UNAIR NEWS – Indonesia’s projected medical inflation of 13.6 percent in 2024 is a clear warning that the nation’s healthcare sector is under mounting pressure. Behind the escalating costs of medical services lies a deeper problem: Indonesia remains heavily reliant on imported active pharmaceutical ingredients (APIs), which make up 90 percent of the country’s supply.
Professor Dr. Rossanto Dwi Handoyo, a senior economist at Universitas Airlangga’s Faculty of Economics and Business, emphasized that medical inflation is not simply a technical issue—it reflects a persistent structural vulnerability.
“Our healthcare system is fragile due to its excessive dependence on imported raw materials. This makes drug prices highly susceptible to currency fluctuations and global disruptions,” Prof. Handoyo stated.
He noted that, unlike the food sector—where inflation tends to be seasonal and fluctuating—medical inflation is enduring. Prices in the healthcare sector often remain elevated over time due to the market’s oligopolistic, and at times monopolistic, structure.
Pharmaceutical industry lacks upstream capabilities
Prof. Handoyo also pointed to the structural limitations of the national pharmaceutical industry. Most Indonesian pharmaceutical firms are involved only in drug formulation and do not produce their own raw ingredients, meaning the industry operates primarily at the downstream level.
“Our pharmaceutical sector is capital-intensive and still lacks the infrastructure necessary for upstream development. Companies are mainly mixing and packaging drugs, while raw materials continue to be sourced from abroad,” he explained.
Implications for consumer purchasing power
Prof. Handoyo warned that soaring healthcare costs not only burden individuals but also risk reducing household purchasing power, increasing the likelihood of new poverty cases, and further straining the government’s National Health Insurance (JKN) program.
“When medicine prices rise unchecked, vulnerable populations may no longer afford them. This leads to greater reliance on government subsidies, putting additional pressure on the state budget,” he said.
He added that a sharp rise in subsidies could force the government to either cut spending in other sectors or reduce the number of JKN recipients. This, he cautioned, could lead to broader social and political tensions, as it affects people’s access to basic rights.
Short-term policy recommendation
As a temporary measure, Prof. Handoyo suggested encouraging the public to utilize government healthcare facilities—such as community health centers (puskesmas) and BPJS-affiliated clinics—where affordable generic medications are available.
“Generic drugs are already priced accessibly. The problem is, many people choose to buy branded, over-the-counter medications, which are far more expensive. Visiting puskesmas would allow them to receive the right prescription at a lower cost,” he concluded.
Author: Rosali Elvira Nurdiansyarani
Editor : Khefti Al Mawalia
