Opportunities in the Indonesian Healthcare System – A summary of recent publications

There has been a great amount of buzz and positive expectation in relation to Indonesia’s growth potential in the last few years and this is especially true when referring to the healthcare industry.
Drivers for growth in the healthcare sector are similar to those identified in many of the original “BRIC” countries and include: A rapidly expanding middle class, changes in lifestyle, increased life expectancy and reduced mortality rates as well as a government action plan to gradually improve a previously inadequate healthcare system.

This combination of both political and socioeconomic factors will guarantee a significant amount of growth in healthcare and bring with it a wide array of opportunities for the industry. The bulk of this growth will most likely be concentrated in the next 5 to 6 years.

One of the main catalysts for growth was the 2014 introduction of a plan to gradually move into a universal healthcare system by 2019 (i.e. the JKN). Funding will be gathered from a monthly insurance premium managed by the “National Social Security Agency (BJPS)”. Those living under the poverty line will have their premiums covered by the government.

Improvements and Expansion in Hospital Services

Traditionally the Indonesian hospital sector has been underfunded, overcrowded and lacked sufficient infrastructure. Added to these challenges, was the fact that most Indonesians had very little trust in the efficiency of the system, resulting in many (i.e. those who could afford it) either opting for private treatment or traveling abroad to countries like Thailand and Malaysia in search of higher quality care.

The launch of the JKN is expected to bring about increased demand and use of both in and outpatient facilities (given the fact that the JKN will now be covering the expenses for hospitalizations and outpatient care). According to research done by Standard Chartered, the hospital services market is expected to increase at a CAGR of 13 to 16 percent until 2023.

They further forecast increased opportunities for business in the private hospital sector due to: The rise in purchasing power from a growing middle class (this will be compounded by the fact that the JKN will be covering healthcare expenses), and the overcrowding of JKN public hospitals (leading those who can afford it to seek care from a private provider).

Increased Demand and Usage of Pharmaceuticals

Drivers like increased population purchasing power, heightened awareness and the JKN coverage of prescription drugs are expected to considerably bolster the pharmaceutical industry during the next 5 years. Standard Chartered research predicts a CAGR of up to 18 percent until 2023.

In particular, the use of generic drugs is expected to sky rocket. Although most Indonesian patients see brand names as a sign of quality and trustworthiness, the government is under high pressure to purchase large amounts and cheaper prices.

Increased Demand for Medical and Surgical Devices

Indonesia is an import dominated market when looking at medical devices, with up to 97 percent of the equipment being brought in from abroad.

According to an article by UK Trade and Investment, the following subsectors hold the most promise:

  • Cancer related therapies and treatments
  • Medical disposables such as syringes and catheters.
  • Dental equipment such as prosthetics, implants and orthodontic supplies
  • Imaging diagnostic equipment
  • Dermatology equipment

The Expanded Use of IT in Healthcare

As is the case with many developing countries, there is much room for development in what concerns the use of IT in healthcare.

Although some of the more modern private institutions are already making use of the more popular IT solutions (e.g. for billing, administration and health records), there is still a wide market of both public and private hospitals that would benefit from the use of IT. According to UK Trade and Investment the following steps are beneficial when entering the Indonesian healthcare IT market:

  • Choose you partners wisely – this is easier to do after the initial “due diligence” work.
  • Maintain regular contact through face to face meetings and regular networking.
  • Create a comprehensive information package with specific information such as a company profile, pricing and specific terms of payment.
  • Exposure – it is important to participate in activities such as trade exhibitions and to be involved in services that relate to your potential buyers.

The Private Sector – To the Rescue

Although the Indonesian government is making great strides in terms of the various healthcare improvements, it will take some time before all the gaps are filled and all demands can be met (e.g. many of the public hospitals are already running over capacity and attempting to get the resources needed to meet current population needs).

Many private institutions are not interested in participating in the JKN because the reimbursement system used is low compared to what they normally charge and according to analysts, may not be enough to cover expensive oncology or cardiovascular treatments.

However, an interesting (and ever increasing) demographic in Indonesia is the middle class, many of whom will be able to afford private care and will opt to use it in order to avoid overcrowded conditions and waiting times. Benefits in private care also include more modern equipment, luxurious hospital rooms and of course faster more dedicated treatment.

Opportunities in Human Resources

One of the major challenges in the Indonesian healthcare system is the shortage of medical staff. Many Indonesian hospitals have begun to collaborate with foreign doctors and institutions to try to better the situation, though this practice is not as ubiquitous as it could be due to government restrictions on foreign doctors.

According to Global business Guide (GBG), the staff shortage can be in itself an opportunity for institutions specializing in professional training. Liaison with local universities would be a plus for such ventures.

The potential for growth and development in Indonesia are quite outstanding and although the healthcare system is still in its early stages, there is no question that growth and profitability will be significant in the years to come.

For further quantitative information on the Indonesian healthcare system and the macroeconomic climate, please look into our Business intelligence platform or order the TforG Deep Dive report for Indonesia containing volumes of 600 surgical procedures in 10 specialisms.

About Bart Van den Mooter

Bart is the founder of TforG and works closely together with over 50 global companies such as Abbott, Baxter, GE, J&J, Medtronic, Philips, Stryker and Covidien. In this function, he spends a lot time with Key Opinion Leaders and Health Policy makers in Europe and in Emerging Markets. He graduated at the Polytechnic University of Leuven with a Master of Engineering and has an MBA (Flanders Business School).