Pharmaceutical firms cut revenue targets

The Jakarta Post, Jakarta

The weakening rupiah against the U.S. dollar in the past weeks has forced pharmaceutical companies to revise down their revenue targets for this year.

The Indonesian Pharmaceutical Association (GP Farmasi) chairman Anthony Ch. Sunardjo said the market size would likely remain stagnant as a result of increasing production costs due to the weakening local currency.

"Earlier this year, we projected our revenue to grow to Rp 23 trillion (US$2.25 billion) from Rp 20 trillion last year. But the new situation may hamper our target, which will stay at Rp 20 trillion," he told The Jakarta Post on Saturday.

Anthony said if the market did not expand, companies would be forced to increase their retail prices due to the increasing prices of imported materials, which account for 90 percent of production substances.

"We are facing a dilemma. On the one hand, we have to raise prices but on the other hand the people's purchasing power is also weakening.

"If the dollar keeps strengthening against the rupiah, it will directly affect our production costs," he said, adding that imports accounted for between 30 and 50 percent of retail prices.

He said raising drug prices should be the last option for pharmaceutical firms. "First, they must be more efficient by reducing their budget for promotion, which is the biggest cost in our business."

PT Kimia Farma revised down its revenue target this year from Rp 100 billion to Rp 60 billion due to rising imported materials, detik.com reported.

Publicly listed PT Kalbe Farma, however, was still optimistic of seeing an 18 to 20 percent growth this year as soon as it revised its sales strategy.

"We still expect this year's revenue to reach Rp 4 trillion. But we must formulate a strategy by, among others methods, adjusting prices, being efficient and focusing promotion efforts on our niche products," said the company's finance director and corporate secretary Vidjongtius.

He said the firm was not worried about the weakening rupiah as it had prepared $55 million in reserves and faced no obligation to pay foreign loans in the near future.

"Our biggest concern is higher inflation, which would weaken the people's purchasing power and would eventually lead to declining sales and demands," he said.

Anthony also pointed to the increase of Bank Indonesia's key interest rate, which would also affect the industry.

He said the situation would cause Indonesians to buy less medicine from pharmaceutical companies than they did at present.

On average, he said, Indonesians spent only $6 to $7 per year on medicine, while Singaporeans and Malaysians spent $70 and $20 respectively.

"If the situation continues, their (Indonesians) annual spending would drop to between $4 and $5," he said.

Anthony urged the government to immediately disburse a low- income assistance fund, chiefly allocated for health services to support pharmaceutical industry growth.

"At least, the government can promote generic medicine sales," he said. (006)