Indonesia clears decks for foreign API manufacturers

  Indonesia President Joko Widodo  

The administration of Indonesian President Joko Widodo has cleared the decks for foreign firms to own 100% of active pharmaceutical ingredient (API) operations, eliminating an 85% threshold that also required a local partner.

Indonesia's three largest pharmaceutical companies are the biggest importers of raw materials and the change is expected to help them meet soaring demand as the country widens access to medical insurance.

Vidjongtius, a director at Jakarta-based drug firm Kalbe Farma, Indonesia's top drug company, told Reuters in an interview that if raw materials were locally manufactured, transactions would be in Indonesian rupiah. The change in foreign investment restrictions could help reduce the reliance on importing raw materials used to make drugs, as well as ease demand for dollars that are more expensive because of a weaker rupiah in the past year.

"In Indonesia currently there's a lack of a basic chemical industry that supports the development of raw materials," Indofarma's Corporate Secretary Yasser Arafat said in a separate interview with Reuters. "We got complacent because it's easier to import. But better late than never."

Indonesia launched a phased universal healthcare insurance program in 2014 that has increasingly shaped demand for drugs that proved a challenge to meet under local partner manufacturing requirements. Indonesia imports about 90% of its API needs, mostly in dollars.

The Indonesian Pharmaceutical Association's group secretary, Kendrariadi Suhanda, said in April last year that domestic industry needs investments of more than $1 billion to cut dependence on imports of APIs and related raw materials.

- here's the report from Reuters