Executive Summary
Market Entry
Current Market Trends
Best Prospects
Market Size
Main Competitors
Current Demand
Registration Process
Reimbursement
Barriers
Procurement & Tenders
FAQs
U.S. Commercial Service Contact Information
Tab Options
Executive Summary
Market Entry
Current Market Trends
Best Prospects
Market Size
Main Competitors
Current Demand
Registration Process
Reimbursement
Barriers
Procurement & Tenders
FAQs
U.S. Commercial Service Contact Information
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Executive Summary
In 2022, the total population of Indonesia is estimated to be approximately 275 million inhabitants, which places Indonesia as one of the top five most populous countries in the world.
As the fourth most populous country globally, Indonesia offers great potential for U.S. exporters of medical devices and equipment. Although the Indonesian government has implemented local content requirements and import tariffs, Indonesia continues to rely on imported, innovative medical devices. Total imports of medical devices and equipment grew from $1,550 million in 2019 to $2,183 million in 2020 and are expected to reach $2,292 million in 2021. U.S.-origin equipment accounts for approximately 10% of imports in the sector. (Source: U.S. Department of Commerce Global Trade Atlas “GTA”).
In 2021, the Government of Indonesia set IDR255.3 trillion ($17.22 billion) as the healthcare budget allocation, representing 9.4% of the state budget. Healthcare spending in Indonesia was IDR 490.3 trillion ($33.4 billion) in 2019 and is projected to rise to IDR692.2 trillion ($47.1 billion) by 2022 and IDR1,224 trillion ($78.0 billion) by 2027, for a 10-year annual growth rate of 11.7% in local currency terms and 10.0% in U.S. dollar terms. Healthcare spending will more than double on a per-capita basis, from $114 in 2017 to $269 by 2027.
Healthcare is a priority on Indonesia’s national agenda, and the central and regional governments continue to build and upgrade healthcare facilities. Indonesia currently has 2,985 hospitals, including 1,058 public and 1,927 private hospitals. In addition, there are over 10,205 public Health Community Centers (PUSKESMAS), which provide comprehensive primary healthcare and vaccinations.
An increase in public awareness about the importance of healthcare, the expansion of public and private hospitals, and the implementation of Indonesia’s public health insurance system known as “BPJS-Kesehatan” (Jaminan Kesehatan Nasional, or JKN) in 2014, have led to an increased demand for more sophisticated and modern medical devices. Per February 2022, the membership coverage has reached 236.8 million people, or around 86% of the total population in Indonesia. This program will increase the demand for advanced medical equipment and supplies. U.S. manufacturers of medical equipment should take advantage of this growing market.
The biggest challenges to achieving universal coverage are geography and financing; the country’s population is spread throughout 17,508 islands, and 6,000 are inhabited. The Indonesian healthcare system suffers from structural problems such as underfinancing, lagging numbers of primary care providers and hospitals, limited access to drugs in rural areas, and overall inaccessibility and inequity of care. As the country needs to increase the capacity of healthcare facilities, combined with solid growth in healthcare spending and a positive economic outlook following the COVID-19 pandemic, the number of hospitals will continue to increase. Some private hospital groups in Indonesia plan to add 3-4 hospitals per year. The hospital’s growth also depends on the availability of qualified physicians and supporting medical teams.
Key private players in the healthcare industry include Siloam Hospitals (Siloam International Hospitals which is part of Lippo Group), Mitra Keluarga (PT Mitra Keluarga Karyasehat), Primaya Hospital Group (previously Awal Bros Hospital Group), Omni Group (PT Sarana Meditama Metropolitan), Mayapada Group (PT Sejahtera Anugrahjaya), Pondok Indah Hospital Group, Ciputra Hospital (Ciputra Development), Eka Hospital (Sinar Mas Group), Ramsay health Care, and Medistra Hospital.
Major private laboratory chains are also expanding their operations in terms of capacity and geographic presence. The six major players in the industry are Prodia, Kimia Farma, Pramita, CITO, BioMedika, and Parahita. The largest private laboratory chain, Prodia, currently operates 255 outlets in 34 provinces throughout Indonesia.
In March 2021, Indonesian Minister for State-Owned Enterprises Erick Thohir announced his plan to develop Sanur Bali as a Special Economic Zone for Health and Elderly to attract medical tourists from other parts of Indonesia and Asia. Of the total 41 hectares of land ready for initial development in Sanur, 21.2 hectares will be allotted to create a health tourism hub with various facilities, including an international hospital, an eco-park, a commercial area, and an art market and hotel and hospitality school. Minister Thohir initiated the Bali International Hospital to present more domestic options for people seeking high-quality healthcare services. Government statistics reveal over two million Indonesians travel overseas to get treated in healthcare facilities in Singapore, Malaysia, and Japan, up to the United States.
On December 27, 2021, President Joko Widodo attended the groundbreaking ceremony for the construction of Bali International Hospital in Denpasar, Bali. This hospital is slated to be Indonesia’s version of Mayo Clinic in the U.S. and is expected to open in mid-2023.
The government issued Omnibus Law to improve Indonesia’s investment climate further. The Omnibus Law marks a vast structural reform to reduce regulatory requirements and bureaucracy that often complicate domestic and foreign investments. The Law aims to increase job creation and accelerate economic development.
The Indonesian government has published the long-awaited new investment list under Presidential Regulation No. 10 of 2021 regarding Investment Sectors (the New Investment List) to implement the Omnibus Law.
Business Activity
Negative List
New Investment List (2021)
Hospitals
67% foreign ownership
Open for 100% foreign ownership, but subject to minimum number of beds
(70% for ASEAN investors)
Pharmaceutical Manufacturing
85% maximum foreign ownership
Open for 100% foreign ownership
Pharmaceutical Wholesaler
Closed for foreign ownership
Open for 100% foreign ownership
Raw Pharmaceutical Wholesaler
Closed for foreign ownership
Open for 100% foreign ownership
Medical Devices Distributor
Maximum 49% foreign ownership
Open for 100% foreign ownership
Medical Devices Testing
Maximum 67% foreign ownership
Open for 100% foreign ownership
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Market Entry Before entering the Indonesian healthcare market, U.S. companies must establish a foreign-invested company in a PT (limited liability company) or appoint a trustworthy local agent or distributor. It is mandatory to have an agent or distributor to serve the Indonesian market. Local agents or distributors handle registration for the products and play an essential role in developing the market and providing after-sales services. Attending conferences and events is a good strategy for meeting equipment importers, agents, and distributors.
U.S. companies must have a solid due diligence process in place and consult with the U.S. Commercial Service before signing up agents and distributors. U.S. companies must visit the Indonesian market to correctly choose an appropriate agent or distributor from Indonesia’s vibrant and experienced international business sector. The appointment of a representative requires care since it is difficult to terminate a bad relationship. Qualified representatives will not take U.S. principals seriously unless they commit to visiting the market regularly. Patience, persistence, and presence are three critical factors for success in Indonesia.
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Current Market Trends
In 2021, the Government of Indonesia set IDR255.3 trillion ($17.22 billion) as the healthcare budget allocation, representing 9.4% of the state budget. According to Fitch Solutions’ Pharmaceuticals and Healthcare Report Q1 2022, healthcare spending in Indonesia, which amounted to $39.1billion USD in 2021, is expected to reach $42.1 billion USD by 2022. As a percentage of GDP, healthcare spending is expected to rise from around 3.5% in 2021 to 3.6% in 2031. Indonesia’s universal healthcare program will substantially boost the top-line healthcare expenditure. It also creates an enormous demand for advanced medical and surgical equipment like X-Ray machines, CT scanners, MRI machines, defibrillators, gamma knives for incision-free surgeries, and different types of drugs related to the expected increase in the prevalence of diabetes and cardiovascular diseases.
We learn that Indonesia’s national health insurance program encounters a few fundamental problems.
First, the number of Indonesians using healthcare services provided under this program exceeds the number of people paying their monthly premiums (hence causing a claims ratio exceeding 100%).
Second, there are still many healthy Indonesian workers in the private sector who do not participate in the program. Lastly, both quantitatively and qualitatively, healthcare services in Indonesia are still not optimal; this could make part of the program’s participants reluctant to pay a higher monthly premium.
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Best Prospects
The following have the largest market shares and potential for U.S. companies interested in entering this market:
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Market Size
Healthcare Spending (Including Investment)
…as percent of GDP
3.5% (2021 est.)
… of which spent on inpatient services (including long-term care)
N/A
… of which spent on pharmaceuticals/consumables
24% (2021 est.)
… of which spent on investments
N/A
… of which spent on outpatient services
N/A
Hospitals, Procedures, Healthcare Professionals UN: http://data.un.or g/Explorer.aspx?d=WHO
Number of Hospitals
2,985 (2020)
… Public
1,058 (2020)
… Private
1,927 (2020)
Number of Hospital Beds
379,548 (2020)
… available beds per capita
1.4 (2020)
… of which in general hospitals
N/A
… of which in specialized clinics and rehab centers
N/A
Number of Surgical Procedures
613,500 (2020)
…of which [top procedure]
N/A
…of which [second highest procedure]
N/A
Physicians
124,449 (2020)
…of which surgeons
3,072 (2020)
…of which internists
5,518 (2020)
…of which pediatricians
4,470 (2020)
Dentists
15,588 (2020)
Demographics: http://www.geoba.se/country.php?cc=ID&year=2019
Population
274.86 million (2022 est.)
Life expectancy men/women
Men: 69.8 / Women: 74.2 (2020)
Infant mortality
17.1 deaths/1,000 live births (2020)
Percent of population older than 65
6.21% - Male: 7,823,600 / Female: 9,015,561 (2020)
…projection, 2030
27,438,000
Annual Deaths
6.6 deaths/1,000 population (2020)
…caused by [highest disease burden]
Stroke: 21.12% (2020)
…caused by [second highest]
Coronary heart disease: 15.33% (2020)
Prevalence of [fastest growing disease burden]
Diabetes Mellitus
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Main Competitors
The market for medical devices is highly competitive. The pricing, although often decisive, is not the only factor in this competitive market. Other factors include high quality and reliability of the products, after-sales services, effective promotional efforts, being able to put together comprehensive and competitive bidding packages, recruiting a potential agent with an extensive distributional network, and good contacts are some the vital factors to keep in mind, to become a successful player in the Indonesian medical device market.
U.S. products have a strong presence in Indonesia. Though, China was still the leading supplier in 2020, accounting for over 26% of total imports. Germany was the number three supplier, accounting for 11.50% of total imports. German suppliers were strong in patient aids, diagnostic imaging, and other medical device product areas. Other leading suppliers include South Korea, Japan, Singapore, and Malaysia. Import from Singapore is high because mainly imported products were shipped through Singapore rather than Singaporean products.
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Current Demand
Imports supply 88% of Indonesia’s medical devices; imported products are mainly geared toward sophisticated medical instruments and other diagnostic equipment yet to be produced in Indonesia.
The following have the most significant market shares and provide enormous opportunities for U.S. companies.
Domestic medical device manufacturers focus on essential items such as surgical gloves, bandages, orthopedic aids, hospital furniture, wheelchairs, portable sterilizers, disposable gowns, anesthesia machines, heart stents, medical needles, and surgical threads. But a few local companies also manufacture more advanced equipment such as ECGs, ultrasound machines, and dental machines.
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Registration Process
Indonesia’s Ministry of Health (MOH) regulates and controls the registration of medical devices in Indonesia. Manufacturers or importers must register all medical device products, whether locally produced or imported, with the MOH. Product registration can only be done if the applicants are enlisted as legal entities per Indonesian law and are regulated by the MOH.
The registration routes vary based on the classification of the device. The time frame required to obtain a “Marketing Authorization Number” (Indonesian acronym Nomor Izin Edar “NIE”) is between 15 to 45 days. “Marketing Authorization Number (NIE)” for medical devices valid for a minimum of two years or a maximum of five years. Please keep in mind that imported medical devices must be registered with the MOH and have a “Marketing Authorization Number (NIE)” before entering Indonesia (clearance through Customs).
In general, products that are FDA-approved and sold in the U.S. will be approved to enter the market in Indonesia.
The following are documents that U.S. companies should submit to register their product with MOH:
• Letter of Authorization (LoA) issued by the manufacturer, legalized by the Indonesian Embassy and notary public in the U.S. and valid for at least five (5) years.
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Reimbursement
Indonesia’s Ministry of Health (MOH) is responsible for all procedures related to reimbursement. Thus, those covered by public healthcare insurance can access healthcare services without financial trouble. Public sector hospitals and other public healthcare facilities provide services either at a subsidized rate or free of charge.
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Barriers
The Directorate General of Pharmaceutical Services & Medical Devices of Indonesia’s Ministry of Health (MOH) regulates medical device registration in Indonesia. Although there is no restriction on the importation of medical equipment, the Indonesian Government prohibits the import of used or refurbished medical equipment. Medical equipment is subject to 5% - 30% import tax, depending on the type, and the standard 10% value-added tax (Source: Indonesia’s Minister of Finance Regulation No. 6/2017 on Stipulation of Goods Classification and Charge of Duty Tariff on Imported Goods).
Indonesia shows good prospects for the healthcare medical devices market; however, there are challenges that go together with doing business in Indonesia, namely:
1. Corruption and bureaucratic inefficiency are a real presence in the Indonesian market. U.S. companies should be patient and ready to face these challenges.
Local Content Requirements (LCRs)
Based on President Regulation No 70/2012 on Government Procurement and Presidential Instruction No 2/2009 regarding the use of local content in government procurement, government procurement decisions are often based on preference for products with local content to encourage domestic sourcing. Government departments, institutions, and corporations are instructed to use domestic goods and services as much as is feasible and to use foreign components only when necessary.
In June 2021, Indonesia introduced local content requirements banning imports of over 5,400 imported medical device products in 79 categories from the LKPP e-Katalog public procurement system used by public hospitals and clinics. For those 79 categories, only locally manufactured medical devices certified to have 40% local content will be included in the e-Katalog system.
Halal Certification
Indonesia accounts for the largest Muslim population worldwide. With approximately two hundred twenty-five (225) million Muslims, there is an increasing demand for Halal products. In response to this growing need, the Government aims to establish Halal certification for all products circulating in Indonesia.
Indonesia’s Government Regulation No. 31/2019 requires many types of goods to be halal certified in the future and will require products from haram (forbidden) material to be labeled accordingly.
Under the Ministry of Religious Affairs, the Halal Products Guarantee Agency, or Badan Penyelenggara Jaminan Produk Halal (BPJPH) oversees all halal certification processes in Indonesia. Halal certification can be processed by accredited certification bodies located in or outside Indonesia.
As of January 2020, the Ministry of Religious Affairs recognized 45 halal certification bodies located outside of Indonesia in 26 countries, including five halal certification bodies in the United States, as follows:
The validity period of halal certification is four years and should be renewed three months before expiry.
At present, halal certification for medical devices is voluntary. However, it will become mandatory for medical devices containing Animal Derived Materials (ADMs) to register for halal certification and labeling requirements for each product category starting on the following dates:
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Procurement & Tenders
There are three main methods used to procure medicines and medical devices for hospitals and clinics in Indonesia under Indonesia’s universal health care program, BPJS-Kesehatan (also referred to as JKN):
In 2014, the Indonesian Government implemented an e-purchasing system (e-Katalog) for any procurement process of medicines and medical devices by public hospitals and clinics. The Government Agency for Procurement of Goods and Services (Lembaga Kebijakan Pengadaan Barang/Jasa Pemerintah “LKPP”) manages the e-Katalog system created to increase transparency and simplify transactions for products available for reimbursement under the national health insurance system. Thousands of medicines and medical devices are listed in the system, allowing public hospitals and clinics to purchase medical devices at a pre-negotiated price without a national or hospital public tender. In 2021, the total procurement transaction value thru e-Katalog was $275 million for pharmaceutical products and $1.0 billion for medical devices. Products currently listed would need to re-enroll to remain listed in the future.
The e-Katalog portal can be a rapid route to large sales volumes for U.S. companies. However, to be listed in the e-Katalog, companies must negotiate prices with the Government, and the price negotiation criteria are not fully transparent. The prices are often negotiated within a fixed range based on a multiple of the import transfer price. And the cost of providing crucial professional education and training to local healthcare providers is not considered in price negotiations. As a result, prices offered in the e-Katalog system are lower than prices in the private health insurance market. To manage the new obstacles and capitalize on a growing market, U.S. manufacturers need to explore creative solutions with knowledgeable and savvy local distributors more than ever before.
On February 11, 2022, Indonesia’s Ministry of Health launched a sectoral e-Katalog for medical devices. Previously, e-Katalog was managed by LKPP and referred to as the national e-Katalog, for all products procured by government institutions street lighting to pacemakers. LKPP e-Katalog is now split into a national e-Katalog for items required nationally and sectoral e-Katalogs, specific to ministries such as the Ministry of Health.
It means that medical devices, health-supporting tools, and household health products will no longer be reviewed by LKPP but by Indonesia’s Ministry of Health. Companies can register their products for inclusion in Indonesia’s Ministry of Health sectoral e-Katalog from November 11, 2022, to November 30, 2022.
The sectoral e-Katalog for medical devices will be directly monitored by Indonesia’s Ministry of Health and LKPP and the Corruption Eradication Commission (KPK). The Ministry of Health launches the sectoral e-Katalog as a transformation of domestic procurement technology to be fast, transparent, independent, responsible, and credible. Domestic medical device manufacturers will get priority in the sectoral e-Katalog as long as they are qualified.
All public tenders are published, but there are often listed specifications that require the knowledge and support of a local company to maximize the chances of success in a given procurement process. To apply for public tenders, a company must register at the Government’s Procurement Portal https://lpse.lkpp.go.id/eproc4 to be eligible to submit applications for any ongoing selection procedures.
As applicable, local distributors or agents need to comply with Indonesian standardization procedures for tender offers. Government procurements prefer products with local content to encourage domestic sourcing.
Healthcare Procurementhttp://www.lpse.depkes.go.id/eproc4
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FAQs
1. How many classes of medical devices are there in Indonesia? Medical devices are classified into four (4) classes based on the risk level in case of malfunction/failure/misuse, namely: Class I (A)-Low Risk / In case of malfunction or misuse the device would not cause serious harm; Class II-A (B) and Class II-B (C)-Moderate Risk / In case of failure or misuse the device can have a significant impact on the health of patients, but not a serious accident; and Class III (D)-High Risk / The failure or misuse of these devices can result in serious implications for the patients or nurses/operators.
2. What is the timeline for Indonesia’s medical device registration process? On January 13, 2018, the MoH enacted a new regulation, Permenkes No. 62 Year 2017, concerning Marketing Authorization of Medical Devices, In Vitro Diagnostic Medical Devices, and Household Health Supplies. The significant change in this new regulation is the approval timeline. Application review times for medical device registration were halved and are now as follows:
Class I (A): 15 working days
Class II-A (B) and II-B (C): 30 working days
Class III (D): 45 working days
3. How much is the registration fee for a medical device in Indonesia? Official guidance on fees for the processing of a Class I (A) is US $115 (IDR1,500,000). For Class II-A (B) and II-B (C), the fee is US $230 (IDR3,000,000). Class III (D) is processed for a fee of US $340 (IDR5,000,000).
4. Who can distribute medical devices and supplies in Indonesia? Importing medical devices and supplies can only be conducted by local companies that already have a Distributor License (Indonesian acronym: Ijin Penyalur Alat Kesehatan/IPAK) for the imported products. A Distributor License is issued by the MoH. Once the distributor license is obtained, it is valid indefinitely, and subject to a MoH audit every five years. Imported products must have only one legal importer and distributor in Indonesia.
5. Can a foreign hospital invest in Indonesian hospitals? Other than maternity hospitals, foreign investors can hold a maximum share of 67% in general hospitals (or 70% if the investor is domiciled in an ASEAN country). Please refer to the Presidential Regulation No. 44 Year 2016 regarding the Negative Investment List (Indonesian acronym: Daftar Negatif Investasi/DNI). In addition, foreign investment must also comply with the procedures under Indonesian Ministry of Health (MoH) Regulation No. 56 of 2014 to establish, manage, and classify a hospital.
6. Can a foreign hospital provide services in Indonesia? (e.g. advising Indonesian hospitals on efficient operations or patient experience, such as telemedicine for patients.) Foreign investors may build a whole new hospital or operate an existing local hospital jointly with a local investor. Foreign personnel in hospitals are limited to consultants’ roles and they do not give direct medical services. A recommendation from the MoH would be necessary for them to do so.
7. Is telemedicine currently being used? In order to improve access to and quality of Primary Healthcare, the MoH has included telemedicine in their 2015-2019 Strategic Plan. Implementation of telehealth in Indonesia has begun with tele-ECG and tele-radiology program initiated by Harapan Kita and Dr. Cipto Mangunkusumo General Hospital. Frost & Sullivan has reported that to address the increasing concern of maternal mortality in Indonesia, Philips run a pilot-project, Mobile Obstetrical Monitoring, in collaboration with local hospital group Bundamedik, the city government of Padang, West Sumatera, and the MoH. This project will remotely monitor pregnant women for early high-risk identification using a new tele-health solution.
Development of telemedicine solutions and software for healthcare has begun in Indonesia on a small scale. Close collaboration between the government and private sector is needed to bring this technology to its full potential. One of the challenges in bringing telemedicine to Indonesia is the lack of solid regulations. Telemedicine combines medical devices with IT, a combination that is unfortunately not clearly addressed in existing government regulations. What we have now is that the devices and software are regulated, but the space where they come together is a gray area that ends up inhibiting the use of medical technology.
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U.S. Commercial Service Contact Information
Name: Pepsi MaryariniPepsi.Maryarini@trade.gov
