Aiming to bring its population of nearly 240m under coverage by 2019, Indonesia continues to roll out its universal health care programme, or Jaminan Kesehatan Nasional (JKN). State-driven developments, as well as activity in the private sector, are triggering impressive growth across the health industry. According to estimates from consultancy Frost and Sullivan, the value of Indonesia’s health care market value will reach $21bn in 2019, up from $7bn in 2014. However, government expenditure on health care remains relatively low at just 3.6% of GDP, one of the lowest rates in South-east Asia.
The public sector covers approximately 40% of health care outlays, while the private sector spends roughly 60%. In the years to come, greater investment will be vital as demand for services, facilities and equipment increases under JKN.
JKN: By November 2014 some 130m Indonesians were brought under JKN coverage, and as of June 2017 around 70% were enrolled in the plan, which was launched in January 2014. The biggest challenges to achieving universal coverage are geography and financing; the country’s population is spread throughout 9000 inhabited islands and many communities still lack the basic infrastructure necessary to support health care facilities.
The rolling out of the JKN has already prompted soaring demand for more hospitals and clinics as well as the staff, technology, pharmaceuticals and supplies for them. There are also opportunities for private investors to finance these needs and to help sustain the universal scheme going forward.
COSTS & CHALLENGES: According to the World Bank, JKN will cost $13bn to $16bn per year once implementation is achieved. The scheme aims to cover the whole population by 2019; however, key sector players have begun to doubt whether this goal is attainable. Studies from the Gadjah Mada University Centre for Health and the Paramadina Graduate School of Diplomacy have deemed it impossible to achieve this goal by 2019, while public health analyst at the University of Indonesia, Yaslis Ilyas, has told OBG that the plan is too ambitious.
Bringing the whole population of a vast archipelago under a universal coverage scheme is no easy task. Though nearly 70% of the population is currently covered, approximately 40% of this total is subsidised, with around 90% of subscribers being from low-income groups. JKN ensures they have the right to health care, regardless of their ability to pay. However, despite their eligibility, less than half of the population is actually able to access hospitals or primary health care facilities because either the infrastructure is not available in their communities or neighbouring health centres are too far away to reach. Major urban agglomerations like Jakarta and Java possess a wealth of hospitals, clinics and pharmacies, but distribution is inadequate in both rural and remote areas. The challenge for the government and the private sector is to expand the reach of these services to patients.
Law No. 36 of 2009 requires the government to spend 5% of its budget on health care, but even if this target were met, it is not enough to meet the costs of JKN. Private investment will be needed to help fill gaps in financing across the spectrum of health care provision. Key areas for public-private partnerships (PPPs) are hospital construction, medical device supply, pharmaceuticals production and human resource development.
There are still low ratios of hospital beds and doctors per patient, and these are other areas where investors could help meet needs. Demand for high-tech medical equipment and specialty clinics is also expected to rise, along with the increasing prevalence of non-communicable diseases (NCDs), which is expected to further compound the financial burden on JKN. While the government is not yet considering moving the 2019 goal post, sceptics are beginning to anticipate a delay. A major increase in financing and more even distribution of services will be necessary to ensure that full implementation is achieved by the end of the decade.
HUMAN RESOURCES: One of the biggest challenges currently facing Indonesia’s health sector is the shortage of doctors, nurses, technicians and other medical professionals available to fill its growing number of hospitals and clinics. With demand for care increasing under the expansion of universal coverage, the human resource crisis is becoming more and more burdensome.
Indonesia has roughly 10,000 puskesmas ( community clinics) available to patients throughout the country. These clinics will likely offer the bulk of care to lower-income patients enrolled in JKN, and more have been constructed in recent years in order to meet rising demand. Approximately 25% of these are understaffed or empty, however, leaving many of those eligible for health care unable to access it.
Traditionally, the country has suffered from brain drain, with many young Indonesian health care professionals going abroad to seek higher salaries and better working conditions. While incentives and improvements to hospital infrastructure and conditions have kept specialists in major urban centres, distribution remains insufficient in smaller cities. Rural areas are the most vulnerable; many lack access to specialists and rely on midwives and informal care givers to meet medical needs.
FILLING GAPS: To address this concern, the government passed a regulation earlier this year that reformed a previously voluntary service programme. Since January 2017 doctors who receive a specialist certification are required to work for at least a year in an underserved area of the country. As of 2014, 48% of doctors were based in Java and Bali alone. This mandatory service programme aims to increase the availability of specialists in outlying regions where people have JKN coverage, but limited or no access to medical professionals. While the scheme is likely to fill significant human resource gaps, there are some concerns about its sustainability. Security in some of these remote areas will need to be addressed and incentives – including housing and salaries – will be an important factor as the programme progresses.
Meanwhile, the focus will also be on improving Indonesia’s colleges and universities, and encouraging students to pursue degrees in medicine and other health services. Greater availability of research opportunities at public and private institutions would help to incubate the next generation of medical professionals. Continued investment in health care facilities and their supporting infrastructure will help to ensure that these professionals are retained in Indonesia and better distributed throughout the country once qualified.
PHARMACEUTICALS: The year 2016 saw major developments in the pharmaceutical sector, and in February it was removed from the negative investment list, with foreign ownership in factories producing raw materials for medicines raised from a maximum of 85% to 100% later in the year.
Investments in local production have continued apace, including Bayer’s $8.1m West Java factory expansion. Hopes are high that domestic production will rise over the long term to the point where the country is self-sufficient in terms of pharmaceuticals. Indonesia’s biggest domestic pharmaceutical firm is Kalbe Farma with a 12% market share. Nearly 70% of the market is held by multinationals, and the total value of the industry reached $5.1bn in 2015.
Demand for medicines, especially generics, has increased under JKN, but competition is tough. Roughly 200 local companies and 25 foreign firms are vying for contracts that would make their products available to patients under the scheme. However, many are also being discouraged by the major discounts required under JKN.
Dono Widiatmoko, patient access head for Novartis Indonesia, a pharmaceuticals company, told OBG, “The government, conscious of the budgetary impact of accepting new pharmaceuticals into JKN, may require a price reduction of 40% or more to bring a product into the programme. Some pharmaceuticals companies will not be able to entertain such a request for the bulk of the population.”
Prices have also been pushed to extremes: name brands in particular can be difficult to afford, while some generics are so cheap that patients question their quality and effectiveness. Nonetheless, demand continues to drive growth in all segments. The market for name-brand drugs is benefitting from middle class expansion, with more people seeking private health care and placing greater trust in brand medicines. Generics are expected to remain in high demand through 2019 and beyond, as they will be prioritised for their affordability under JKN.
The government is making moves to open access as widely as possible, and most prescriptions are now covered under JKN. However, because the ratio of doctors to patients is quite low in public institutions, there are often long waits for medications and access is insufficient in many rural communities. These issues will gradually be addressed as outlying regions see greater infrastructure development and access to health care facilities. Going forward, the industry is expected to prioritise patient awareness of products, especially the benefits of generics.
Greater investment in research and development would also help the sector grow. Most ingredients for medications and supplements are still imported, but Indonesia has a wealth of natural resources that could be developed for pharmaceutical use in the future. While it is unlikely that the country will become a regional production centre in the near term, this goal could be attainable further in the future should supportive policies be put in place and investment remains on an upward trajectory.
PRIVATE HOSPITAL EXPANSION: Private hospitals and clinics continue to attract higher-income patients and are poised to benefit from the expanding middle class. As public facilities are burdened with long queues and insufficient human resources, more patients are choosing to seek care from private providers. According to Frost & Sullivan estimates, private hospital revenue will see a compound annual growth rate of 8.1% between 2013 and 2019. By the latter date revenue is expected to reach $11.7bn. Indonesia’s current private hospital providers include Mayapada, OMNI, Siloam, Mitra Keluarga and Ciputra. A number of foreign firms are also looking to enter the market, including India’s Apollo Hospital group and two Malaysian companies, IHH Health care and Columbia Asia Health Services Group.
On the domestic side, Siloam has announced significant expansion plans, aiming to double its number of hospitals by 2019. The company’s operating revenue rose by 25% in 2016, and the firm is now focusing on hospital construction in more remote areas where distribution has previously been low.
While expansion in the private hospital segment will expand penetration in outlying areas, it is also expected to help retain patients who traditionally travel abroad for health care in more advanced markets. In addition, private hospital growth will likely allow the country to tap the region’s booming medical tourism segment, although major investment will be required if Indonesia is to compete with more developed neighbouring markets like Thailand and Malaysia in the near future.
INNOVATIVE SOLUTIONS: While Indonesia works to develop and renew the infrastructure needed to support a more equalised distribution of services, mobile apps and other innovative technologies are helping to fill the gap in remote areas. Telemedicine (or telehealth) has been one of the greatest health care growth drivers in Asia. As Indonesia’s geography is one of the biggest barriers to health care access, providers are expected to rely increasingly on telemedicine to connect patients with preventative care and consultations. Foreign and domestic firms alike are exploring opportunities to expand into this segment. Andi Wijaya, chairman of Prodia, told OBG, “The government will expand some of the more than 9000 puskesmas into small hospitals, which will include clinical labs. Hence, there is a big potential for laboratories to invest, especially in everything related to telemedicine.”
In June 2017 Alodokter, an online health platform, revealed plans to develop an app that would allow users to compare hospitals. The start-up has already secured a strong foothold in the health IT market and gained the attention of international investors. Its website now receives approximately 12m users each month and its app, launched in March of 2016, serves 150,000 subscribers monthly.
Another app, the Hypertension Online Treatment (HOT) service, was introduced to the market in early 2017. Based in a puskesmas in East Jakarta, HOT offers android users online consultations and appointment reminders. Technological solutions like these can help cut down on waiting times in health care centres and connect patients in underserved communities to the care they need.
Dutch technology company Philips made waves in 2016 after introducing an app aiming to assist Indonesia with one of its most pressing public health challenges. The mobile obstetrics monitoring (MOM) technology offers health care practitioners an innovative way to address the maternal mortality rate, one of South-east Asia’s highest. The app connects midwives in rural communities with gynaecologists in clinics and hospitals, allowing them to monitor patient’s vital signs and identify risk factors throughout a pregnancy. While helping to save lives, apps like MOM can also serve as a training tool for health care providers who would otherwise have limited access to research or skills development.
PUBLIC HEALTH: In March 2017 the Ministry of Health (MoH) opened the Public Health Emergency Operating Centre (PHEOC) to improve its response to communicable disease (CD) outbreaks. PHEOC is a 24-hour response unit that will monitor, prevent and manage disease emergence across the country. The ministry hopes that the unit will boost its response capacity and enable it to better control the spread of transmissible diseases that are common throughout the archipelago.
Indonesia has long battled tropical diseases, as well as HIV/AIDS and other highly transmissible conditions. Various international organisations, including the United States Agency for International Development, UNICEF and the World Health Organisation (WHO) continue to partner with the MoH and other institutions to improve awareness of prevention techniques and to increase access to lifesaving vaccinations and treatments.
VACCINATIONS: Authorities are also working to ease concerns about vaccinations following a 2016 scandal involving the illegal distribution of fake vaccines affecting 14 facilities, mostly in West Java. Those responsible have since been apprehended and the placebo vaccines are no longer in circulation. However, lingering suspicions remain among portions of the rural populace.
While much progress has been made for public health, the country remains vulnerable, given the nature of its geography and climate, and is occasionally faced with new threats to mitigate. For example, outbreaks of the Zika virus were reported in neighbouring Singapore, Malaysia and Thailand in 2016, though Indonesia appeared to be spared.
Nonetheless, the government has indicated testing may not be sufficient enough to completely rule out Zika prevalence, and foreign governments, including the UK and Australia, have maintained travel warnings on their websites noting that Indonesia is an area of risk for the disease. Meanwhile, the country continues to battle an older, more entrenched foe: dengue, a mosquito-transmitted virus prominent in the tropics. Infections typically spike during the rainy season, and in 2016 several regions across the country declared a state of emergency or “extraordinary occurrences” of the disease.
Later in the same year Sanofi Pasteur, the France-based pharmaceutical firm, announced Indonesia’s approval of its dengue vaccine. The vaccine is the world’s first and had already been approved by the WHO and six other countries before becoming available in Indonesia. The distribution of the vaccine began in September 2016 and a five-year, multi-country efficacy research effort is expected to publish its conclusions in late 2017.
RISE OF NCD: NCDs have swiftly overtaken CDs as Indonesia’s top public health concern. Increasing cases of diabetes, cancer, heart disease and other lifestyle-related conditions are triggering a demand for specialised care and diagnostics in both the public and private sectors. NCDs are expected to place great financial strain on JKN, leading the MoH, NGOs and aid organisations to prioritise preventative education and care. Like many other countries, Indonesia is a place where middle-class growth has coincided with an increase in obesity. Urbanisation, sedentary lifestyles and greater access to processed foods are commonly behind spikes in obesity rates and Indonesia is no stranger to this trend.
Specialist clinics are sparse in Indonesia, and there is an urgent need for more facilities, specialist practitioners and equipment – especially radiologists and radiology equipment – to treat the higher prevalence of NCDs seen in recent years. The low availability of these resources is another factor driving patients to seek medical care abroad. As the country tackles these epidemics, demand for diabetes and cancer medications is also expected to remain high.
Tobacco is another cause for concern in the realm of public health. Indonesia has one of the world’s highest smoking rates, and usage has led to increasing cancer diagnoses, especially among men. Approximately two-thirds of the male population smokes tobacco, and cigarettes are easily affordable for the majority of people, at less than $2 per pack.
With Indonesia also being a major producer of tobacco, authorities have been reluctant to create anti-smoking legislation out of concern that it would harm production and cut jobs. To compensate, various organisations have pursued educational initiatives aimed at smoking prevention, which they hope will contribute to a healthier population and ease the financial burden on JKN.
Widiatmoko of Novartis believes that disease awareness is an area that holds a great deal of potential for PPPs. “The MoH is limited in budget and capacity, especially given the size of Indonesia’s population. The public could benefit from private sector contribution to outreach, especially that which covers NCDs,” he told OBG.
OUTLOOK: Overall growth in the health care sector is being driven by supportive legislation, a growing middle class and relatively low penetration. With only two years to go until the 2019 JKN implementation deadline is reached, authorities are working quickly to address shortfalls and build the framework for the universal health care system. Encouraging higher-income groups to enrol in JKN and sourcing greater contribution from the private sector will help to bridge gaps in financing and ensure a sustainable programme. Meanwhile, on the private side, hospitals and clinics will continue to benefit from sustained demand for services. Investors in the medical equipment and devices segment can also expect to see continued growth on the back of further infrastructure expansion. One of the fastest-growing health care markets in Asia, Indonesia is poised to benefit from increasing investor interest and robust expansion in the years to come.
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