Rupiah Weakness Pressures Pharmaceutical Industry, Threatening Margins and Investment

The weakening of the rupiah exchange rate, which has breached the level of Rp18,000 per US dollar, has the potential to pressure the performance of the national pharmaceutical industry. A continued high dependency on imported raw materials makes the industry’s production costs increasingly vulnerable to exchange rate volatility.

The Head of the Macroeconomics and Finance Centre at the Institute for Development of Economics and Finance (Indef), M. Rizal Taufikurahman, stated that the rupiah’s depreciation will directly increase production costs for pharmaceutical companies, as most medicinal raw materials, excipients, and production machinery are still sourced from abroad. Consequently, the impact is reflected not only in the rising prices of imported raw materials but also extends to logistics costs, financing, and working capital requirements.

“The larger the proportion of imports within a company’s cost structure, the stronger the pressure on production costs,” he told Bisnis on Saturday (6/6/2026).

This cost pressure ultimately threatens to erode industry profitability. Rizal explained that pharmaceutical companies do not have full flexibility to raise product selling prices to compensate for the surge in production costs. This is because the domestic medicine market remains highly sensitive to public purchasing power. Furthermore, many pharmaceutical products are tied to government procurement mechanisms, the e-catalogue system, and the national health insurance programme, which limit the scope for price adjustments.

“As a result, increases in input costs cannot always be passed directly to consumers, leading to the erosion of company margins,” he said.

Furthermore, Rizal assessed that a prolonged weakening of the rupiah also risks hindering investment and the expansion of production capacity within the pharmaceutical industry. In conditions of volatile exchange rates, investors tend to be more cautious as the costs of importing machinery, technology, initial raw materials, and investment financing become more expensive. This situation encourages companies to withhold capital expenditure and focus more on maintaining liquidity and cash flow.

On the other hand, Rizal believes that the rupiah’s depreciation could actually serve as a momentum to accelerate efforts in substituting imported medicinal raw materials. However, this opportunity can only be realised if supported by strong and sustainable industrial policies. According to him, the development of domestic pharmaceutical raw materials requires support through research, fiscal incentives, certainty of demand, and adequate production scales to be economically competitive.

“Therefore, import substitution cannot be driven solely by the high cost of imports; it must be built through consistent industrial policy,” he emphasised.

In facing this situation in the short term, Rizal believes the government and Bank Indonesia need to take steps to maintain exchange rate stability and strengthen the availability of foreign exchange liquidity for industry players. More affordable hedging schemes also need to be expanded to help companies manage currency risks.

Regarding industrial policy, the government is deemed to need an acceleration in the development of domestic medicinal raw material production, the promotion of downstreaming in the basic pharmaceutical chemical industry, and the improvement of the procurement system through the e-catalogue to be more adaptive to exchange rate changes.

“For the pharmaceutical sector, exchange rate stability is not just a business issue, but also a component of national health resilience,” Rizal concluded.