Drug companies enter Indonesia and the Philippines

19-02-2010: An increasing number of Pharmaceutical (Pharma) companies are targeting emerging markets. Indonesia and the Philippines are starting to gain considerable attention thanks to their burgeoning healthcare systems. A recent report by independent market analyst Datamonitor shows that Pharma’s interest in Indonesia and the Philippines will rise as both are currently reforming and expanding their respective healthcare systems.

Indonesia: an attractive market in the long term

Indonesia is the fourth most populated country in the world and therefore has a large patient population. The introduction of a full universal health insurance is a much-needed step to increase access to healthcare, given that only 26% of the Indonesians are covered by health insurance and the fact that they often find medications to be unaffordable. This is one of the primary aims of the government, which targets to cover all its citizens by 2013. However, given the large size of its population and the low current coverage, opportunities for the Pharma industry will likely only be seen in the long run.

In the absence of a true universal healthcare, Indonesians without coverage opt for cheaper drugs, namely branded generics that are usually produced by the local industry. “The market remains dominated by branded generics despite the availability of even cheaper unbranded generics, indicating a huge market potential for Big Pharma as Indonesians seem to be willing to pay more for a reputed brand” says Maura Musciacco, healthcare analyst at Datamonitor.

The Phillippines: beneficial in the short term

Reforms of the universal health insurance system have made greater headway in the Philippines, with 78% of the population covered. This, in combination with dominance of more expensive branded drugs over cheap generics, generated a market valued double that of Indonesia’s in 2008, with sales of $2.1 billion.

“The prices of medicines in the Philippines are some of the highest in the region, ranking second to Japan. With 14% of the Filipino population living below the poverty line of $1 per day — double that of Indonesia — this makes patient access a major challenge” comments Musciacco based in London.

Due to the mounting need to make drugs both accessible and affordable, the government has taken strong measures likely to create a challenging environment for foreign companies. In mid-2009, the government imposed 50% price cuts on 21 essential drugs, which will certainly impact sales for these companies going forward.

Enter with caution

Multinational players have garnered considerably higher sales and faster growth rates in the Philippines reflecting the country’s more fertile market for foreign companies. Going forward, however, branded Pharma will find the Philippines to be more challenging given it is shifting towards a generics-based market. In the long run, Indonesia will offer a larger market where multinationals can better position its high-value drugs due to a more Western disease pattern.