Indonesian
President Joko Widodo signed Presidential Instruction No. 6/2016 on the
Acceleration of Development of the Pharmaceutical Industry and Medical Devices
on 8 June 2016.
Through this instruction Widodo calls on all relevant
ministries - including the Health Ministry, Industry Ministry and Finance
Ministry - to take efforts to boost development of Indonesia's pharmaceutical
industry.
The Health Industry has a key task to write an action plan for the
development of a self-sufficient pharmaceutical industry and to boost
competitiveness.
Indonesia's
pharmaceutical industry is highly dependent - for some 90 percent - on imports
of raw materials from abroad. Considering that sales in the nation's
pharmaceutical industry are expanding by around 10 percent year-on-year (y/y),
it implies imports of raw materials will continue to rise, especially now the
Indonesian government is eager to turn its ambitious universal healthcare
scheme (in Indonesian: Jaminan Kesehatan Nasional, or JKN) into a success. JKN,
which was implemented by the social security agency Badan Penyelenggara Jaminan
Sosial Kesehatan (BPJS) in early 2014, aims to provide all Indonesian citizens
with access to a wide range of health services (by 2019). If conditions do not
change but the JKN program is a success, then it would imply a significant
surge in imports of raw materials, putting pressure on Indonesia's trade and
current account balances.
The
presidential instruction also orders the Health Ministry to create an
integrated data system that covers the demand, production and distribution of
pharmaceutical supplies and healthcare services. Meanwhile, the process to
obtain permits to develop a pharmaceutical factory should be simplified.
Furthermore, BPJS needs to improve its capacity to pay bills submitted by local
hospitals and health clinics.
Earlier
this year we reported about the growing mismatch between claims paid and
premiums received by BPJS. The subsequent growing deficit undermines the
financial sustainability of the whole program. Moreover, given that 90 percent
of medicines' raw materials are imported, part of BPJS' funds (taken from the
central government's state budget) flow abroad.
Presidential
Instruction No. 6/2016 also calls on Indonesia's Finance Ministry to provide
fiscal incentives in order to attract investment in the pharmaceutical
industry. Also the Indonesia Investment Coordinating Board (BKPM), the
government agency that provides investment services, is tasked to create new
policies that boost investment in this sector.
Earlier
this year the Indonesian government had already widened room for foreign
ownership in factories that produce raw materials for medicines from 85 percent
to full 100 percent foreign ownership. However, more incentives are needed to
attract investment.
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