Mylan Pharmaceutical Company Venture in Indonesia Proposal

Background Information

The pharmaceuticals industry in Indonesia remains promising for foreign investors as evidenced by the persistent growth of the pharmaceutical firms there. It is believed that the growth of pharmaceutical industry could reach double figures for the first time in its history. The provision of healthcare coverage in Indonesia has boosted the growth of the local domestic industry. However, the foreign investment in the country is more likely to be limited by the restrictive regulation on ownership and manufacturing. In the year 2014, the country established its national Health Insurance program with the sole purpose of ensuring that every citizen of Indonesia has universal health coverage by 2019. The fulfillment of this goal will improve the system of healthcare financing (Mulyadi, and Rosinta, 2).

The current spending in the sphere of healthcare is approximately $24 billion, and this amount was expected to increase to about $31 billion by the year 2016 (Mulyadi, and Rosinta, 2). As such, the pharmaceutical industry is currently worth $5 billion, and the sum is expected to rise to about 9.9 billion by the end of the year 2010. Besides, the increase of the clients from the middle class and the growing incidence of chronic illnesses are likely to increase the demand for medicinal products. According to Mulyadi and Rosinta, the pharmaceuticals products market is dominated by local Indonesian firms of generic medications. It is believed the domestic market production is likely to grow since it is a requirement for all doctors to use around 92% of generics drugs, while the innovator drugs are only allowed at the number of 2.5% (3). For this reason, the penetration of brand medications from the international companies such as Mylan is rather slow. However, due to the strategic approach coupled with the acquisition policy, Mylan Pharmaceutical can be able to perform well in Indonesia primarily because there is a growing demand for high-quality medicinal products there.

The Difficulty in Accessing Indonesian Market: Evidence

In Indonesia, the relevant regulations regarding the pharmaceutical sector include the Ministerial Decree No. 1010/2008 on Pharmaceutical Industry and Ministerial Decree 1010/2008 on Drug Registration. By taking into consideration the decree No 1010/2008, all foreign investment companies should own manufacturing facilities in Indonesia, and if not, they should establish partnerships with the local industries that are their competitors in order to sell their products in Indonesia (Mulyadi, and Rosinta, 4). Additionally, the process of registration under National Agency of Drug and Food Control can be very challenging and daunting sometimes since it also needs foreign firms to agree with the ASEAN Common Technical Documents requirements (Limakrisna, and Rita 274). Moreover, the importation of medicinal products is only allowed in Indonesia if the local companies cannot manufacture them or if they are required for the national health program.

Another impending obstacle is the possible implementation of the Halal Bill. According to this bill, all companies will need to acquire a certificate from Halal for medications production, which raises serious concerns among the pharmaceutical manufacturers. Therefore, the law will make it very challenging for any foreign market to access Indonesian pharmaceutical industry because it will force the firms to undergo a new registration process. Also, other investments in facilities will be needed in order to fit the requirements of standard Halal medications. Vaccine producers from Indonesia have organized serious opposition to the proposed bill since approximately 95% of the resources needed to manufacture the vaccines are imported, and to make matters worse, not all of the imported raw materials can meet the Halal requirements standards (Limakrisna, and Rita 274). The recent negative investments revision has increased the maximum permissible numbers from 75% to 85% when it comes to foreign ownership of the companies in the pharmaceutical sector (Mulyadi, and Rosinta, 5). However, this minor increase will not play a significant role in the improvement of the situation since foreign investments will still need to enter into a partnership with local manufacturing companies.

Reasons for Choosing Indonesia: Evidence

The pharmaceutical market in Indonesia possesses a promising future, especially considering its growing population and the fundamental aspects implying that medicine is one of the most demanded products. The country’s pharmaceutical value has increased by around 11% in half a decade and accumulated into a value of 69 trillion IDR by the year 2015 (Limakrisna, and Rita 274). The extensive market of Indonesia has invested a lot of resources into the pharmaceutical industry, stimulating its growth. The government is also playing an important role in promoting the pharmaceutical industry by issuing Health Ministry Regulation NO. 87/2013 in regard to the development of medicinal raw materials (Limakrisna, and Rita 274). As such, some pharmaceutical companies are setting pace regarding the development of Indonesian raw materials.

However, the aforementioned development still presents several significant challenges (Mulyadi, and Rosinta, 6). For a start, the development of raw materials lacks supplies from local petrochemical industries as far as the production of counterfeit goods is concerned, hence resulting in high costs of production since most of them need to be obtained from the foreign markets. Second, the local production requires a lot of investments, and it is a long-term process that needs a supportive and positive business environment (Limakrisna, and Rita 274). Finally, the growth of the medicinal industry alongside its derivatives can sometimes incur price fluctuations, hence discouraging other local investors from entering the market. With its growing population and the demand for medicinal products, Indonesia needs to welcome foreign pharmaceutical companies such as Mylan.

Reasons for Mylan’s Potential Success in Indonesia

Mylan is accepted universally as an international healthcare company that concentrates on high-quality medicines available to anyone who demands them. Its diverse and broad portfolio, which is composed of approximately 7500 medicinal products, is open to all kinds and types of customers, including pharmacy establishments, government institutions, wholesalers, and physicians (Mylan, web page). Since most of the Indonesian domestic pharmaceutical industries focus on generic medicinal products, Mylan will be the best alternative as far as high-quality innovator drugs are concerned (Mylan, web page). Mylan uses one international quality standard across all product lines and all facilities regardless of the market. Mylan will ahcieve success in Indonesia because it does not perform poorly irrespective of the quantity of the medicine produced. In other words, whether it is medication for a handful of individuals or for millions of people, the company’s priority is to exceed or meet the standards of the industry. Therefore, with the increasing population and demand for medicinal products in Indonesia, Mylan will be able to offer a long-lasting solution.

There is nothing generic about the standards of Mylan quality. The company has some internal teams that conduct reviews of the firm’s medicinal products from the beginning to the end, regardless of where they are being processed (Mylan, web page). In fact, the company was responsible for championing a law that empowered FDA to inspect all manufacturing products and facilities around the globe that supply medicinal raw materials to the United States Market (Mulyadi, and Rosinta, 6). As such, working hand in hand with Indonesia’s regulations will not be a problem to Mylan. The company’s reliability extends beyond its quality standards due to its policy to care for people that find their help essential.

Mylan as a global company believes in providing access to medical products that are of high quality, as well as to trustworthy healthcare products. The company’s representatives tend to think that every epidemic should have an ending, every disease should have a cure, and every consumer operating in the market should be able to monitor and manage personal wellness (Mylan, web page). For instance, Mylan is responsible for the marketing of 7500 high-quality healthcare products that are required around the globe (Mylan, web page). Both its brand and its generic medicines can be found in every therapeutic area, including respiratory, oncology, allergy, and dermatology ones (Limakrisna, and Rita 274). The company is also responsible for offering consumer healthcare and medicinal products that deal with specific needs. With the increasing demand and population in Indonesia, Mylan can perform admirably since it has a growing Research and Development network. Besides, the R&D center has qualified scientists that are helping the company to further innovate and improve its expertise in multifaceted medicines such as transdermal and antiretroviral (Mylan, web page).

To help improve patient care, the trusted portfolio and innovation ability of Mylan will deliver the quality that Indonesia consumers need. The company offers an extensive variety of state-of-the-art delivery and packaging systems across all its settings. Its dedication to providing the right dosage at the convenient time can be observed through ointments, sprays, creams, dressings, and units of use designed to assist in enhancing efficiency, improving patient satisfaction, and promoting safety, all of which are important in Indonesia’s pharmaceutical industry.

Strategy That Mylan Can Use In Indonesian Pharmaceutical Industry

Using its strategic fit policy, Mylan announced the acquisition of Meda AB through a public offer of around $9.9 billion consideration (Mylan, web page). Unlike the deal they made with Perrigo, this acquisition ended up being successful since it received the approval from Meda’s largest shareholders who own approximately 30% of its shares (Mylan, web page). Additionally, its acquisition was instrumental in improving the numbers of production of prescription drugs, over-counter segments, and generic drugs. Moreover, by taking into consideration the success of the acquisition, Mylan Pharmaceuticals has entered the global arena since its presence has increased in countries such as Middle East, Asia, China, Russia, and Mexico. Moreover, Peers Pfizer and Teva Pharmaceuticals have also played a crucial role in the expansion and growth of the company in the international market.

Since the beginning of the year 2011, Mylan Pharmaceuticals has collaborated with Meda AB since it assists it in the distribution and marketing of EpiPen around Europe (Limakrisna, and Rita 274). With Meda AB Acquiring Rottapharmm in the year 2014, and Mylan acquiring the generics sector of Abbott laboratories, it can be argued that these two acquisitions have increased their infrastructure that can be used to strengthen their marketing position in both Europe and Indonesia (Mylan, web page). As such, through mergers and acquisition, Mylan has been able to establish itself as a global leader in the allergy and respiratory market, and in doing so, it has improved its market share in pain and dermatology segments. Therefore, since it is a requirement in Indonesia that international companies should obtain a certificate of owning a facility or having a partner in a local company, Mylan will easily abide by this regulation through its strategic fit and acquisition policy.

Conclusion

The Indonesia’s pharmaceutical market has increased tremendously over the past five years because the government has established strategies that ensure that the domestic pharmaceutical industries can take control of the market. By doing so, it has relieved regulations governing the local sectors while strengthening the stringed measures as far as international investments are concerned. As such, it is very challenging to invest or promote foreign medicinal products in Indonesia because of the stringent measures that the Indonesian government has established. However, considering that Mylan is a global pharmaceutical industry with a good brand name, it can quickly enter the business in Indonesia because of the growing demand for medicinal products and the ever-increasing population of Indonesian people. Through the use of a strategic fit, Mylan can acquire some local pharmaceutical firms in Indonesia, hence making it possible for it to operate in Indonesia with ease. Since the company believes in delivering high-quality products, Mylan is well suited to successfully perform in the Indonesian market.