Market Trends: Impact of Indonesias

National Healthcare Scheme

Insights for Market Participants

9AB9-52
July 2015
 Table of Content

Contents Slide

Introduction 3

Universal Healthcare Coverage 8

The Frost & Sullivan Story 26

9AB9-52 2
 Introduction

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9AB9-52 3
 Introduction
Why is Indonesia an Attractive Market for Healthcare?

Improved Access 3
to Healthcare

Increasing Healthcare 2
Expenditure
Large Population 1

1 Large Population: Indonesias middle class is already big and booming. It is expected to grow more than double
over the next 7 years to 85 million people, and by 2030 there will be 135 million middle-class consumers.

Increasing Healthcare Expenditure: The spending power of middle income group is increasing at the same time
2 as medical technologies are becoming cheaper. The price-affordability balance for the average Indonesian is
changing and purchase power is increasing.

3 Improved Access to Healthcare: With the implementation of Jaminan Kesehatan Nasional (JKN), demand for
pharmaceuticals, medical devices, and other healthcare products has already increased.

Source: World Bank; Frost & Sullivan

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 Large Population

Total Population, Indonesia, 20132019F Personal Disposable Income, Indonesia, 20132019F

CAGR 1.48% (2013-2019F) CAGR 6.53% (2013-2019F)

300.0 Economy 272

249 20.0 19.0
250.0 17.0
GDP ($ Billion)

13.0
65 years
200.0 15.0 13.0
184.0 15-64 years
150.0 167.0
10.0
0-14 years
100.0

50.0 Population (in Millions) by Urbanization* 5.0

69.0 71.0
0.0 0.0
2013 2019F 2013 2019F

Large local consumption base with increasing spending power

4th largest country in the globe
Quarter billion population growing at a substantial rate of 1.4%
Increasing spending power

Source: Frost & Sullivan

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 Increasing Healthcare Expenditure

Total Healthcare Expenditure, Indonesia, 20102019E

AAGR 2010-2013: 12.6% CAGR 2014E-2019E: 14.5%

100.0
GDP ($ Billion)

69.0
61.0
53.0
46.0
35.0 40.0
26.0 30.0
21.0 23.0

0.0

Increased Healthcare Expenditure:

Indonesia had the lowest spending on healthcare as percentage of its gross domestic product (GDP) (3.3% in 2013)
Lowest in the region when compared with neighboring countries like Singapore (5.8%), Malaysia (4.3%) and Thailand
(4.2%)
However, the healthcare expenditure is expected to double in 2019, growing at a CAGR of 14.5%

Source: World Bank; Frost & Sullivan

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 Improved Access to Healthcare

Universal Healthcare Coverage Timeline, Indonesia, 2014-2019

Goal:
An estimated 150 million
Indonesians are insured under All Indonesian people (estimated at
various schemes. 270 million) are covered under
Badan Penyelenggara Jaminan
The remaining ~90 million people
Sosial (BPJS) Kesehatan (Universal
do not have health coverage.
Healthcare Coverage).

2010 2012 2014 2016 2018 2019

BPJS covers an estimated ~120 million people as of 2014.

The remaining 50 million people are covered by other schemes.

Transformation is still being implemented.

A significant number of Indonesians are still uninsured (~70 million).

Source: MOH Indonesia; BPJS; Frost & Sullivan

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 Universal Healthcare Coverage

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9AB9-52 8
 Universal Healthcare Coverage

Restructuring of the existing insurance schemes under one banner of either JKN or National
Health Insurance

Transformation from public schemes to national BPJS is expanded to include big, medium,
social security, BPJS, begins
small, and micro enterprises (which also
includes the JAMKESDA scheme).
JPK*
JAMSOSTEK* BPJS Current BPJS implementation is revised
Membership data annually to review benefit packages and
JAMKESMAS*
is synchronized. services.
ASKES* Only one single
identity number Customer satisfaction is measured twice a
TNI/POLRI* year.

On 1 January 2014, the Indonesian Government launched its Universal Healthcare Coverage (UHC) program, with the
objective of attaining 100% insurance coverage by 2019 (about 270 million people).

The universal coverage is more popularly known as BPJS, which oversees the implementation of universal healthcare
coverage and conducts audits annually to monitor the healthcare coverage progress.

Current insurance schemes was transferred and integrated to BPJS since 2010, starting with existing public schemes.
Following that, BPJS Kesehatan will be continue to expand coverage to all enterprises across the nation.

*Defined in glossary Source: MOH Indonesia; BPJS Web site; Frost & Sullivan

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Key Predictions
Key 2015/2016 Healthcare Market Predictions

A JKN will boost all B Private hospitals will C Medical device

segments of the
healthcare market
move beyond key cities;
non-conventional
participants will enter the
market
companies will form
Public Private
Partnership (PPPs) to
improve patient access
and expand its products
reach

D E In vitro diagnostic (IVD)

Pharmaceutical market
will be driven by the
demand for generics
and vaccines
market will be driven by
increased demand for
basic tests covered by
JKN

Source: Frost & Sullivan

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 Role of JKN

About a quarter billion Indonesians will demand quality healthcare services, faster disease screening,
advanced medical technologies for early diagnosis, and low cost, high quality efficacious medicines for
treatment

Frost & Sullivan Prediction: National Health Insurance (JKN) will Boost
All Segments of the Healthcare Market

Demand for More Hospital Beds

a

b Demand for More Drugs (Generics)

National Health Insurance (JKN)

Demand for More Medical Equipment
c Demand for More Diagnostic Tests

d Demand for Qualified and Skilled Healthcare

Professionals

Source: Frost & Sullivan

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 Expanding Patient Volume

National Health Insurance (JKN) Aims to Cover all Citizens by 2019

a Demand for More Hospital Beds 3,500 200% Pre JKN

3,000 Jan-Feb 2014
3,000

Daily Patient Volume

Expected Growth in Number of % YoY
2,500
Hospital Beds
CAGR 2,000
Country 2013 2019 (2013-2019)
1,500
Indonesia 278,450 319,200 2.3%
1,000 50%
1,000 40%
Malaysia 57,470 63,533 1.7%
420 600
500 300 400
Thailand 147,400 170,460 2.5%
0
Bandung Sumedang Tegal
Provinces of Indonesia

Indonesia is expected to add about 40,000 beds by 2019 and JKN would be a key driver; one of the early reports shows how
the daily patient volume in some of the provinces jumped up after JKN initiation.

Source: Standard Chartered Report 2014; Frost & Sullivan

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 Demand for Prescription Drugs

As more patient get access to healthcare through JKN, demand for prescription drugs (generics) will grow;
some companies have already preempted this and increased their production capacity to address the
increased demand.

b Demand for More Drugs (Generics)

Post JKN implementation:
Estimated drug spend as a
Pharmaceutical companies have been percentage of total health
expanding production capacity in expenditure will be
anticipation of the JKN implementation

State Owned ~19%

Pharmaceutical Increase in Production
Companies Capacity (%)
PT Kimia Farma 123

PT Indofarma 200

Source: Frost & Sullivan

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 Demand for Tests

Demand for medical devices is expected to grow at much faster rate in the future as compared with the
historical growth rate, especially for consumables and imaging devices.

Demand for More Medical Equipment

c
Demand for More Diagnostic Tests

Domestic consumption of following

CAGR (2008-2012) CAGR (2013-2019) are expected to increase:
(%) (%)
X-ray films
Consumable 10.2 15.2 Consumables like gloves,
chemicals, catheters
Imaging Market 15.9 18.2 Computed tomography/magnetic
resonance imaging (CT/MRI)
equipment and consumable
associated with advanced imaging
procedures

Source: Frost & Sullivan

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 Demand for Medical Professionals

The already scarce medical professionals (doctors and paramedical staff), which are way below the global
and Organisation for Economic Co-operation and Development (OECD) averages, will be put under pressure
by the burden of the increasing number of JKN patients.

d Demand for Qualified and Skilled Healthcare

Professionals

Number of Doctors per 1,000 Population, Number of Nurses and Midwives per

Nurses/midwives per 1,000 Population

South East Asia, 2012 1,000 Population, South East Asia, 2012
(or latest available year) (or latest available year)
Doctors per 1,000 Population

2.5 9.0 7.7

2.0 8.0 6.7
2.0 7.0
1.5 1.6 6.0
1.5 1.2 1.2 5.0 4.4
3.8
4.0 2.7
1.0 0.7 3.0
0.6
2.0 1.4 1.0 1.1
0.5 0.2 0.3 0.2 0.9 0.9
1.0
0.0 0.0

Source: Frost & Sullivan

9AB9-52 15
 Demand for Hospital Beds

The demand for hospital beds, especially outside greater Jakarta area, cannot be addressed by public
hospitals alone and therefore private hospitals will expand beyond the key cities to capture the new and
growing catchment areas.

2013 2019 (Expected) Gap

40,750
Number of hospital beds 278,450 319,200
(Additional beds)

Hospital Bed ratio

11 12 49 OECD Average
(beds per 10,000 population)

Government hospitals alone can not address this huge gap, so private participants have to contribute.

There are total 73 major private hospitals in Indonesia operated by top 10 private participants.

Of these, 57% of the hospitals are located in Greater Jakarta area (42 hospitals) and there is need for more private
hospitals in areas like Makassar and Kalimantan.

Because the government hospitals alone cant address the dearth in the number of beds, private participants will have
to contribute; since the key Tier I cities are saturated, private hospitals will expand outside the Tier I cities.

Source: Frost & Sullivan

9AB9-52 16
 Spread of Private Hospitals

Frost & Sullivan Prediction: Private hospitals will move beyond key cities; non-conventional participants will
enter the market
Aceh
Number of
Hospitals: 31

Sumatra
Selatan
Number of Opportunity
Hospitals: 35
Sumatra
Utara Jawa Barat Jawa Timur
Sulawesi
Number of Number of Number of
Selatan
Hospitals: 66 Hospitals: Hospitals:
Number of
132 181
Hospitals: 46
Sumatra
Barat
Number of
Hospitals: 43
DKI Jakarta
Number of
Hospitals: 68 Jawa Tengah Bali
Number of Number of
Hospitals: 157 Hospitals: 31

Some of the attractive regions, where private participants are likely to expand
Image Source: citymocha.com
Source: Frost & Sullivan

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 Foreign Investments

Increasingly friendly foreign investment policies and the huge opportunities in healthcare will attract both
conventional and non-conventional participants into healthcare.

Before 2012 From 2012 From 2014

Cap in % on foreign investment 65% 67% 67%

Cap in % on foreign investment for ASEAN

65% 67% 70%
investors

Allowed to invest in Surabaya, Medan Country wide Country wide

Case Study:
Pt Kalbe is diversifying from its stable drug maker business into hospital services business, developing a new liver specialist
hospital (200 rooms) in Jakarta and evaluating building upto eight other hospitals in Bandung, West Java; Makassar, South
Sulawesi; Medan, South Sumatra; Semarang, Central Java; and Surabaya, East Javac.

More foreign, as well as local, investments are likely to be made in Indonesia, not only from the traditional healthcare
services providers (hospitals) but also from non traditional participants that want to diversify.

Source: Frost & Sullivan

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 Telehealth Services

Medical device companies will adopt collaborative business models to penetrate the rural markets with remote
patient monitoring and tele-health devices that can improve patient access and increase the awareness and
reach of their products
Remote Patient Monitoring Market in Selected
South East Asia Countries, 2012 and 2017F
50
6.2%

Innovative Devices:
7.6%
About 6 months ago, GE
Revenue ($ Million)

Healthcare launched the Vscan

1.3 in Indonesiaa handheld,
25 pocket-sized screening device
with ultrasound technologies. It
was adapted locally with a user
3.2% 43.9 interface in Bahasa Indonesia for
7.3% 33.9
32.5 use by medical general
23.5 practitioners (GPs).
4.5 6.4 5.3 6.2
0
Indonesia Malaysia Phillipines Singapore Note: RPM market includes the market
for equipment only
2012 2017 CAGR (2012-2017F)

Collaborative Model:
To address the increasing concern of maternal mortality in Indonesia, Philips is running a pilot-project, Mobile Obstetrical
Monitoring, in collaboration with local hospital group Bundamedik, the city government of Padang, and the MOH (Ministry of
Health). This project will remotely monitor pregnant women for early high risk identification using a new tele-health solution.
Source: Frost & Sullivan

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 Demand for Generics and Vaccines
The biggest opportunities are bio-similars, generics, and vaccines, which the government funds

JKN mandates the use of

biosimilars/generics because they are
cheaper
Generics manufacturers are promoted more
than originators
Originators have to prove that their more
expensive innovator brands are in fact safer,
more effective, or have better quality control
Government funds are mostly used to support
vaccines and anti-infectious drugs (the
latter with a high priority)
The promotion of generics along with
Potential Market
vaccines remains the high opportunity
Growing Market
segment for investors
Nascent Market

Source: Frost & Sullivan

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 The IVD Market
Because the basic tests will be covered by JKN health insurance, the demand for these tests will
increase

Frost & Sullivan Prediction: The IVD market will be driven by increased demand for basic tests covered by
JKN
Indonesia as Country of IVD Destination:
JKN covers first-level referrals and advanced
healthcare services at all the health facilities that have
collaborated with BPJS Health
First-level outpatient services covered under JKN:
o Simple laboratorium diagnostic tests (blood tests,
urine tests, stool tests, and blood glucose tests)
Market segments:
o Immunochemistry testing
o Microbiology testing
o Molecular diagnostics testing (high growth area)
Virology
Bacteriology
Potential Market
Molecular blood donor screening
Growing Market
Genetic testing
Nascent Market
The local market is served mostly by the domestic
participants, while the high-ended IVD market is
dominated by MNCs
Source: Frost & Sullivan

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 Key Healthcare Segments
Indonesia healthcare market will be worth close to $21 Billion in 2019

Estimated Healthcare Market by Segments, Indonesia, 2019

14,000 18
16.7
11,700 16
12,000

CARG (2013-2019) (%)

Revenue ($ Million)

14
10,000 13.1
8,400 12
11.4
8,000 10

6,000 8.1 8

6
4,000
4
2,000 1,465
2
76
0 0
Private Hospital Pharmaceutical Medical Technology IVD Market
Market Market Market

2019
2019(Million
Revenue USD)
($ Million) CAGR
CAGR(%) (2013-2019)
(2013-2019) (%)

Source: Frost & Sullivan

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 Summary

As JKN provides access to an increasing number of Indonesians,

there will be a sharp rise in the demand for consumables,
medicines, diagnostics, medical devices, and hospital beds.

Though Greater Jakarta is still the most attractive

destination, areas including Makassar, Pekanbaru, and
Balikpapan hold potential for future investments.
2015
Indonesia While eCatalogues will lead to pricing pressure, medical
Healthcare device companies will use collaborative models and
Market localized products to increase penetration to the bottom
of the pyramid.

Generics, specialty medicine, and vaccines will drive the

pharmaceutical market.

JKN-sponsored basic tests will drive the IVD market.

Source: Frost & Sullivan

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 Glossary

Schemes Abbreviations Eligibility

JAMKESMAS or Jaminan Sosial
The poor and near poor
Masyarakat
JAMKESDA or jaminan kesehatan
Public Schemes Only cover the poor
Kota Depok
Civil servants, government employees
ASKES (Including TNI/POLRI)
and armed forces

JAMSOSTEK Private sector employees

Private Schemes
Private Health Insurance
Universal Healthcare Coverage
Employees under mid-large sized
companies or those who can afford to
pay for individual insurance
Existing insurance scheme to be
transferred to UHC to cover 100% of
population by 2019

Source: Frost & Sullivan

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 The Frost & Sullivan Story
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The Frost & Sullivan Story

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