Opportunities, await drug companies

Opportunities, await drug companies

The Jakarta Post, Jakarta

Trade liberalization among the Association of Southeast Asian
Nations (ASEAN) members and a government plan to subsidize health
care costs for the poor offer opportunities for the
pharmaceutical industry here to speed up growth in the coming
years, say industry executives.

"The implementation of the ASEAN free trade on pharmaceutical
products at the end of 2008 will challenge the pharmaceutical
industry here to meet the demand for medicine of about 600
million people," said managing director of Dexa Medica Ferry
Soetikno over the weekend.

He was referring to the ASEAN Free Trade Agreement (AFTA),
which will allow duty-free pharmaceutical products to be traded
between ASEAN members in less than four years.

Indonesia's exports of pharmaceutical products to other ASEAN
members reach about US$30 million a year, accounting for about 30
percent of the nation's total exports of pharmaceutical products
to 80 countries per annum.

Besides Indonesia, ASEAN also groups Brunei, Cambodia, Laos,
Malaysia, Myanmar, the Philippines, Singapore, Thailand and
Vietnam.

With the total market size of pharmaceutical products among
its members valued at about $5 billion per year, the ASEAN market
is too big a carrot for local players to miss out on, Ferry said.

In addition, plans to provide free health services -- which
include subsidized medicine -- for the poor starting this year,
as a result of a recent increase in domestic fuel prices, would
create an additional market of millions of customers.

Still, in order to take advantage of the opportunity offered
by the AFTA and government subsidy, plenty of work still needs to
be done.

"The pharmaceutical industry needs to improve efficiency,
boost production, expand the distribution network and improve
human resources," Ferry said.

Failure to do that would result in Indonesian producers
lagging behind others in the region, and leaving them impotent to
compete even in their own market.

Ferry acknowledged that mergers among local companies would be
one of the most feasible solutions, as it would help improve the
efficiency of the industry, not to mention that merging would
strengthen their capital base and help them reduce costs for
research and development.

There are 198 pharmaceutical companies in the country, of
which four are state-owned, 31 foreign joint ventures and the
remainder private domestic companies.

The Food and Drug Monitoring Agency (BPOM) estimates total
sales of pharmaceutical products in Indonesia at $2 billion a
year, of which 50 percent is dominated by foreign joint ventures.

Meanwhile, Erwin Tenggono, managing director of distributor PT
Anugrah Argon Medica, said distributors could play a vital role
in speeding up growth in the pharmaceutical industry.

Despite a government ruling allowing drug manufacturers to
distribute their products directly to retail outlets, Erwin said
producers would still rely on distributors that have strong
distribution networks nationwide, including in remote areas.

There are more than 2,200 distributors in the country compared
to the 198 pharmaceutical producers.(004)