INDONESIA MEDICAL DEVICE OUTLOOK 2017

ISSUES IMPACTING THE GLOBAL HEALTH CARE SECTOR IN 2016

2016 Global health care outlook| Battling costs while improving care

MEDICAL DEVICE MARKET REVENUE

5.94

6.53

8.90

12.47

14.25

18.40

20.48

21.07

23.45

37.10

48.08

55.80

24.34

0.00 10.00 20.00 30.00 40.00 50.00 60.00

Cosmetic Surgery & Lifestyle Products

Neurology & Neuromuscular Devices

Intravenous & Infusion Devices

Urology & Gynecology Devices

Ophthalmic & Optical Devices

General Surgical & Therapeutic Devices

Single use Surgical & Disposables

Minimally Invasive Surgical Devices

Wound Care and Biomaterials

Orthopedic and Prosthetic Devices

Anesthetic and Respiratory Devices

Cardiology and Thoracic Surgery

Others

SEGMENTS Cosmetic

Neurology &

Neuromuscular Devices

Intravenous &

Infusion Devices

Urology &

Gynecology

Devices

Ophthalmic &

Optical Devices

General Surgical

& Therape

utic Devices

Single use

Surgical &

Disposables

Wound Care and

Biomaterials

Minimally

Invasive Surgical Devices

Orthopedic and

Prosthetic

Devices

Anesthetic and

Respiratory

Devices

Cardiology and

Thoracic Surgery Others

Revenue ($ Billion) 5.94 6.53 8.90 12.47 14.25 18.40 20.48 23.45 21.07 37.10 48.08 55.80 24.34

Medical Device Market: Total Revenue (World)

Source: Frost & Sullivan

GLOBAL MEDICAL DEVICE MARKET

http://blog.euromonitor.com/2016/02/medical-device-market-2016-opportunities-in-asia-pacific.html

THE VALUE SEGMENT IS MORE RELEVANT IN MATURE PRODUCT CATEGORIES

OUR EXPRESSION AFTER HEAR CHANGE…….

Last Decade Current Decade Next Decade

Types of Companies

Market Dynamics

Main Focus

Revenue

MEDICAL DEVICES—BUSINESS OUTLOOK

$153.40 Billion $271.55 Billion $509.25 Billion

More emphasis on quality of treatment

and cure because treatment time was

never a constraint. Invasive procedures

were the golden standard.

Faster diagnosis and prompt therapy

along with patient safety using minimal

invasive technologies

Minimal invasive technologies becoming the

preferred choice; therefore, reducing therapy

duration and post-operative complications.

Consistently increasing number of chronic

cardiovascular diseases led to most

pertinent surgical intervention when

absolutely required.

Improved diagnostic imaging capabilities

coupled with advanced minimally invasive

technologies has led to increased

procedural volume and product uptake.

Advancement in minimally invasive

technology in the form of fully automated,

robot-assisted, minimally invasive cardiac

surgery and continuous diagnostic pre-

operative imaging

Presence of individual imaging, devices,

and pharmaceutical companies, for

example, Johnson and Johnson, GE

Healthcare, and Merck and Co.

Individual companies have started moving

towards intersection, for example, BD and

Novartis.

A definite intersection of applications and

product line between established

companies. For instance, a leading vendor

from the cardiac imaging industry

collaborating with participants from the

cardiac devices and consumables

industries.

Source: Frost & Sullivan

SECTOR SPLIT

GLOBAL MEDICAL EQUIPMENT AND SUPPLIES REPORT 2014, Clearwater International.

SECTOR SPLIT CONT.

GLOBAL MEDICAL EQUIPMENT AND SUPPLIES REPORT 2014, Clearwater International.

KEY CHARACTERISTICS OF THE MEDICAL DEVICE SECTOR

14

Recognized for its growth potential and relationship with economic development. Certain market drivers are inevitable

Industry Structure Predominantly SMEs, however large companies have a significant share of the industry’s total revenue

Highly Regulated: Regulatory landscapes are changing, with increased levels of scrutiny

Reimbursement is Key: Adequate reimbursement is necessary for products to succeed in the market

Rapid Pace of Advancement/Relatively Short Life Cycle: Average life cycle of about 18 months before an improved product becomes available

Ebb and Flow to Market Demand: Intense competition demands faster times-to-market. Products can be overtaken by new products, or by events

WORLD MARKET GROWTH FOR MED DEVICES

245.7 275.1

303.8 309 328.4

346 366.6

390.5 419.7

454.6

0

50

100

150

200

250

300

350

400

450

500

Market

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

15 Source: BMI Espicom Worldwide Medical Market Forecasts to 2018 ($Billion)

EMERGO POLL: WHAT ARE THE BIGGEST CHALLENGES YOU FACE? (SORTED BY RESPONDENT LOCATION )

(SOURCE: EMERGO 2013)

16

EMERGING MARKETS TYPICALLY REPRESENT THREE OPPORTUNITIES FOR MEDICAL DEVICE AND EQUIPMENT

MANUFACTURERS

Local Market Opportunity

Source of Innovation

Cost Effective Manufacturing

Key Questions: 1. What are the specific local market opportunities? 2. What is the future demand for medical devices and equipment versus today? 3. What are the demand drivers and how volatile are they? 4. What are the key challenges?

Key Questions: 1. Which companies have established R&D centers in emerging markets and why? 2. What are the benefits? 3. What are the key drivers of an increased focus on R&D in emerging markets? 4. What trends exist, if any?

Key Questions: 1. What % of the top players’ manufacturing bases are in emerging markets? 2. In which countries and why? 3. What are the key drivers shaping the continued move to manufacturing in emerging countries? 4. What trends exist, if any? Source:

(1) BA Knowledge Repository.

SOUTH EAST ASIA: ECONOMIC GROWTH AND POSITIVE OUTLOOK

• 10 members are Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam from US$4.6 billion in 2013 to US$9 billion by 2019.

• These six countries, commonly referred to as the ASEAN6, make up for more than 95% of ASEAN economy.

• The ASEAN6 countries’ GDP grew on average 4.55% in the last 7 years, compared with the poor 0.10% p.a. for the G6 (the US, Japan, Germany, the UK, France and Italy).

• The region benefits from a bi-modal population. While half of those living in ASEAN are under 30, there are more than 55 million people over the age of 60, a population larger than Korea and equivalent to that in South Africa(source: United Nations Population Fund)

• The implementation of new public health policies and an ageing population, will further support the sector’s growth in the mid-term

SPENDING ON ASEAN HEALTHCARE IN 2015

ASEAN’S MEDICAL DEVICE MARKET SIZE BY CATEGORY

BREAKDOWN OF MEDICAL DEVICE MARKET BY CATEGORY

Source: Espicom Business Intelligence, Ipsos Business Consulting

“Change the way you

look at things, and the

things you look at

change”

-Sun Tzu

http://data.worldbank.org/indicator/SH.XPD.TOTL.ZS?locations=ID

INDONESIA HEALTH EXPENDITURE, TOTAL (% OF GDP)

2.847%

INDONESIA

•US $ 27.62 billion

•Growth 14.9 %

•2018 (F) US $ 61 billion and 2024 (F) US $ 80 billion Market

•97.2 % of its medical devices

•Market growth steadily exceeding 15% annually during the last 10 years

•Market value of USD 1 billion by 2016, up from USD 593.8 in 2013. Import

•51% of the healthcare facilities in Indonesia are government-owned

•More than 1.5 million Indonesians travelling abroad for medical treatment last year

•Under present regulations, pharmaceutical or medical device registration can take anywhere from 6 months to 3 years to complete

•The government will add more than 100,000 hospital beds and hundreds of hospitals by 2020.

Healthcare facilities

•Therapies and treatment equipment for cancer

•Clinical laboratory equipment for circulatory problems, infections and parasites, and respiratory problems

•Medical disposables such as syringes, catheters, stomach cups (made from silicone), etc

•Dental equipment for scaling and polishing, bleaching, orthodontics, etc

•Diagnostic equipment such as CT scan slices, x-ray, magnetic resonance imaging (MRI) and other surgical equipment

•Dermatology equipment such as electrocardiography, acupuncture, skin laser beauty treatments for the skin

The most promising sub-sectors for imported

medical and surgical devices

OECD Development Centre’s Medium Term Projection Framework,2014 / OECD Economic Outlook for Southeast Asia, China and India, 2014 / Worldbank / ASEAN Finance and Macro-economic Surveillance Unit Database / ASEAN Merchandise Trade Statistics Database / ASEAN Foreign Direct Investment Statistics Database / IMF Working Paper, Asia and Pacific Department, IMF, 2013 / Asia 2050, Realising the Asian Century, Asian Development Bank, 2011 / ADB Economic Research Department, 2013 / ASEAN’s Demographic Dividend, ASEAN Briefing, 2013 / ASEAN Integration and the Private Sector, 2014 / ASEAN 2030: Toward a Borderless Economic Community, ADB, 2012

QUICK FACTS…..

INDONESIA’S MEDICAL DEVICES IMPORTS BY HIGH POTENTIAL SUB-SECTORS IN US$ MILLIONS

2003 2008 2013

Diagnostic Imaging 22,6 99,5 144,2

Implants and Orthopaedic Appliances 0,8 81,1 127,8

Respiratory Devices 2,4 7,1 55,3

Dental 0,5 0,5 2,4

Consumables 15,8 50,3 51,7

Furniture & Wheelchairs 3,6 17,0 33,1

http://www.allianceexperts.com/en/knowledge/countries/asia/market-for-medical-devices-in-indonesia/

http://emerhub.com/indonesia/medical-devices-registration-indonesia/

INDONESIA

KEY PREDICTIONS

Source: Frost & Sullivan

INDONESIA - MEDICAL EQUIPMENT

2014 2015 2016 (est.) 2017 (est.) Total Market Size 1,739 1,864 2,000 2,149

Total Local Production 1,200 1,320 1,452 1,598 Total Exports 165 182 201 221 Total Imports 704 726 749 772

Imports from the U.S. 111 114 118 122

Data Source: Indonesian Medical Device Producers Association (ASPAKI), Statistics Indonesia (Badan Pusat Statistik), and U.S. Department of Commerce TradeStats Express

Last Published: 6/27/2016 Unit: USD millions

FOREIGN MEDICAL DEVICES REGISTRATION

Incorporation Limited Liability

Company

(PT PMA)

Izin Usaha (Permanent

Business License) from BKPM

Izin Penyalur Alat Kesehatan / IPAK (Medical Devices

Distributor License)

Izin Edar (Distribution of Medical Devices

License) from Ministry of Health

(MOH)

NATIONAL HEALTH SYSTEM

HEALTH DELIVERY SYSTEM

NATIONAL HEALTH INSURANCE (JKN) WILL BOOST ALL SEGMENTS OF THE HEALTHCARE MARKET

National Health Insurance (JKN)

Source: Frost & Sullivan

HEALTH DELIVERY SYSTEM

GROWTH OF HOSPITALS IN INDONESIA

51

156

60

54

29

51

19 49

14

25

150

274

275

69

319

77

57

23

41

25 82

9

12

26

40

27

18 35

16

17 31

40

54

Area No of Hospital Share

Sumatera 511 23%

Jawa 1,164 52%

Bali 57 3%

Nusa Tenggara 64 3%

Kalimantan 142 6%

Sulawesi 194 9%

Maluku 45 2%

Papua 51 2%

National 2,228 100%

NUMBER OF HOSPITAL BY PROVINCE

NO OF BED PER HOSPITAL

RULES & REGULATIONS

STRUCTURE OF NATIONAL INDUSTRY

PHARMACEUTICAL AND MEDICAL DEVICES: DEVELOPMENT OBJECTIVES

Source: COORDINATING MINISTRY FOR ECONOMIC AFFAIRS

ROADMAP OF MEDICAL DEVICES INDUSTRY DEVELOPMENT OBJECTIVES 2015 - 2025

Source: COORDINATING MINISTRY FOR ECONOMIC AFFAIRS

DURATION OF MEDICAL EQUIPMENT REGISTRATION

INDONESIAN HEALTH CARE : EXECUTIVE SUMMARY

Indonesia’s spending on health care is one of the lowest in ASEAN. The country requires significant investment to expand and upgrade its poor health care infrastructure

The recent introduction of Indonesian Government supported Universal Health Coverage (UHC) for all citizens and residents provides opportunities for investors to develop the health care sector

The rising middle class is expected to drive demand for affordable health care

The rising middle class, with its rather unhealthy lifestyle, is expected to drive an increase in lifestyle-related diseases.

Indonesia faces a shortage of hospitals, with rural areas being most severely underserved

Foreign investors are allowed to operate specialized hospitals in a market where only 23% of hospitals are specialized

INDONESIAN HEALTH CARE : EXECUTIVE SUMMARY

Building a new hospital from scratch is difficult, due to a lengthy and complicated licensing process. This barrier to entry attracts investors to existing small hospitals that have the potential for improvements

Qualified doctors and nurses are in high demand, but the education system has yet to increase its capacity

The AEC could address the lack of qualified doctors, but new barriers are making it harder for foreign doctors to practice in Indonesia

A high conversion rate of hospitals serving UHC and private patients can translate into higher profitability through increased out-of-pocket spending and it can help shorten ramp-up time

The Indonesian Government is committed to supporting the UHC scheme

BPJS Health premiums are likely to increase

LOCAL CONTENT (TKDN) POLICY

Local Content (TKDN)

Domestic Component

Domestic Component + Imported Component %TKDN X 100% =

• The component consists of :

- Direct cost of material

- Direct cost of manpower

- Non-direct cost of factory overhead

• Determination of domestic component:

- Country of origin of material

- Ownership of the facilities and equipment

- Citizenhip of the manpower

• R&D cost can be assessed in TKDN, with term and condition:

- R&D cost was counted in production cost and and distributed to each product price

- R&D was conducted in Indonesia, and was proven with:

Certificate in Intellectual Property Right

Invoices of R&D cost (product/technology definition, design, prototype, system test and integration, and production preparation)

Government’s Procurement

(TKDN+BMP) ≥ 40% TKDN ≥ 25%

(TKDN+BMP) < 40% TKDN ≥ 15%

Mandatory to use Domestic Product*)

Both Domestic and Imported

Product can participate in the selection on the procurement

*) as long as the Domestic

Product can fulfill the

specification, amount, and

time required with normal

price

BMP : Award for company who invest in Indonesia and: - empower SMEs through partnership,

- has certificate in HSE Management,

- do community development/CSR,

- provide after-sales service

INTEGRATING TRADITIONAL AND DIGITAL MARKETING

Market ing 4.0 Moving from Traditional to Digital, Copyright © 2017 by Philip Kotler , Hermawan Kartajaya, and Iwan Setiawan. All rights reserved. Published by John Wiley & Sons, Inc., Hoboken, New Jersey

MAPPING THE CUSTOMER PATH

Market ing 4.0 Moving from Traditional to Digital, Copyright © 2017 by Philip Kotler , Hermawan Kartajaya, and Iwan Setiawan. All rights reserved. Published by John Wiley & Sons, Inc., Hoboken, New Jersey

You are driving a car.

On one big storm night.

You are passing a station.

There are three people who are waiting for the bus

One doctor who saved your life before.

One guy/lady who is someone you have been

dreaming to get married to.

One old lady who is dying.

You can only take one passenger,

which one you will choose?

Please explain your reason.

A Reflection (cont’)

Best Prices

High Quality Products

BIG IDEA

at the