Global Business Guide Indonesia

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Joint Ventures | Export
Combiphar | Mr Michael Wanandi
Michael Wanandi

As the substantial youth subset of the population gets older we expect to see a marked rise in the consumption of products geared towards healthy lifestyles

Mr Michael Wanandi, CEO

Founded over forty years ago, PT Combiphar is a leading manufacturer and marketer of more than 200 drugs and medicines in Indonesia. What can you tell us about your company’s background and its strategies going forward?

Combiphar was established in 1971 and then acquired by my father and his partners in 1985. The motivation at that time behind acquiring this company was so that it could be used as the vehicle for Glaxo to enter the Indonesian market by manufacturing one of their blockbuster products, Zantac, here. This arrangement was made necessary by local regulations requiring pharmaceutical companies to have a manufacturing site within the country. From this background Combiphar has developed into a leading manufacturer of generic drugs and OBH Combi, a cough syrup medicine that is popular among local consumers. As one of the few products we actively market, this cough syrup commands a dominant market position.

The last two years beginning in 2012 has seen our company undergo a substantial transformation coinciding with my appointment as CEO in 2011. My first task was to develop a clear vision for Combiphar’s position by 2020 given the context of a very competitive and fragmented pharmaceuticals industry that does not have many substantial industry players with the exception of Kalbe Farma and 29-30 multinational companies. Being a manufacturer that was primarily focused on generic products, it was a challenge to differentiate ourselves amidst competition from manufacturers in China and India. As such we made it our priority to manufacture value added products and repositioned ourselves not as a producer of generic drugs but instead as a company involved in consumer health and wellbeing. Our company is thus currently focused on serving the middle class segment looking for high quality products that fall within an affordable price range.

What was Combiphar’s primary motivation in taking this course of action to shift its focus towards consumer health products and services?

We decided to carry out this transformation upon seeing that over the last three to four years there have been a growing number of complaints in regards to the high prices of pharmaceutical drugs and medicines. The government has thus encouraged manufacturers to offer inexpensive alternatives, but because pricing is out of the control of these companies, we saw more potential in providing preventative rather than corrective products. We thus now play a vocal role in promoting healthy lifestyles as a proactive way to mitigate the need for expensive drugs. In this regard we seek to provide added value through initiatives and campaigns to educate consumers on the benefits of healthy living and steps that can be taken to avoid illnesses. Our company has found that one of the most effective ways to reach out to the market, particularly the youth demographic, is through the use of social media.

In line with this change in approach towards downstream pharmaceuticals we also introduced a new logo emblematic of our desire to be unique and differentiate ourselves from the many traditional companies in the industry. Our company has also sought to be more direct in showcasing our product quality – something we only used to do for our cough syrup products – to appeal to a wider consumer base and demonstrate our dedication to quality characterised by international certifications.

Given the context of an average growth rate of 12.5% between 2007 and 2013 as well as the inauguration of a new government, what is your outlook for the pharmaceutical industry?

There are bright prospects in Indonesia’s pharmaceutical industry, particularly when you look at Indonesia’s demographic structure.

The country has a very young population and this explains why the spending on health here is still relatively low. As the substantial youth subset of the population gets older we expect to see a marked rise in the consumption of products geared towards healthy lifestyles.

We also believe that the pharmaceutical industry will be boosted by the implementation of a universal health care program in Indonesia by increasing demand for medicines among consumers that previously could not afford such products. Our company thus supports this government initiative, but I am of the opinion that more steps need to be taken to better socialize the program and ensure that the general public fully understands the health coverage that is being made available to them.

Where do you stand from an international markets point of view and which countries have you identified as key targets for the future?

Our company has set about obtaining both local and international product certifications such as TGA approval from Australia to facilitate the export of our products. In addition to allowing for a more straightforward distribution of Combiphar goods overseas, these certifications also boost our corporate image and reputation among multinationals coming to Indonesia in search of a reliable local manufacturer. This creates new opportunities for us to serve as a manufacturer of top brands on behalf of numerous leading multinationals, and enables us to meet our goal of increasing capacity utilization.

How is your company positioned towards working with international investors and foreign partners looking for an experienced local pharmaceutical manufacturer in Indonesia?

The regulatory framework in Indonesia requires that foreign companies looking to enter the market need to do so with a local partner. The challenge to these international entities is finding Indonesian manufacturers able to meet the required standards of production because many local players are family owned businesses less open to prospective partnerships. It is thus advisable for foreign companies in approaching the market to be able to bring something tangible to the table to demonstrate benefits to the local partner beyond monetary incentives. Combiphar, in particular, is interested in working with medium sized companies that share our values and hope to form stable, long-term partnerships less subject to fluid changes in business priorities. For us, financial investment is not the most critical part of any cooperation agreement and we are instead drawn towards partnerships for product development, having already enjoyed success through this type of cooperation with Korean pharmaceutical firms.

We are also interested in opportunities to purchase formulations and ideas from across the world to take advantage of advanced R & D. In this type of partnership we offer direct access to a sizeable consumer base much larger than that in our international counterpart’s home market.

As a final message, what would you like our readers at Global Business Guide Indonesia to remember about Combiphar?

Business is not always about making money; it is also about how you create value. If you are able to add value for consumers, it will be automatically reflected in your business performance.

Global Business Guide Indonesia - 2015

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