its products. What busi- There are many medical device prod- ness units does BSN have in Indonesia ucts on the market. What differentiates and how do its Indonesian operations BSN’s products from the competition? benefit from BSN’s global network? BSN is a global company that is head- Overall, BSN employs around 200 peo- quartered in Germany. Naturally, we ple in Indonesia whose activity is dedi- are focused on providing quality prod- cated to the sales and marketing of its ucts that are supported by high levels products. BSN benefits from a global of R&D. If one was to compare BSN’s network of R&D and manufacturing fa- products with low-cost substitutes, they cilities. The majority of BSN’s products would find that BSN’s durability is signif- that are present in Indonesia are im- icantly superior. In every single one of ported from its specialty plants located its products BSN commits substantial around the world: wound care products amounts of R&D, this is apparent in the coming from Germany, and orthope- overall quality of its products. dic products coming from the United States. In terms of R&D, BSN launches In any market there is an obvious trade- four or five new products globally each off between quality and price. How year. In 2015, BSN plans to launch more have BSN’s products performed in the than 10 new products in Indonesia. Indonesian market? From BSN’s inception in 2001 up until What is included in BSN’s profile of today it has grown its Indonesian oper- products offerings? ations sevenfold. It is apparent that the

INDONESIA PHARMACEUTICALS 2015 - 58 - Industry Explorations Industry Explorations - 59 - INDONESIA PHARMACEUTICALS 2015 INTERVIEW Global Business Reports Global Business Reports INTERVIEW

Dr. Stanley Ch. Budihardja

INDONESIA PHARMACEUTICALS 2015 - 58 - Industry Explorations Industry Explorations - 59 - INDONESIA PHARMACEUTICALS 2015 EDITORIAL Global Business Reports Global Business Reports EDITORIAL

The Distribution of Indonesian Pharmaceuticals Medan

Navigating a Complex Geodemographic

Palembang

Ujungpandang

Jakarta Semarang Bandung Surabaya

Indonesia is the world’s largest regulation dictates that the distribution economies of scale is a critical de- In order to provide pharmaceutical archipelagic nation: comprised of or wholesale operations of pharmaceu- terminant of the success of pharma- manufacturers with interesting val- 17,000 islands, its landmass includes tical manufacturers must be performed ceutical distributors; a reality that has ue-propositions, many distributors are nearly two million square kilometers “ by separate legal entities. positioned large distributors at the top diversifying their service offerings in “ The cost of shipping products to some of terrain and holds claim to over three of these isolated areas can be as high of the industry. While limited in terms an effort to retain existing business Margins are on the decline due to million square kilometers of ocean un- as six times the price of the product. The objective of segmenting manufac- of scale, smaller distributors have his- and attract new principals. One such macroeconomic factors such as der its jurisdiction. With a population of turing and distribution operations within torically been able to survive “due to company that is expanding upon its increasing labor and freight costs…most 250 million inhabiting its sprawling ter- Indonesia’s pharmaceutical industry relationships with specific regional traditional service offerings is Anugrah pharmacies in Indonesia do not keep rain, Indonesia is placed as the world’s - Andrew Makmuri, has been to promote an environment governments and hospitals,” says Dr. Argon Medica (AAM). In addition to its inventories of products. fourth most populous nation. In addi- President Director, of unbiased access to health care. Johannes Setijono, Chairman of GP 44 distribution branches located across tion to the immensity of its population, Merapi Utama Pharma Despite this decree, many of Indone- Farmasi Indonesia. Indonesia, AAM is developing a range Indonesia is also home to one of the sia’s larger domestic manufacturers Although many of Indonesia’s largest of value-added services that are driven - Richard Prayago, world’s most diverse citizenships, rep- maintain separate entities that serve domestic pharmaceutical manufactur- by sophisticated information technol- Associate Business Unit Manager, resented by over 300 ethnic groups as distribution legs for their operations. ers have integrated their operations ogy. Drawing upon its extensive stock- Anugerah Pharmindo Lestari (APL) and 700 living languages. pharmaceutical distributors is found in With that said, other manufacturers, to include distribution services, work- pile of data and analytics, AAM will use Indonesia’s complex geodemographic ” especially multinational manufactures, ing with an independent distributor its systems to analyze trends and help servicing the needs of this network on composition creates an intricate land- a cost-effective basis. which are not vertically integrated with also holds strong value. Merapi is one its principals identify markets in which scape for the distribution of pharma- The framework for pharmaceutical distribution capabilities, rely upon a di- such distributor that differentiates it- their products can achieve greater im- ceuticals. Consequently, pharma- distribution in Indonesia is largely de- verse network of distributors to bring self by providing manufacturers with pact. According to Hery Sutanto, Pres- ceutical distributors work across an termined by the Ministry of Health their products to market. a strong suite of value-added services. ident Director of AAM, “information Recognized as a distributor of choice” extensive network of retail channels (MoH). Under one such mandate the The market for pharmaceutical distri- According to Andrew Makmuri, Presi- systems have become a burgeoning for multinational pharmaceutical man- in an effort to reach the entirety of MoH delegates the ability to distribute bution in Indonesia is dominated by dent Director of Merapi, “many man- focus for AAM over the years,” a focus ufacturers, APL distributes products the country’s population. In 2013, pharmaceuticals within Indonesia ex- 12 distributors that provide coverage ufacturers that are vertically integrated which is unique within the distribution for nearly 50 percent of Indonesia’s there were 2,278 hospitals in Indone- clusively to domestic companies. Con- across the entire archipelago. This to handle distribution are not able to sector. With the implementation of multinationals. According to Nyoman sia, 17,667 pharmacies, 8,285 drug sequently, although several multina- primary grouping of distributors con- provide proper visibility for their OTC these solutions, AAM seeks to position Sukertha, Vice President of Sales of stores, and numerous wholesalers and tionals have been allowed to continue trols around 65 percent of the market products.” Consequently, Merapi has itself as a leader in market exploration, APL, “after evaluating the needs of non-traditional outlets focused on the their distribution operations through a for pharmaceutical distribution in In- teams dedicated to managing product supply chain solutions, and knowledge our clients, we are trying to innovate distribution of pharmaceuticals. Due grandfather clause in the legislation, donesia, while the remaining share of visibility, inventory management, and management. and expand our product offerings to in- to the diversity of Indonesia’s terrain domestic companies largely control the market is claimed by an array of complaint handling in retail outlets, Another distributor that is diversify- clude a range of other services.” and the immensity of its distribution the market for pharmaceutical distri- smaller niche distributors. Consequent while also providing a range of other ing its range of service offerings is Elaborating on this plan, Richard channels, the greatest challenge facing bution in Indonesia. Furthermore, MoH to Indonesia’s vastness, achieving value-added services. Anugerah Pharmindo Lestari (APL). Prayogo, Associate Business Unit

INDONESIA PHARMACEUTICALS 2015 - 60 - Industry Explorations Industry Explorations - 61 - INDONESIA PHARMACEUTICALS 2015 EDITORIAL Global Business Reports Global Business Reports EDITORIAL

The Distribution of Indonesian Pharmaceuticals Medan

Navigating a Complex Geodemographic

Palembang

Ujungpandang

Jakarta Semarang Bandung Surabaya

INDONESIA PHARMACEUTICALS 2015 - 60 - Industry Explorations Industry Explorations - 61 - INDONESIA PHARMACEUTICALS 2015 EDITORIAL Global Business Reports Global Business Reports INTERVIEW

Manager of APL, states: “APL’s new Merapi’s distribution network is extensive. and promotion of their own manufactured aim is to be a provider of end-to-end Andrew What is the composition of your principals products and we deliver their products solutions for the Indonesian pharma- and their product offerings? downstream to retail outlets. Many man- ceutical industry. As the majority of Makmuri Merapi works with 40 principals and con- ufacturers that are vertically integrated to our principals are multinationals, many sequently distributes a range of diverse handle distribution are not able to provide of our services are catered to their products. Roughly 60 percent of our prin- proper visibility for their OTC products. needs. For example, we offer services cipals are multinational companies, with Merapi has a salesforce that is responsible in other areas such as regulatory as- the remaining 40 percent of companies for managing inventory and product visibil- sessment and guidance to multina- President Director being domestic. Our activity includes the ity in retail outlets. tional companies that are new to the Merapi Utama Pharma distribution of IV, medical drugs, medical Indonesian pharmaceutical market.” equipment, disposable medical products, What are some of the major challenges Services such as these are of particu- over-the counter (OTC), and consumer facing distribution companies, such as lar interest to multinationals, as they healthcare products. The breakdown of our Merapi, in Indonesia’s pharmaceutical have historically struggled to penetrate product distribution is as follows: 40% in- sector? Indonesia’s more rural markets due to travenous (IV) products, 30% ethical prod- Merapi has a dominant stake in the distri- geodemographic hurdles such as re- ucts, 20% medical equipment, and 10% bution of IV products in Indonesia. These moteness and diversity of languages. OTC products. Merapi is Indonesia’s leader products are bulky and expensive to ship to While many distributors are differen- in IV distribution to hospitals, controlling rural areas. This difficulty within the market tiating themselves with unique val- 70% market share in this field. has been exacerbated by the recent im- ue-propositions, the physical distribu- Merapi’s distribution centers (DCs) have plementation of e-catalogue services, for tion of products in Indonesia entails a cumulative space of 28,000 square me- which Indonesia’s Ministry of Health has numerous challenges due to the coun- ters, which ensures reliable management mandated that all orders placed using this try’s extensive network that requires of our principals’ supply chains. Further- medium must be fulfilled regardless of the servicing. As a result of buying power more, our DCs are able to accommodate product’s cost of delivery. This is unsus- demographics and population density, several trips each day to different out- a wide range of temperatures and provide tainable for distribution companies, as In- access to health care is most pervasive lets in order to ensure the same day accurate and integrated stock allocation donesia does not currently have the proper on the islands of Java and Sumatra, re- delivery of products. and replenishment systems to branches. infrastructure to sustainably deliver small gions that consequently benefit from In light of the many challenges cur- “ Merapi’s fleet consists of 110 motorcycles quantities of products to rural areas on a the largest concentration of pharma- rently facing distributors, with the im- The distribution segment of the and 147 trucks dedicated to the timely de- cost-effective basis. The cost of shipping ceutical distribution centers. Indone- plementation of national health care pharmaceutical industry will need to livery of our principals’ products. products to some of these isolated areas sia’s more sparsely populated regions, reforms (JKN), Dr. Setijono posits: change…retailers need to change their Please provide a brief overview of Merapi can be as high as six times the price of the such as the province of Papua, pose “The distribution segment of the business models as well. and its distribution operations in Indone- Indonesia has a sprawling network of product. Going forward, this will be some- more difficult challenges for distribu- pharmaceutical industry will need to sia’s pharmaceutical sector. retail outlets. What is the breakdown of re- thing that the Ministry of Health will give tors especially given the Indonesian change.” A likely consequence of the Merapi is a subsidiary of the Japanese tail customers that Merapi distributes to? attention to and likely change. government’s implementation of an reforms will be a reduction in the num- - Dr. Johannes Setijono, Chairman, Otsuka Group and its activity has been Merapi distributes products to hospitals, e-catalogue system, which mandates ber of small-scale distributors, as it is National Board Indonesian rooted in Indonesia since the company’s pharmacies, and drugstores. Considering Going forward, what strategies will Merapi the delivery of pharmaceuticals re- predicted that niche distribution chan- Pharmaceutical Association establishment in 1973. Indonesian law statistics from 2013, there were 2,278 implement to grow its business? gardless of volume ordered or cost-ef- nels such as pharmacies will realize de- (GP. Farmasi Indonesia) mandates that pharmaceutical distribution hospitals in Indonesia, 17,667 pharmacies, Merapi would like to grow its business with fective feasibility. Commenting on clined product volumes and formalized companies must be domestically owned, and 8,285 drug stores. Out of these out- existing partners, but would also invite challenges within the market, Andrew channels such as hospitals and JKN but Merapi is a multinational company, lets, Merapi distributes to 1,716, or 75% new principals to its operations. In terms Makmuri notes: “The cost of shipping providers will attract greater product allowed to operate in Indonesia, as its of Indonesia’s hospitals; 11,952, or 68% of markets, Merapi would like to increase products to some of these isolated volumes. As the distribution sector is ” presence here predates this legislation. of pharmacies; and 2,514, or 30% of drug its activity in OTC and consumer-product areas can be as high as six times the expected to change, Dr. Setijono goes Despite Otsuka Group’s diversified global stores. Hospitals act as Merapi’s largest markets. Drugs are more attractive than IV price of the product.” While expanding on to describe that “retailers need fronts that provide customers with a operations, Merapi is its sole distribution distribution channel, accounting for 75% of solutions, which constitutes much of our access to health care is a noble cause, to change their business models as wider range of product offerings. leg. Merapi’s distribution network is ca- its volume, pharmacies constitute 21% of operations today, as both freight and facil- many distributors have commented well.” The vast majority of Indonesia’s As the rollout of JKN continues through pable of reaching most regions within In- volume, and drug stores claim the remain- ity space is less expensive. that Indonesia currently lacks the nec- nearly 20,000 pharmacies are special- 2019, it is expected that access to donesia, and is composed of the following ing 4%. Indonesia’s national health care reforms essary infrastructure to deliver small ized storefronts focused on the sale of health care will be extended to an ad- elements: 1,105 employees, 28 branches, will have a substantial effect. Many of our product quantities on a cost-effective prescription drugs, with little attention ditional 80 million people in Indonesia. and two distribution centers. Merapi’s vi- Merapi offers a host of services, not principals have recently experienced mas- basis. being given to the market for over-the- This creates an environment of ample sion is “to become a trusted pharmaceu- just distribution to its principals. What sive growth, and this trend should continue As an additional challenge, Prayago counter (OTC) products. As Indone- opportunity for both pharmaceutical tical and healthcare distribution company are some of the other services Merapi over the next five years, as the reforms be- states: “Margins are on the decline sia’s market for OTCs is expected to manufacturers and distributors, es- by providing excellent services and added provides? come fully implemented. We will continue due to macroeconomic factors such grow to encompass 50 percent of the pecially in the market for unbranded values for better health throughout Indone- Merapi offers the following services to its to collaborate with our principals on this. as increasing labor and freight costs.” value of its pharmaceutical industry in generics. In order to grow with the sia.” The name “Merapi” is derived from principals: sales; coverage/network; inven- Merapi is excited about opportunities in Furthermore, he states: “most phar- 2015, Dr. Setijono states that “it will be industry, distributors will need to con- the active Indonesian volcano of the same tory management, which includes avail- Indonesia’s pharmaceutical sector, as it macies in Indonesia do not keep inven- difficult for retailers to continue in this tinue to implement creative solutions name, which acts as a metaphor for how ability and visibility; complaint handling; as represents the fastest growing and most tories of products.” This reality means way.” Alternatively, it will be important that bring health care solutions to cus- our company operates: an active and pow- well as several other services. Our prin- promising sector for our business activity that many distributors have to make for retailers to evolve as larger store- tomers on a cost-effective basis. • erful force in the distribution sector. cipals are responsible for the marketing in Indonesia. •

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preeminent distribution companies with and help determine where and when our RP: APL’s new aim is to be a provider of channels like wholesalers, modern trade Hery robust IT capabilities. principals’ products are most needed. Nyoman end-to-end solutions for the Indonesian and drugstores for consumer health prod- This enables our principals to selectively pharmaceutical industry. As the majority ucts. Sutanto AAM has diversified its operations be- target new and existing markets in order Sukertha & of our principals are multinationals, many yond being simply a distributor of phar- to maximize the effect of their products. of our services are catered to their needs. What is the competitive landscape for maceutical products. What is the profile This service is unique within the distribu- Richard Prayogo For example, we offer services in areas the distribution of pharmaceuticals in of principals that you work with today? tion sector and for this reason AAM con- NS: Vice President Sales, Pharma, such as regulatory assessment and guid- Indonesia? Today, 40% to 45% of AAM’s business siders itself “the partner to grow with.” Medical Devices, Diagnostics & Vaccines ance to multinational companies that are NS: The distribution market for phar- President Director comes from Dexa Group, while the re- Information systems have become a bur- RP: Associate Business Unit Manager new to the Indonesian pharmaceutical maceuticals in Indonesia is highly frag- Anugrah Argon Medica maining portion of our activity comes geoning focus for AAM over recent years. Anugerah Pharmindo market. mented, as 12 nation-wide coverage dis- from domestic and international princi- We have developed five distinct services Lestari (APL) tributors control around 60 to 70 percent pals, such as Dexa Medica, Ferron Par called “InfoStep,” which utilize our ex- Indonesia is renowned for its complex market share. With the implementation of Pharmaceuticals, Pfizer, GSK, Merck tensive databases to provide a wealth of landscape and inaccessible distribution universal health coverage this landscape Serono, Tanabe, Bayer, Novartis, Actavis, information. Supply chain solutions are channels. What is APL’s reach across will change, as there will be more un- Novo Nordisk, Becton Dickinson, BSN, incorporated in our company’s overall ac- Indonesia? branded generics in the market. Currently, and Abbott Nutrition. AAM works with tivity, and we are proud to be one of the RP: APL’s distribution network spans the APL has around 17 or 18 percent market more than 30 principals spread through- distributors driving the Indonesian phar- entire Indonesian archipelago. We are share in the distribution of Indonesia’s out the pharmaceutical, medical devices, maceutical market for efficient solutions. present in 104 cities, covering close to pharmaceuticals. Our dominant stake in consumer healthcare, and specialty sec- Knowledge management is the final pillar 434 cities, which are serviced by 31 ware- the sector comes from multinationals, tors. All of AAM’s principals are treated of our value-added services and comes NS houses spread throughout the country. In as we control around 47 percent market equally and fairly, regardless of their size from the fact that AAM is a learning orga- order to reduce costs, APL utilizes third share of IPMG members. or relative importance to overall opera- nization. AAM frequently holds meetings party transportation companies that are tions. with its principals and customers to share trained by our team to deliver products What are some of the major challenges knowledge and provide information on across channels. In terms of regional fo- facing Indonesia’s pharmaceutical dis- Indonesia is renowned for its difficult good distribution practices. cus, 72 percent of our business is concen- tributors? distribution climate. How expansive is trated in Java and 15 percent is in Suma- RP: Margins are on the decline due to AAM’s distribution network? In recent years, how has AAM performed tra. Indonesia’s most developed cities are macroeconomic factors such as increas- AAM has Indonesia’s most extensive and what is AAM’s current share of the RP in Java and Sumatra, and consequently, ing labor and freight costs. Additionally, distribution network and is respected as market for distribution? healthcare is most accessible in these keeping a frequent supply throughout Anugrah Argon Medica has a long one of the leader’s in the market. We In the last five years, AAM has achieved APL is one of Indonesia’s largest inde- areas. This draws a strong correlation to retail channels is a costly endeavor for history in Indonesia, being one of the have 44 branches spread throughout In- an average CIGR of 18%. Last year, this pendent pharmaceutical distributors. the concentration of our regional activity: distribution companies. Most pharmacies chosen and largest pharmaceutical donesia and are able to service the entire figure was down to 17%, but next year Could you please give us an overview of APL’s distribution focus ultimately aligns in Indonesia do not keep inventories of distributing companies. Please describe country with our direct coverage services. we anticipate a rebound in our growth to the company? with Indonesia’s buying power demo- products, and due to APL’s policy of en- the formation of AAM and any important AAM’s mission is not only to be a logistics 24%. Overall, AAM controls roughly 18% NS: APL was established in 1984 and graphics. suring same-day-delivery, we sometimes milestones to its development. provider, but also a partner to grow, with of the distribution market share for phar- since its inception has consistently grown NS: There are only 21 – very rural – cities are required to make several trips per day Anugrah Argon Medica (AAM) was comprehensive selling and distribution maceuticals in Indonesia. to incorporate more principals and expand in Indonesia that do not fall under APL’s to a single outlet. This is a costly feature founded by Dexa Medica in 1980 due solutions provider. To satisfy this goal, its presence in the Indonesian market- reach of distribution. These areas are not of our distribution network. to a Ministry of Health decree that man- we are constantly looking to expand our Universal health coverage will have a place. The majority of our principals are very developed cities, and it is likely we dated to separate legal entities for com- market in order to provide better direct palpable effect on Indonesia’s pharma- multinational companies, which account will not open offices there in the foresee- What is APL’s strategy going forward? panies involved in the manufacturing and access to the market and improve the ceutical sector. What do these reforms for about 90 percent of our business. able future. Compared to other distribu- RP: We never stop hunting for new prin- distribution of pharmaceuticals. AAM’s business of our principals. mean for distribution companies and RP: The majority stake of APL is owned tion companies, the area where APL is cipals. Bidding processes are a regular operations began as a trader of products, how is AAM preparing for them? by Zuellig Pharmaceuticals, which allows unable to reach is very small. occurrence for distribution companies, so initially working exclusively with Dexa In addition to distribution services, AAM With the implementation of universal us to capitalize on our regional network we will continue to compete and attract Medica. In 1996, AAM shifted its focus offers a range of value-added services. healthcare, we strive to expand our net- and leverage volumes across entities. We Multinationals constitute a large pro- new business opportunities through this within the industry and repositioned itself What are these services and how do work to meet the growing demands of also collaborate with our partners in the portion of your clientele. What is the medium. In the coming year a big focus as a physical distributor of pharmaceuti- they fit into the scheme of your overall the Indonesian population. Economies of network to exchange human capital and breakdown of your principals, their for APL will be on increasing its business cals and medical devices, not only for operations? scale are the key to success for any distri- other valuable resources. product offerings, and the channels that of distributing medical devices as well as Dexa Medica, but for a range of domestic AAM has three primary, value-added bution company, so we are investing ag- APL utilizes? end-to-end solutions for its multinational and multinational principals. This mile- services that are driven by sophisticated gressively in infrastructure, including the APL is well known for its distribution RP: APL works with 43 principals, the principals. stone is what has defined in our presence information technology and act as com- creation of six new branches by 2016. The services. What other services does APL majority of which are multinationals. The Over the next 3 to 5 years there will be for the industry today. Most recently, petitive advantages: strong market explo- pharmaceutical sector is becoming more offer the pharmaceutical sector? product mix of our distribution is varied: 56 huge developments in Indonesia’s phar- AAM has undertaken significant invest- ration, reliable supply chain solutions, and of a volume business, so AAM seeks NS: Traditionally, APL’s core business percent are ethical products, 30 percent maceutical sector due to the implemen- ments to develop its capabilities in IT so- knowledge management. to prepare by building up its warehouse driver has been distribution, which will OTC, and 14 percent medical devices and tation of the new health care program. lutions, market exploration, supply chain Due to AAM’s extensive stockpile of and transportation capacities. The overall be the case going forward, but after eval- diagnostics. APL does not currently have APL always strives to be significant in the and knowledge enterprise. This has been data and analytics, we are able to be our expansion of our network translates into uating the market and the needs of our a focus on the distribution of unbranded market and our goal is to bring healthful- the emphasis of AAM’s recent efforts and principals’ partner of choice for market better service to patients and customers, clients, we are trying to innovate and ex- generics. Half of our distribution volume ness to the people of Indonesia, so we has catapulted AAM to its current position exploration. Using our extensive and re- which is great for AAM and Indonesia as pand our product offerings to include a is channeled to pharmacies and hospitals, will continue to follow the market in this within the industry as one of Indonesia’s altime databases, we can analyze trends a whole. • range of other services. while the remaining half goes to other direction. •

INDONESIA PHARMACEUTICALS 2015 - 64 - Industry Explorations Industry Explorations - 65 - INDONESIA PHARMACEUTICALS 2015 INTERVIEW Global Business Reports Global Business Reports INTERVIEW

INDONESIA PHARMACEUTICALS 2015 - 64 - Industry Explorations Industry Explorations - 65 - INDONESIA PHARMACEUTICALS 2015 Into the Future: Future Outlook and Company Index

“Our target demographic is the middle class, and we want to focus on young to middle-aged women, as target influencers who can also influence their families and surrounding communities. Our corporate social responsibility program focuses on healthy living education and women’s empowerment. We work actively in educating the youth and women’s communities on lifestyle disease prevention. We empower marginalized women by providing them with knowledge and skills in marketing and finance as well as educating them on sustaining good health.”

- Michael Wanandi, President Director, Combiphar

Image: Combiphar Into the Future: Future Outlook and Company Index

- Michael Wanandi, President Director, Combiphar

Image: Combiphar EDITORIAL Global Business Reports

Future Outlook

Expanded Access to Health Care and a Focus on Continuous Improvement

To make forecasts based on primary re- More partnerships between search, the Indonesian pharmaceuticals multinational corporations and industry can expect the following trends domestic players in the coming decade: Local companies today are actively A focus on developing the seeking international partners for whom healthcare infrastructure they can distribute. Likewise, Indonesia is a promising market for a multinational Eric Ng, president director of Sanofi, considering entry. The outlook for In- said: “The proposed increases in health- donesia’s pharmaceutical industry is care spending will be a good thing for positive because the enormous growth Indonesia. While not every dollar will be potential of the local market outweighs spent on medication – medicines typi- regulatory, legal, logistical and capacity cally account for less than 10 percent of constraints. these funds – the government will likely There are a myriad of strong domestic spend the majority of its healthcare bud- manufacturers in the generics section get on much needed healthcare infra- and multinationals that supply niche structure. The development of primary markets. Cooperation with local drug healthcare systems and doctors will be makers and distributors and acquisi- key features to the plan’s execution.” tions prove to be an effective channel to enter the market for foreign companies; Increased production of over the similarly, local manufacturers of generic counter drugs and those to treat drugs will gain from the expertise and lifestyle-related diseases high levels of technology that global players have obtained in cost competi- Trends show that prescription drugs, tive marketplaces. over-the-counter drugs and food supple- Currently, almost all locally produced ments (nutritional and vitamins) have all pharmaceuticals go to the domes- experienced increasing sales. Demand tic market. However, sales to other for drugs to treat lifestyle-related dis- ASEAN countries become an increas- eases, such as diabetes, cardiovascular ingly interesting proposition for high- illnesses and gastric conditions, is set to er-value brands, where the sourcing of rise rapidly with increasing urbanization raw materials has less impact on total in Indonesia and in neighboring emerg- costs. Turning Indonesia into a regional ing economies. Multinationals catering pharmaceutical hub, however, will de- to the markets of diabetes care or nu- pend on supportive regulations and in- tritional care can expect an increasing frastructure. • demand given the great focus on conscious consumer healthcare.

- 68 - Industry Explorations EDITORIAL Global Business Reports

Future Outlook

Expanded Access to Health Care and a Focus on Continuous Improvement

- 68 - Industry Explorations COMPANY INDEX Global Business Reports Global Business Reports CREDITS

GOVERNMENT AND ASSOCIATIONS INVESTMENT COORDINATING BOARD, REPUBLIC OF INDONESIA (BKPM) 11, 13, 71 MINISTRY OF HEALTH, REPUBLIC OF INDONESIA 10, 20, 26, 60, 63, 64, 71 EDITORIAL AND MANAGEMENT TEAM MINISTRY OF RESEARCH AND TECHNOLOGY, REPUBLIC OF INDONESIA 71 NATIONAL BOARD INDONESIAN PHARMACEUTICAL ASSOCIATION (GP. FARMASI INDONESIA) 7, 11, 13, 15, 36, 61, 62, 71 NATIONAL AGENCY FOR DRUG AND FOOD CONTROL (BPOM) 10, 12, 18, 19, 20, 27, 36, 40, 43, 71 Project Director: Vanessa Acuna Chapela ([email protected]) MANUFACTURING AND DISTRIBUTION ACG INDONESIA 25, 32 Journalist: Neha Premjee ([email protected]) ACTAVIS INDONESIA 17, 36, 38, 43, 64 Journalist: Bryce Stevenson ([email protected]) ANUGERAH PHARMINDO LESTARI (APL) 18, 61, 65 ANUGRAH ARGON MEDICA 61, 64 BSN MEDICAL INDONESIA 50, 58, 59, 64 CHEMCO PRIMA MANDIRI 46, 47, 50 Executive Editor: John Bowlus ([email protected]) EKACITTA DIAN PERSADA 50, 54 Graphic Designer: Gonzalo Da Cunha ([email protected]) GAIASCIENCE INDONESIA 55 GE HEATHCARE LIFE SCIENCES 33 GENERO PHARMACEUTICALS 6, 19, 22, 30, 31, 38, 70 IMEDCO 23, 46 INTERBAT 16, 36, 37, 38, 40, 51 KIMIA FARMA 35 MENJANGAN SAKTI, MENSA GROUP 15, 34, 46, 48 For updated industry news from our on-the-ground teams around the world, please visit our MERAPI UTAMA PHARMA 60, 61, 63 website at gbreports.com, subscribe to our newsletter by signing up to our VIP list through our NOVO NORDISK INDONESIA 24, 25, 26, 64 PHAROS 37, 38, 39 website, or follow us on Twitter: @GBReports. SANOFI GROUP INDONESIA 24, 27, 36, 38, 68 SOHO GLOBAL HEALTH 42 SUNTHI SEPURI 44 Additional copies of this book can be ordered through Elif Ozturk ([email protected]). TIGAKA DISTRINDO PERKASA (TDP) 50, 52, 53

CONSUMER HEALTH CARE COMBIPHAR 25, 45, 66, 67 DSM NUTRITIONAL PRODUCTS INDONESIA 24, 25, 28, 29 CONSULTING THANK YOU ERNST & YOUNG INDONESIA (EY) 19, 21

EQUIPMENT AND SERVICES IMAS ASRI MULIA 51 ROBINA ANUGERAH ABADI 49, 51 We would also like to sincerely thank all the governmental bodies and associations, that took SANNER PHARMACEUTICAL & MEDICAL PACKAGING MATERIALS 50 TETRA PAK STAINLESS EQUIPMENT, INDONESIA 50, 56, 57 the time to give their insights into the market and share their experience and knowledge.

Image: Genero Pharmaceuticals

INVESTMENT COORDINATING BOARD, REPUBLIC OF INDONESIA (BKPM) bkpm.go.id

MINISTRY OF HEALTH, REPUBLIC OF INDONESIA indonesia.go.id/en/ministries/ministers/ministry-of-health

MINISTRY OF RESEARCH AND TECHNOLOGY, REPUBLIC OF INDONESIA international.ristek.go.id

NATIONAL AGENCY OF DRUG AND FOOD CONTROL (BPOM) pom.go.id/new/index.php/home/en

NATIONAL BOARD INDONESIAN PHARMACEUTICAL ASSOCIATION (GP. FARMASI INDONESIA) gpfarmasi.org

PMMC recognized CPhI as the perfect platform to promote the pharmaceutical industry in Indonesia and helped established its “ presence in the country in 2012. PMMC’s members are involved in all aspects of the pharmaceuticals industry in Indonesia, from raw materials and packaging to machinery and contract manufacturing. In the coming years, PMMC hopes to strength its relationship with CPhI and continue collaborate to make the industry stronger.

- Dr. Kendrariadi S., Chairman, Indonesia Pharma Materials Management Club (PMMC)

This list contains those companies interviewed during the course of research for this publication and as such represents only a limited selection of the companies operating in the pharmaceutical industry of Indonesia. It should not be considered a comprehensive guide. GBR holds an exclusive and extensive pharmaceutical database for Indonesia and the wider region. For further information on Industry Explorations - 71 - INDONESIA PHARMACEUTICALS 2015 database access packages, please contact [email protected] or call +44 20 7812 4511. ” COMPANY INDEX Global Business Reports Global Business Reports CREDITS

CONSUMER HEALTH CARE COMBIPHAR 25, 45, 66, 67 DSM NUTRITIONAL PRODUCTS INDONESIA 24, 25, 28, 29 CONSULTING THANK YOU ERNST & YOUNG INDONESIA (EY) 19, 21

Image: Genero Pharmaceuticals

INVESTMENT COORDINATING BOARD, REPUBLIC OF INDONESIA (BKPM) bkpm.go.id

MINISTRY OF HEALTH, REPUBLIC OF INDONESIA indonesia.go.id/en/ministries/ministers/ministry-of-health

MINISTRY OF RESEARCH AND TECHNOLOGY, REPUBLIC OF INDONESIA international.ristek.go.id

NATIONAL AGENCY OF DRUG AND FOOD CONTROL (BPOM) pom.go.id/new/index.php/home/en

NATIONAL BOARD INDONESIAN PHARMACEUTICAL ASSOCIATION (GP. FARMASI INDONESIA) gpfarmasi.org

- Dr. Kendrariadi S., Chairman, Indonesia Pharma Materials Management Club (PMMC)