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SOARING FUEL PRICES CONTINUE TO AFFECT INDONESIAN DRUG MARKET

November 21, 2005

The Indonesian association of pharmaceutical companies, GP Farmasi, is continuing its pessimistic outlook concerning the country's drug market, forecasting that growth will stand at only 5% this year and that total sales will fail to reach its target of IDR23trn (US$2.23bn).

Industry observers blame the current slump in the market on a 125% hike in fuel prices in October, which has hit consumer spending power. In 2004, Indonesia's drug market expanded by 25%. The current figure of 5% is the lowest since the Asian economic crisis of 1997.

Earlier this year, the weakening of the Indonesian Rupiah against the US dollar led to local drugmakers issuing threats of a 10-15% price hike. The currency's value has a strong influence on the drug market, as roughly 90% of drug raw materials used in manufacturing are imported. Raw materials account for around 30% of drug production costs.

According to industry observers, the continuing rise in fuel prices will only make the situation worse and could lead to a number of foreign drugmakers pulling out of the country.