Indonesia is offering significant growth potentials for rapid tests as the demand for quality healthcare increases in line with government’s goal to offer universal healthcare for all its citizens.
Rapid tests or lateral flow tests – also called lateral flow Immuno-technology assays – are performed to detect the presence of a specific analyte in a sample, without the need for any specialized, expensive equipment or highly trained healthcare professionals.
The simplicity of these diagnostic tests makes them an essential tool not only for preliminary screening, but also as an accurate, fast, and affordable method for the diagnosis of various infectious diseases lately- thanks to the advancements in related technology platforms and increasing market competition. Rapid tests are used for medical diagnostics in laboratories, point-of-care (POC) units, and for home testing.
Demand for Lateral Flow Tests
The APAC market for rapid tests has been steadily growing over the past few years, and poised to grow considerably in the future. As far as geography is concerned, the APAC market for lateral flow tests are distributed across 14 countries. Of these, Japan is the current leader, while Indonesia is experiencing the highest growth
Clinical Lateral Flow Assay Markets in Indonesia: Trends & Forecasts report published by AcuBiz Consulting predicts that the market size of rapid tests will grow at a CAGR of 13% between 2016 and 2021 in Indonesia.
The growth is being driven by three factors: an increasing rate of infectious diseases, the government’s healthcare initiatives, and product advancements and innovations by rapid test manufacturers.
Application-wise, the lateral flow diagnostics market includes tests for pregnancy, HIV, hepatitis, malaria, syphilis, and influenza, to name some. Across the board, home pregnancy tests lead the overall market on the back of factors such as high sensitivity, reliability, and specificity.
Particularly in Indonesia, the hepatitis application segment is expected to witness the highest growth. The country has one of the highest viral hepatitis rates in Southeast Asia. As of 2007, over 2 percent of the country’s population had hepatitis C. Moreover, co-infection with HIV can exponentially increase the risk of liver failure and liver-related death from hepatitis C. Multiplexed screening strategies for HIV, HBV, and HCV using POC platforms is gaining traction in Indonesia.
Healthcare Sector Growth Opening up New Opportunities
The country’s healthcare industry continues growing at a fast pace and is opening up opportunities for local and global investors. Overall industry sales – including medical devices, medical insurance, and hospitals – are up, and outperforming other industries. In fact, the South East Asia medical device markets have witnessed robust growth at a rate higher than developed medical markets in the Western hemisphere.
Government’s healthcare focus
Since its launch back in 2014, the government’s Jaminan Kesehatan Nasional (JKN) initiative to provide universal healthcare coverage has given an impetus to healthcare facilities. The number of hospitals and clinics continue to increase. Many have announced plans to expand existing facilities in order to serve the country’s rapidly growing middle class, particularly in secondary cities.
In addition, primary care centers (puskesmas) are increasingly offering rapid testing services for various infectious diseases including dengue, malaria, and HIV. As healthcare facilities and coverage grow, the opportunities for simple and cost-effective rapid tests are also expected to increase.
Reliance on imports
The fast growth of Indonesian medical device sector had been predicted by BMI in a report published in 2014, where the demand was projected to cross $1 billion by 2018 at a CAGR 12.7%. As local manufacturing is mostly concentrated in the basic sector – bandages, surgical gloves, and hospital furniture and hollowware – the reliance on imports is heavy for all the other medical devices and diagnostic products including rapid tests.
While companies such as Alere have their own offices in Indonesia, rapid tests are not locally manufactured. Moreover, there are hardly any local brands, except for a few that are offering products through OEM arrangement with foreign companies.
This is in line with the scenario in other sectors of medical devices and diagnostics. For instance, medical consumable products such as catheters account for 24% of total imports, while diagnostic imaging equipment accounts for 35% of total imports.
Though in terms of overall value rapid tests account for a lower percentage of total medical device imports, opportunities for foreign rapid test manufacturers are significant. However, foreign manufacturers need to work with local distributors to tap the opportunities.
Adapting to E-procurement System
To assist local medical facilities with a convenient and transparent means of purchasing medical devices from foreign suppliers, the Ministry of Health has implemented an e-procurement system listing over 1,600 types of medical devices and their costs.
Rapid test companies are adapting to the new e-procurement system slowly, as most distributors are concerned about the need to meet the government’s price caps, which can eat into profit margins. And though private hospitals cannot purchase through the e-procurement system, visibility to prices offered by the system increases their negotiating powers. This requires foreign manufacturers to rethink engagement and partnership tactics with local distributors.
Potential for 100% foreign ownership
Revisions to the government’s Negative Investment List have further increased opportunities in the healthcare industry in general to support the broader goal of a universal healthcare system (BPJS). Healthcare segments where 100% foreign ownership is possible at present, include pharmaceutical raw materials, healthcare support services (laboratory clinic, medical equipment rental, and medical check-up clinic), and business and management consulting or hospital management services.
Rapid tests, however, are excluded from these limited number of healthcare-related sectors where 100% foreign ownership is allowed.
Dealing with the competition
While opportunities exist, rapid test players also need to contend with competitors in an emerging yet highly fragmented market. Advancements to improve sensitivity and specificity can help to improve market shares, especially in the case of infectious diseases such as dengue, malaria, hepatitis, and HIV.
Additionally, as discussed above, collaborating with an experienced distributor with strong connections with end users will be necessary to make the most of the opportunities. AcuBiz Consulting has recently published a comprehensive database of medical device distributors in Indonesia. This serves as a good screening tool for foreign manufacturers on the look out for suitable distribution partners in Indonesia.