By Sanath Balasubramanyam
Contagion was just a movie until COVID-19 showed its momentous presence across the globe earlier this year – a pandemic that continues to take the world by storm. Countries, agencies, and healthcare providers are grappling to respond effectively owing to gaps in knowledge, medical supplies and material, political rigidity, infrastructure, governance, and enforcement. The last few months are a prequel to an impending global recession, putting many things to the test – but most of all, each country's public health administration and healthcare system are on the center stage.
Demand across critical raw materials, drugs, medical equipment, and medical supplies has soared over the last few months. With China's pharmaceutical throughput crashing, countries across the European union restricting exports of medical supplies. India is drastically reducing the export of critical APIs, and every other country is maximizing available products for domestic consumption. The global pharma supply chain is at an all-time fatigue. So how does Indonesia cope during this call of crisis?
Indonesia's pharmaceutical market was valued at Rp 115 trillion in 2019, which is around 0.7% of the GDP and severely exposed to supply chain disruptions, given that the industry draws its lifeline from imports. Over 90% of equipment & Active Pharmaceutical Ingredient (API) are imported, these are the base ingredient for most of the drugs manufactured in the country. Thus, although 85% of the medicines consumed are manufactured in Indonesia, they are at risk to continuity & external shocks due to the significant dependency on imports.
So, what is the implication to a patient? Eighty basic products across the top five therapeutic segments (anti-infectives, gastrointestinal and metabolism, cardiovascular system, central nervous system, and respiratory) contribute to 50% of the market share. Heavy usage drugs such as Amoxicillin (basic antibiotic), Amlodipine (commonly used for cardiovascular treatment), Lansoprazole (acidity, gastrointestinal) to complex antibiotics critical for surgery are at a high risk of stockouts across the nation in the next 6 -12 months.
A domestic drug market primarily built on the philosophy of quick growth does not stand a chance to win at scale. Leading local pharmaceutical companies are attempting domestic production in trial batches of selected raw materials, thanks to the collaboration with Korean, Japanese, and Indian manufacturers. But the truth is we are still at the very beginning of this journey. The country is trying to play it right. Still, with Indonesia's limited pharmaceutical R&D capabilities and manufacturing technology, commercial success is far from reality - they remain observers in this "make vs buy" game.
In addition, pressure on government hospitals has now quadrupled. Subsidized drugs purchased by the government through the e-catalog channel has been on red alert for over 6-8 months due to delay in the government tender release with no clarity on timelines. What's the impact? Drugs such as anti-retroviral/HIV drugs that are life-critical for many infected patients are unfortunately already showing signs of stockout in several government hospitals.
With the healthcare budget at 5% of total government annual budget, BPJS struggling with over Rp 13 trillion deficit in 2019, a healthcare system that lacks capability and infrastructure, and a pharmaceutical industry that is running on a 'Parasite Mode' – The outlook for Indonesia's healthcare system looks bleak. COVID-19 has only put enormous pressure and imposed larger uncertainty.
The SOE Ministry, alongside several other private conglomerates, are taking actions to manage the pandemic. We need to sort out the crisis today with more agility. An urgent plan from crisis management to recovery, including supply security, resource planning, testing strategy, and efficient contact tracing, is vital at a national level. But that's not enough, this will have a long-lasting impact on Indonesia's healthcare value chain, and the country needs an urgent 5 point 'National Healthcare Reset Plan'.
1. Regulatory Reforms across R&D, Manufacturing, and Hospital Technology: Implement policy revisions that incentivize multinational corporations R&D investment, and local manufacturing of critical API, with the aim to reduce imports by 50% in the next five years. As well as establish new policies that will allow foreign investments and collaboration across advanced testing and equipment for hospitals.
2. Improvement in Capability of Medical Professionals: Fundamentally transform and increase the quality of medical schooling, upskill medical professionals through public-private partnerships, and cross-country collaborations. Additionally, we need to relax existing regulations around medical practitioners, which will allow foreign medical professionals (doctors, nurses, health technicians, etc.) to practice in the country.
3. Hospital and Pharmacy Footprint: Radically improve our hospital and pharmacy footprint per capita, giving more access to healthcare across satellite cities and remote parts of the country. Reduce the current extremely fragmented nature of the business.
4. Restructuring Universal Health Coverage: Restructure the national universal health plan with a bifocal agenda, a massive stimulus to safeguard the sinking ship, and a complete revamp of strategy including a robust B2B operating model that does not put pressure on participating businesses and provides better coverage for patients across all strata.
5. Digital Health Investment: Implement a digital healthcare ecosystem that will increase transparency and empower agile response to events. Increase collaboration across digital healthcare startups to accelerate services including AI-powered diagnosis, telemedicine, remote monitoring, etc. which will solve increase availability, accessibility, and affordability to medicine.
Indonesia's healthcare system has been wallowing on quicksand, COVID's arrival has only put this on the global radar. While its citizens watch in anxiety and the world observes in anticipation – deliberate Action and Purpose to make Healthcare a number 1 priority for the country is the only way forward.
Sanath Kumar Balasubramanyam is the Principal at Kearney. At the company, Sanath has had a two-pronged focus: driving the healthcare agenda in collaboration with the Asia leadership, and delivering diverse high impact engagements across key accounts. Sanath is currently leading a large healthcare transformation project based out of Jakarta.