Increasing government healthcare provision has led to costs cutting and a preference for biosimilars and generics. This led to a perception that innovator drugs are pricier with no better clinical advantage, so the government inadvertently endorses generics. Doctors often rely on government endorsement over innovator promotion. Indonesia has long had successful generics companies, which are now booming as a result. Now major innovators such as Pfizer are building substantial generics businesses.
Another challenge to foreign pharmaceutical companies is market access barriers. A 2008 Decree mandates that foreign pharma companies must manufacture locally or partner with local companies to register their own drugs. Although patented products are exempt for a period, with the global patent cliffs many products will need to be locally manufactured because the grace period is running out. So Merck Sharp & Dohme and Sanofi Aventis are now starting manufacturing operations. Others are looking at M&A as the route in such as when Invida purchased Indonesian manufacturer MUGI.
While the market is developing fast many things still need to change. The Ministry of Health is one of the more active and some say progressive ministries. But counterfeit pharma products remain widely available and breaches of rules are common by many companies, due to the difficulty in complying and also lax general business practices (especially for local companies).