Indonesia's drug manufacturers are expanding their production capacities to take advantage of the implementation of the country's Social Security Law, which will provide universal insurance to the country's population.
SOHO Group president director Marcus Pitt said local pharmaceutical companies would benefit a lot from the national health insurance system, which would result in a sharp increase in the demand for medicine.
'The presence of universal healthcare is a great opportunity for pharmaceutical companies to significantly expand their product volume,' he said recently.
Like Pitt, Kalbe Farma finance director Vidjongtius said the national health insurance program would result in the sharp increase in generic medicine. 'We're looking into generic antibiotics, but because there are hundreds of listed generic antibiotics, we will only make those we are capable of,' he said
With a market capitalization of Rp 63.4 trillion ( about US$5.52 billion ), Kalbe Farma is one of the largest listed pharmaceutical companies in Southeast Asia. Its net sales rose by 18.9 percent year-on-year to Rp 7.4 trillion in the first half of 2013.
Information company IMS Health predicts a doubling of the Indonesian pharmaceutical market to Â¤7.1 billion ( about $9.6 billion ) by 2018 as access to modern healthcare expands thanks to universal health insurance coverage.
To get a share of the universal health care market, SOHO and Kalbe have been buffering their manufacturing capabilities.
SOHO announced last month it had sold 51 percent of its subsidiary, Ethics Industri Farmasi, to German pharmaceutical firm Fresenius Kabi AG. The deal would enable SOHO to expand its intravenous ( IV ) generic drugs and infusion solutions ' products which it plans to supply to universal health programs ' by 300 products within the next 10 years.
Similarly, Kalbe invested Rp 150 billion to establish a 13,295 square meter factory with a capacity of 87 million tablets per month in Cikarang, West Java, last year to anticipate the rise in demand for generic drugs once the universal healthcare system was in place.
'The factory started operating in the first quarter of the year and is producing a small fraction of its capacity,' Vidjongtius said, adding hitting the right production volume would allow the pharmaceutical firm to reach economies of scale, which in turn, translated into more affordable drugs for the program.
The government plans to fully implement the universal healthcare insurance program on Jan. 1, 2014. However, it has not issued important regulations needed for the implementation of the program.
Besides drug manufacturers, private health insurance companies also expect to gain from the presence of the universal healthcare program through product bundling.
Prudential Life Assurance spokesperson Nini Sumohandoyo, said while the program provided compulsory basic health coverage, private insurers could offer 'enhanced health protection choices'.
Prudential had more that 1.9 million clients as of June 2013, with 90 percent of its product portfolio being unit link. Its total income from premiums has grown by a compound annual growth rate
( CAGR ) of 25 percent in the five years up to 2012.
Asuransi Jiwa Manulife Indonesia vice president director Nelly Husnayati added this bundling could be done through an agreement with the Indonesian Life Insurance Association ( AAJI ).
'Under this memorandum of understanding, private insurers can channel their products as a complement to the package offered by the universal health coverage,' she told The Jakarta Post, adding the market for this complementary package was largely mid-level employees and upward.
The universal health care program states in case of sickness, a person must go to community healthcare centers first. If the center is unable to treat the disease, it will issue a referral for hospital treatment.
The program also caps the class of hospital room a person can have.