Opportunities for Foreign Medical Device Manufacturers in Indonesia

Opportunities for Foreign Medical Device Manufacturers in Indonesia

Syamala Ariyanchira

By Syamala Ariyanchira

January 05, 2017


Lucrative opportunities beckon for foreign medical device manufacturers, in Indonesia. Indonesia relies mainly on imports to meet its medical technology requirements. Imports account for approximately 97% of the country’s medical device market. In 2015, the market was worth about $870 million, and if the consistent year-on-year CAGR (compound annual growth rate) growth is any indication, we may be looking at a billion dollar medical device market in 2018. Already, the likes of Pfizer, GE Healthcare, Philips, Roche and Siemens have made inroads into this segment.

Key opportunities for growth

There are multiple reasons why Indonesia’s medical device market can be considered an emerging and a fast-growing one.

Universal healthcare rollout

Around 40% of the nation’s population is uninsured. In 2014, the government implemented its National Health Insurance Plan pursuing universal coverage for its 254 million-strong population by 2019. This is a welcome development for the healthcare sector in general, and can be expected to spur demand for healthcare products, including medical devices.

New and upgraded medical facilities

The government has set to work on improving existing healthcare facilities and building new hospitals and clinics. Last year, the Ministry of Health requested a higher budget allocation to effect this change.

The government has set to work on improving existing healthcare facilities and building new hospitals and clinics. Last year, the Ministry of Health requested a higher budget allocation to effect this change.

The momentum hasn’t just built up in public sector healthcare; private sector hospitals and clinics are also expanding and upgrading to meet the universal healthcare agenda and sustain their competitive edge. With the government backing the development of medical facilities in the private sector, it is little surprise that 30 new hospitals are in the offing!

Lifestyle demands

In Indonesia, fatalities from non-communicable diseases account for 71% of the total deaths (Source : World Health Organization). The rise in cancer, diabetes and heart diseases calls for timely diagnosis and treatment, which in turn, requires high-tech equipment.The Asia-Pacific region is a fast-growing market for LFIA tests used for diagnosing a number of infectious diseases. For more information and insights on this, you can access our report here.

There is a large reliance on imported medical devices, especially in the light of the transformatory changes envisioned in national healthcare, representing significant opportunities for foreign medical device manufacturers.

Moreover, the government has been encouraging the middle class to stay back in the country for diagnosis and treatment. The proliferation of specialist hospitals will support this initiative while also further fueling the need for cost-effective medical devices.

Key segments attracting foreign producers of medical devices

Maternal Care The country’s traditional birth centers lack sophisticated infrastructure and training, which has put the spotlight on maternal and infant care. There is a need for basic diagnostic ultrasound, catheters, fetal monitors and related equipment. Blood testing kits are also required for the early detection of conditions that may pose a risk to the mother and fetus.

While traditional birth attendants (Dunkuns) are mainly preferred for natural births, the services of local midwives are also utilized by expectant couples. Most Dunkuns don’t have much formal training on childbirth and insufficient access to emergency equipment; on the other hand, local midwives have better but not optimal access.

Though midwives don’t have a role to play in the diagnosis aspects of pre-natal care, they can still be tapped to improve services through better training and provision of medical devices. This opportunity exists at government and private hospitals – where the midwives work – as well as some birth centers – which they own. The device categories, in this regard, include fetal monitors, infant ventilators, obstetrics or gynecology ultrasound, incubators and radiant warmers.

A majority of gynecologists in Indonesia are managing with black and white ultrasound. There is also a vast untapped market for diagnostic ultrasound for general physicians, both in private and public healthcare.

In small cities and rural areas, GPs receive predominantly low income patients, who cannot afford the costs of ultrasound scans. There is, therefore, a need for low-cost ultrasound machines in GP facilities.

Market entry hurdles and opportunities

Foreign producers of medical devices are required to establish a foreign investment company as a PT (limited liability company) or assign an Indonesian distributor to market and sell medical equipment in the country. Our recently launched database of medical device distributors in Indonesia offers a peek into the current landscape of local distributors.

Three years ago, the Ministry of Health implemented an online purchasing system for medical devices that lists over 1600 types of medical devices – along with distribution costs – in an ecatalogue.

The e-procurement system allows local medical facilities to purchase devices without a tender, and aims to create transparency and simplify transactions. For foreign companies, the portal is a means to fast-track exports and bypass red tape.

However, to be listed on the e-catalogue, companies have to adhere to price caps imposed by the government, which can directly impact profit margins. As private hospitals have access to the catalogue, they now have an upper hand in negotiating prices, once again affecting the bottom line.

To manage the new obstacles and capitalize on a growing, thriving and highly-reliant market, foreign manufacturers need to explore creative solutions with knowledgeable and savvy local distributors more than even before.

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