CHAPTER I: INTRODUCTION
In 2030, estimated total population in Indonesia will be 270 million. From the total population there will be estimate 25% suffer from several degenerative diseases and impacted to the productivity and economic sector of Indonesia. The expanding middle class of Indonesia also boosts demand in Indonesia’s pharmaceutical industry as the lack awareness of healthy lifestyles lead to catastrophic diseases such as cancer, cardiovascular and metabolic disease.
Table 1.1 Indonesia Population projection 2010-2035 (in thousand)
Earlier, the World Health Organization (WHO) predicted that diseases that are caused by unhealthy lifestyles will account for 87 percent of all deaths in Indonesia by the year 2030. To resolve the issues, the government formed Badan Penyelenggara Jaminan Sosial Nasional (known as BPJS) start in 2001 with the National Social Security Working Group and Megawati as the elected President approved the regulation for Sistem Jaminan Sosial Nasional (SJSN) since 2000. The President legalized the regulation of the SJSN and for the implementation include the definition of the participants and the payment of the program based on UU No. 40 in 2004 and for BPJS regulation based on n UU No. 24 Tahun 2011.
Jaminan Kesehatan Nasional started in 1 January 2014, with multi benefits for both medical and non-medical purpose. The JKN has a comprehensive benefit and provided services from preventive, promotive, curative and rehabilitative purpose. The services of JKN not influenced by the cost contributions of the participants. The participants not limited to Indonesian citizen only, it also including foreigners who work and stay more than six months and must pay a certain percentage or nominal fee except for the poor. The government will cover some of the population which are poor. The membership is mandatory and the registration should be done to the BPJS or PT. Askes.
BPJS as the legal entity formed to organize the program Jaminan
Kesehatan Nasional. The vision and mission of BPJS to establish sustain and good health insurance system in 2019 for all Indonesian population based on mutual cooperation.
Table 1.2. Population coverage of BPJS per December 2016
To provide the access to healthcare in BPJS era, the government, ministry health and BPJS engage the health facilities nationwide. The infrastructure and resource are the main contributors for the implementation of the program. BPJS implement referral system to ensure the coverage of the population, there are 14 referral hospital under the ministry of health and more than 1,000 hospitals diagnose and treat BPJS patients. BPJS implement effective and efficient systems with web based registration and also partnership with primary healthcare to extend the capacity and simplify the infrastructure management nationwide.
Primary care facilities type
Total facilities nationwide
RS D Pratama
Referral facilities type
Total facilities nationwide
Army / police hospital
Tables 1.3. BPJS Healthcare facilities distribution nationwide
After JKN become massive and mandatory program with almost 70% coverage of the population, one of the concerns from the government related to significantly increase number in catastrophic diseases such as diabetes mellitus, stroke hemorrhage, primary hypertension, hypertensive heart diseases, kidney failure, hemophilia, thalassemia and cancer cases. (BPJS UGM, Oral Presentation, 03022016).
The ministry of health shared the total JKN budget spending for catastrophic disease almost 29.67% or in value estimated IDR 16.9 Trillion. (Apinino, 2017).
From the total budget of JKN, the three top spender are heart diseases 53%, cancer 17.3% and stroke 11.2%. (Branch Office application, 2014-2017).
For this research, the focus will be in cancer disease whereas the significant increase of the cases almost double within a year. In 2017, estimated 9 million worldwide patients with cancer died and will reach 13 million in 2030. Refer to Riskesdas 2013 data, Indonesian prevalence is 1.4 per 100 population or 347.000 people with cancer. This disease need comprehensive
diagnosis and treatment with innovative and targeted drugs to prolong the survival and improve the quality of life of the patients.
Figures 1.1. WHO 2014 Cancer mortality rate in Indonesia (population 247.000)
Figures 1.2. WHO 2014 Cancer Incidences in Indonesia
In 2014, there was significant growth in pharmaceutical industry after the socialization of JKN. Indonesia’s total pharmaceutical sales estimated 24% of Healthcare expenditure in 20143. Based on 2015, 25 USD per capita pharmaceutical sales in Indonesia.
1.2. Pharmaceutical industry profile
Healthcare business has growth significantly in the last five years. For multinational pharma company, with its unique role in developing new medicines to treat and improve the lives of patients worldwide. Recognized as research based manufactures, thus committed in researching, developing, manufacturing and marketing safe, also to provide high quality medicines.
Figure 1.3. Pharmaceutical R&D spending
The role and contribution of this research based manufacturers also as catalyst for and advancement of an effective and integrated healthcare system in each respective country. Engage the government and multi-stakeholders to enhance the system and collaborate to support the resources in a continuous effort to bring the latest innovations that are safe and fulfil international standards of quality that have proven through extensive certified clinical trials also state of the art manufacturing facilities.
In providing full access to innovative medicines, the manufactures also respect and comply with the prevailing local laws and regulations in line with the highest ethical marketing codes.
1.2.1. Scope of Business field
To invest in Research and development of new medicines, it would analyze first the chemical and biological compound thus potentially for treating new or existing conditions. In 2015, there were 56 new medicines were launched and recently more than 7000 compounds develop globally
Figure 1.4. Medicines in development for multinational pharma company global (Selected categories)
In worldwide, there were significantly decreased death rates for HIV/AIDS, cancer, polios and measles. For example, HIV/AIDS death rates declined from 10.2 deaths in 1990 to 2.0 deaths in 2014 (per 100.000 people) in United States. Today, metabolic disease could be treated with oral therapy. The existing cancer treatments could cut half annual death rates nowadays.
Based on the Ministry of Health data in 2013, there were 206 pharmaceutical companies operating in Indonesia. The national average annual growth in prescription drugs sales is estimated at 12%-13%. Currently, Indonesia’s pharmaceutical market value is estimated at USD 6.24 billion, reflecting pharmaceutical spend of USD 26 per capita per annum, with national companies controlling 75% of the market share. Ethical drugs contributed 55%, or USD 3.2 billion, to the total market, while the over-the-counter drugs made up the remaining 41%, or USD 2.2 billion.
In 2015, the country’s pharmaceutical sales-to-GDP ratio is forecasted to shrink to 0.57% despite an expected increase in pharmaceutical sales to USD 6.89 billion from USD 6.18 billion in 2014. A pharmaceutical sale per capita is estimated to go up to USD 26.9 billion in 2015 from USD 24.5 billion in 2014. The pharmaceutical sales-to-health spending ratio is predicted to drop from USD 21.4 billion in 2014 to USD 20.5 billion next year.
1.2.2. The Multinational pharma company in Indonesia
In Indonesia, the multinational pharma company established IPMF (International Pharmaceutical Manufacturers Group) in 2002 as an organization and active member of IFPMA (International Federation of Pharmaceutical Manufacturers & Associations) and KADIN (The Indonesian Chambers of Commerce). The organization consist of twenty-five multinational pharma companies operating in Indonesia, with commitment to the research, development, manufacture and compliance for all the activities.
IPMG represents the views of its members in the dialogue with the government, and the respective stakeholders regarding health care issues especially on the establishment of JKN start in 2014. The IPMG has important roles collaborates with the government, the parliament, academics, medical associations, institutions, media health forum and other partners in an ongoing effort and continuous collaboration to improve the national health care system.
In an effort to provide access to innovative medicines for the Indonesian population, IPMG respects and abides by the law and regulation in this country. The organizations also have code of conduct to ensure the marketing practices comply with the regulation. The IPMG members also support local communities, local health programs, organize public education campaigns on diseases and promote health promotion. In Indonesia, this research based manufacturers have introduced more than 900 products to treat several diseases such as cancers, infectious diseases, cardiovascular diseases, etc.
Figure 1.5. IPMG YTD Q3 Cancer drugs sales 2014-2017
In 2015, there were significant growth 18% from multinational pharma company associated under IPMG (International Pharmaceutical Manufacturer Group). The double digit growth supported by the government program to reimburse chronic and non-chronic diseases with JKN. The number of patients doubled and significantly increased after the ministry of health open the access focus on type A hospital in big cities. After two years of the implementation, the multinational pharma company start declining due to hurdles and challenges regarding infrastructures in hospital, diagnosis of the disease and limited resources while the government propose for lower scheme to the multinational pharma company to support the sustainability of the universal health coverage program in Indonesia.
In 2017, the members of IPMG had launched two new targeted molecules for cancer with growth contribution almost 10% compare to its total company. This growth contribution shown that the innovative drugs become the main driver for the profitability of the multinational pharma company regardless the JKN era.
The IPMG sales value in 2017 estimated IDR 18.9 Trillion and the market growth is 13.7%. For the total pharmaceutical industry growth in Indonesia, would be estimated reach $10.11 billion by 2021. (GlobalData, 2017). There are opportunities for the multinational pharma company to expand the market share and sustain the profitability in Indonesia market.
1.3. Business Issue Faced
The innovative drug especially for cancer treatment in JKN era has been declining due to budget limitation and several issues specifically in number of patients to be covered and the program implementation nationwide such as numbers of doctors, referral systems and drug distribution (shown in figure 1.5). In the future, there are opportunities and threats rely on some uncertain factors for the multinational pharma company. To ensure the growth and sustain the business, the company should to have contingency and risk management by developing a scenario planning which is able to answer the following key focal issue:
What is the future of the innovative cancer drugs manufacturers in JKN era in the coming 5 years? How could the manufacturers able to growth and sustain the business?
1.4. Project Objectives
Based on the background and key focal issue above, this final project developed to answer the following questions related to BPJS era in the coming 5 years:
1. What are the Key Driving Forces that influence innovative cancer drugs manufacturers in the market?
2. What are the Critical Uncertainties that affect innovative cancer drugs manufacturers market?
3. How does the Scenario Framework of the innovative cancer drugs manufacturers?
4. What are the Implications and Options available for each scenario?
1.5. Project Limitations
The scenario planning will analyze external and internal data and in narrative forms as well as qualitative base on the key driving forces and critical uncertainties of innovative manufacturers specifically oncology market in BPJS era. The development of scenario is to answer all the questions in these final project objectives.
As limitation of this final project, there are some points thus need to be convey as mentioned below”
1. The time range for the scenario planning development is limited to 5 years forward i.e. until 2022. The selection of 5 years’ time frame is based on the government program (President election) and product life cycle
2. Interview session involved external and internal stakeholders. External stakeholders involved Ministry of Health, BPJS, hospitals management. Internal stakeholders involve cross functions i.e. Market Access, Marketing, Sales, and Medical team.
1.6. Research Methodology
1.6.1. Project design
Design of scenario planning in this final project is based on business issues exploration that includes internal and external analysis, strategy framework. In this approach, therios those will be used as mentioned below:
1. External analysis:
a. General environment analysis (PESTEL)
b. Industry analysis (Porter’s 5 Forces)
2. Internal analysis:
a. Resources, capabilities and competencies analysis
b. Resource based analysis
c. Value chain analysis
3. Strategy framework:
a. SWOT analysis
1.6.2. Project methodology
This final project methodology is based on desk and field research. Desk research using third party data, publication and information from the Internet and media. For field research is based on interview sessions with external and internal stakeholders.