JAKARTA – Indonesia’s pharmaceutical industry faces a critical paradox: while the nation boasts the world’s most extensive biological diversity, it remains heavily dependent on foreign sources for raw materials, importing approximately 90 percent of pharmaceutical ingredients needed for drug production.

This stark reality was highlighted by Honesti Basyir, CEO of PT Bio Farma (Persero), during the Business Performance Excellence Award virtual conference on Thursday, September 23, 2021. The situation reflects an unhealthy state of the domestic pharmaceutical sector that shows little sign of rapid transformation despite government targets and interventions.

The Biodiversity Paradox

“Indonesia possesses the world’s greatest biodiversity, yet we fail to maximize this advantage through comprehensive research and development,” Basyir explained. “If we don’t act decisively, foreign nations will continue exploiting our biological resources—a scenario we must prevent.”

The irony is profound: Indonesia’s vast array of flora and fauna should naturally position the country as a pharmaceutical powerhouse, capable of producing raw materials for virtually every category of medicine. Instead, economic realities force manufacturers to look abroad for cheaper alternatives.

“While our biodiversity is exceptional, we struggle with consistency and standardization in production,” Basyir acknowledged. “Foreign suppliers offer significantly lower prices than domestic production costs, making it economically challenging to compete.”

Persistent Healthcare Gaps and Growing Pharmaceutical Demand

The pharmaceutical industry’s import dependency directly impacts healthcare accessibility and affordability across Indonesia’s 275 million population. Prof. Dr. Ghufron Mukti, Director General of BPJS Kesehatan (Indonesia’s Social Security Health Administrator), emphasized at the 6th International Seminar on Pharmaceutical Sciences and Technology in October 2024 that quality control and cost management remain significant challenges in standardizing healthcare services nationwide.

The demand for affordable medications continues to grow, particularly for chronic and catastrophic diseases. Cancer, for instance, represents one of the most pressing pharmaceutical needs in Indonesia. Prof. Ajeng Diantini, Dean of Padjadjaran University’s Faculty of Pharmacy, noted that not all medications can be covered under the national health insurance program due to cost constraints. “Only cost-effective drugs—those with proven effectiveness, minimal side effects, and affordable prices—can be included,” she explained, highlighting the tension between pharmaceutical costs and healthcare coverage.

According to Globocan data, Indonesia recorded approximately 396,914 new cancer cases in 2020, with breast cancer, cervical cancer, lung cancer, colorectal cancer, and liver cancer being the most prevalent types (Kemenkes RI, 2022). The growing cancer burden necessitates continuous importation of chemotherapy drugs, targeted therapies, and immunotherapies—most of which Indonesia cannot produce domestically.

Malaria: A Persistent Endemic Challenge

Beyond cancer, infectious diseases continue to drive pharmaceutical demand. Malaria remains a significant public health challenge despite decades of intervention efforts. With 418,546 cases reported in 2023—a mere 10 percent decline from 464,764 cases in 2010—Indonesia’s progress toward malaria elimination has been disappointingly slow (Kementerian Kesehatan, 2024).

The geographic concentration of malaria cases is striking: 92 percent occur in Papua, which houses only 2 percent of Indonesia’s population. This concentration reflects not only epidemiological patterns but also infrastructure deficiencies and limited pharmaceutical access in remote regions. The country’s ambitious target to achieve malaria elimination by 2030 appears increasingly unrealistic given current trajectories.

The malaria situation exposes critical gaps in Indonesia’s pharmaceutical supply chain. Antimalarial drugs, particularly artemisinin-based combination therapies (ACT), remain predominantly imported. During the COVID-19 pandemic, disruptions in global supply chains caused severe stockouts of rapid diagnostic tests (RDT) and antimalarial medications in endemic regions, demonstrating the vulnerability of import-dependent pharmaceutical systems.

Despite the development of promising vaccines like R21/Matrix-M—which achieved 77 percent efficacy in clinical trials conducted in Burkina Faso—Indonesia has neither the capability to produce such vaccines domestically nor has it conducted local clinical trials for adaptation (Datoo et al., 2021). The country remains dependent on international pharmaceutical companies and organizations like GAVI and the Global Fund for vaccine and drug procurement.

Limited Domestic Production Capacity

Bio Farma’s roadmap initially targeted reducing import dependency from 90 percent to 70 percent by 2024. However, as of 2025, this target remains largely unmet. While the company claims to have successfully produced 10 types of pharmaceutical ingredients locally since 2017, this represents a fraction of the hundreds of active pharmaceutical ingredients (APIs) required by Indonesia’s healthcare system.

The revised target now aims for 2030, but structural challenges suggest even this extended timeline may be optimistic. Research by Nugroho and Pramono (2020) identified several critical barriers to domestic pharmaceutical production:

Infrastructure Deficiencies: Most Indonesian pharmaceutical manufacturers lack the advanced production facilities required for complex API synthesis. The technology gap between Indonesian facilities and international standards remains substantial.

Limited R&D Investment: Indonesia’s pharmaceutical R&D spending represents less than 0.3 percent of industry revenue, compared to 15-20 percent in developed pharmaceutical markets (Putri & Supardi, 2019). This underinvestment perpetuates technological dependency.

Regulatory and Quality Control Challenges: Domestic pharmaceutical products often struggle to meet international quality standards. Good Manufacturing Practice (GMP) compliance remains inconsistent across facilities, limiting export potential and domestic confidence in locally produced medicines.

Raw Material Supply Chain Issues: Even when production capacity exists, securing consistent, standardized raw materials from Indonesia’s biodiversity proves challenging. Traditional harvesting methods, seasonal variations, and lack of cultivation infrastructure create supply unpredictability.

High-Value Therapeutic Areas Dominated by Imports

Several therapeutic categories remain almost entirely import-dependent:

Oncology Drugs: Chemotherapy agents, targeted cancer therapies, and immunotherapies are nearly 100 percent imported. Indonesia lacks the biotechnology infrastructure to produce monoclonal antibodies or complex targeted therapies. The growing cancer incidence—projected to reach 600,000 new cases annually by 2030—ensures continued demand growth (WHO, 2020).

Antimicrobials: While Indonesia produces some generic antibiotics, advanced antimicrobials, antifungals, and antivirals remain imported. The emergence of antimicrobial resistance necessitates continuous access to newer-generation drugs, which domestic manufacturers cannot produce.

Vaccines: Despite Bio Farma’s vaccine production capabilities, the company primarily operates through technology transfer agreements and toll manufacturing arrangements. The COVID-19 pandemic exposed Indonesia’s inability to rapidly develop novel vaccine platforms domestically.

Biologics: Insulin, growth hormones, blood factors, and other biologic drugs are exclusively imported. Indonesia lacks the biosimilar production capacity that neighboring countries like India have developed.

Cardiovascular Drugs: Advanced cardiovascular medications, including novel anticoagulants, PCSK9 inhibitors, and newer antihypertensive agents, remain imported. With cardiovascular disease representing Indonesia’s leading cause of mortality, this therapeutic area represents a substantial and growing market.

The Healthcare Financing Pressure

BPJS Kesehatan, Indonesia’s national health insurance program covering more than 220 million people, faces chronic financial deficits partly attributable to pharmaceutical costs. The program’s pharmaceutical expenditure reached approximately IDR 14.5 trillion (USD 970 million) in 2023, with imported drugs accounting for the majority of spending (BPJS Kesehatan, 2024).

Prof. Ghufron’s emphasis on “cost-effective” medications reflects the financial constraints facing Indonesia’s healthcare system. However, cost-effectiveness often means prioritizing older, generic drugs over newer, more effective therapies. This creates a multi-tiered pharmaceutical market where those who can afford out-of-pocket expenses access imported premium medications, while BPJS beneficiaries receive older alternatives.

The formulary restrictions imposed by BPJS create ongoing tensions. Many imported oncology drugs, for instance, are not covered, forcing patients to either forgo treatment or pay entirely out-of-pocket—a situation that drives private pharmaceutical market growth despite universal health coverage.

Geographic and Demographic Market Characteristics

Indonesia’s pharmaceutical market exhibits significant geographic disparities. Java, home to approximately 60 percent of the population, accounts for roughly 75 percent of pharmaceutical consumption. Modern retail pharmacy chains concentrate in urban centers, while remote regions—particularly in eastern Indonesia—rely on limited public health facility dispensaries.

This distribution pattern has implications for pharmaceutical importers: urban centers in Java, Bali, and Sumatra offer the most accessible market entry points, with established distribution networks and higher purchasing power. However, government procurement for public facilities in remote regions represents substantial volume opportunities, albeit with different pricing expectations and procurement processes.

The demographic profile further shapes pharmaceutical demand. Indonesia’s aging population—those over 60 are projected to reach 15 percent of the population by 2035—will drive increased demand for chronic disease medications, particularly cardiovascular drugs, diabetes treatments, and osteoporosis therapies (BPS, 2023). This demographic transition occurs while the country still contends with infectious disease burdens, creating a complex “double burden” that sustains demand across diverse therapeutic categories.

Regulatory Environment and Import Procedures

The Indonesian Food and Drug Authority (BPOM) regulates pharmaceutical imports through a registration and licensing system. While theoretically straightforward, the process can be lengthy. New drug registrations typically require 18-24 months, though fast-track pathways exist for certain priority medications (Wirasto et al., 2021).

BPOM has been strengthening post-market surveillance and quality control, periodically conducting market sweeps that reveal counterfeit and substandard products. This creates opportunities for legitimate international pharmaceutical companies to differentiate based on quality assurance, particularly as middle-class Indonesians become more conscious of medication authenticity and efficacy.

Government procurement processes, particularly for BPJS-covered medications, follow competitive tender systems that prioritize cost. However, the government increasingly includes quality parameters and prefers suppliers who can demonstrate consistent supply reliability—a response to previous stockout incidents during the pandemic.

Digital Health Integration and Pharmaceutical Access

BPJS Kesehatan’s Mobile JKN application, which features health risk assessments and the “BUGAR” vital signs monitoring system, represents Indonesia’s push toward digital health integration. This digital infrastructure creates data on disease prevalence, treatment patterns, and pharmaceutical utilization that can inform market entry strategies.

The application enables early disease detection, potentially increasing diagnosed cases that require pharmaceutical intervention. For instance, the IVA (Visual Inspection with Acetic Acid) screening recommendations for cervical cancer could increase detection rates, subsequently driving demand for oncology drugs as more cases are identified and treated.

However, digital health infrastructure remains unevenly distributed. Rural and remote areas with limited internet connectivity cannot fully utilize these tools, perpetuating health inequities that affect pharmaceutical access patterns.

The Persistent Reality of Import Dependency

Despite ambitious targets and policy initiatives, Indonesia’s pharmaceutical self-sufficiency remains elusive. Multiple structural factors ensure continued import dependence:

Technology Gaps: The pharmaceutical industry requires sophisticated chemistry, biotechnology, and manufacturing capabilities that Indonesia has not yet developed at scale. The knowledge transfer necessary to close these gaps is a multi-decade process requiring sustained investment and institutional development.

Economic Competitiveness: Even when technical capability exists, Indonesia struggles to compete with established pharmaceutical manufacturing hubs in India and China, where economies of scale, established supply chains, and government support create cost advantages. A 2022 study by Andayani et al. found that domestically produced APIs cost 25-40 percent more than imported alternatives, making local production economically unviable for many compounds.

Quality Assurance Challenges: Maintaining consistent pharmaceutical quality requires rigorous process control, validated analytical methods, and comprehensive documentation systems. Many Indonesian manufacturers lack the quality culture and systems that international standards demand, limiting their ability to produce competitive products.

Limited Clinical Research Infrastructure: Developing new drugs or adapting existing therapies to local disease profiles requires robust clinical research capabilities. Indonesia’s clinical trial infrastructure remains underdeveloped, with limited Good Clinical Practice (GCP)-certified sites and a shortage of trained clinical researchers (Postma et al., 2018).

Fragmented Industry Structure: Indonesia’s pharmaceutical sector consists of numerous small-to-medium manufacturers with limited individual capacity for innovation or major capital investment. Industry consolidation or strategic partnerships necessary to build competitive scale have progressed slowly.

Disease Burden Driving Pharmaceutical Demand

Indonesia’s epidemiological profile creates sustained demand across multiple therapeutic categories:

Non-Communicable Diseases (NCDs): Cardiovascular diseases, diabetes, chronic respiratory diseases, and cancer collectively account for 73 percent of deaths in Indonesia (WHO, 2018). Managing these conditions requires continuous pharmaceutical therapy, creating predictable long-term demand.

Infectious Diseases: Beyond malaria, Indonesia contends with tuberculosis (approximately 845,000 new cases annually), dengue fever (seasonal outbreaks affecting hundreds of thousands), and emerging infectious disease threats. Each creates pharmaceutical demand for diagnostics, therapeutics, and prevention.

Neglected Tropical Diseases: Diseases like lymphatic filariasis, soil-transmitted helminthiasis, and others remain endemic in various regions, requiring ongoing public health pharmaceutical interventions.

Mental Health: Increasingly recognized as a public health priority, mental health conditions create growing demand for psychiatric medications, an area where domestic production is particularly limited.

The Outlook for 2025 and Beyond

As Indonesia enters 2025, the gap between pharmaceutical self-sufficiency aspirations and reality remains wide. The revised target to reduce import dependency to 70 percent by 2030 appears increasingly ambitious. Current trajectories suggest import dependency will likely remain above 80 percent through the remainder of the decade.

Several factors reinforce this assessment:

Slow R&D Progress: Despite government initiatives and academic research, the translation of biodiversity research into commercial pharmaceutical production has been minimal. The pipeline of domestically developed drugs remains nearly empty.

Investment Constraints: Global pharmaceutical companies show limited interest in establishing major manufacturing operations in Indonesia, preferring to supply the market through imports or minimal local finishing operations. Domestic companies lack the capital for transformative investments in advanced manufacturing.

Policy Implementation Gaps: While pharmaceutical self-sufficiency features in national policy documents, implementation suffers from bureaucratic fragmentation, inconsistent funding, and competing priorities. The gap between policy ambition and operational execution persists.

Global Supply Chain Integration: Indonesia’s pharmaceutical sector is increasingly integrated into global supply chains, with local manufacturers often serving as packaging or finishing operations for imported bulk drugs. This integration, while providing economic benefits, reinforces rather than reduces import dependency.

Conclusion: A Market Sustained by Structural Import Dependence

Indonesia’s pharmaceutical sector represents a substantial and growing market sustained by structural dependence on imported drugs and pharmaceutical ingredients. With 90 percent of raw materials and a significant proportion of finished pharmaceuticals sourced from abroad, this dependency is not a temporary phase but a persistent characteristic shaped by technological, economic, and institutional realities.

The country’s substantial disease burden—from high-incidence cancers to persistent endemic malaria, growing NCDs, and ongoing infectious disease challenges—creates diverse pharmaceutical demand across virtually all therapeutic categories. The population of 275 million, combined with expanding health insurance coverage and rising middle-class purchasing power, ensures market growth despite economic headwinds.

For international pharmaceutical companies and exporters, Indonesia offers a large, growing market with limited near-term prospects for domestic substitution in most therapeutic areas. The government’s ambitious self-sufficiency targets, while politically significant, face implementation barriers that ensure continued import dependence for the foreseeable future.

The gaps are particularly pronounced in high-value, technologically complex therapeutics: oncology drugs, biologics, advanced cardiovascular medications, and novel antimicrobials. These categories, which represent the future of pharmaceutical innovation globally, are areas where Indonesia’s domestic industry shows virtually no capacity for near-term development.

Bio Farma’s claim of producing 10 API types since 2017 must be contextualized against the hundreds of essential medicines Indonesia requires. Even achieving the revised 2030 target of 70 percent import dependency would mean the country still imports USD 5-6 billion worth of pharmaceuticals and ingredients annually based on projected market growth.

The COVID-19 pandemic starkly illustrated Indonesia’s pharmaceutical vulnerability. Despite being home to Southeast Asia’s largest vaccine manufacturer, the country could not develop its own vaccine platform and relied entirely on technology transfers and imports. This experience has been repeated across therapeutic areas and will likely continue.

Indonesia’s pharmaceutical market remains fundamentally import-dependent, with structural factors ensuring this dependency persists well beyond current policy horizons. The combination of substantial disease burden, growing population and healthcare coverage, limited domestic production capacity, and technological gaps creates sustained market opportunities for pharmaceutical exporters across diverse therapeutic categories.

References

Andayani, T. M., Irijanto, F., & Pramantara, I. D. P. (2022). Cost analysis of domestic versus imported active pharmaceutical ingredients in Indonesian pharmaceutical industry. Indonesian Journal of Pharmacy, 33(2), 178-186. 

Datoo, M. S., Natama, M. H., Somé, A., Traoré, O., Rouamba, T., Bellamy, D., … & Tinto, H. (2021). Efficacy of a low-dose candidate malaria vaccine, R21 in adjuvant Matrix-M, with seasonal administration to children in Burkina Faso: A randomised controlled trial. The Lancet, 397(10287), 1809-1818. https://doi.org/10.1016/S0140-6736(21)00943-0

Kompas.id. (2025, April 26). Mengapa malaria masih saja jadi masalah kesehatan di Indonesia? Retrivied from https://www.kompas.id/baca/humaniora/2025/04/26/mengapa-malaria-masih-saja-jadi-masalah-kesehatan-di-indonesia