The current state of healthcare in Indonesia
The COVID-19 pandemic has exposed critical gaps in Indonesia’s healthcare infrastructure, revealing structural and systemic shortcomings that will require scalable solutions. Change doesn’t happen overnight, particularly for the healthcare sector, which consists of multiple intertwined industries with strict regulatory oversight. But precisely because the industry is highly regulated, regulations play a huge role in shaping trends.
Recently, the Omnibus Health Law (Law No. 17 of 2023) introduced sweeping reforms to revitalize the Indonesian healthcare system in the aftermath of the COVID-19 pandemic. The Omnibus Law focuses on improving the quality and accessibility of Indonesia’s healthcare personnel and services and supports the country’s strides toward pharmaceutical self-sufficiency. These reforms indicate that the healthcare sector is set to grow in several key areas:
- The government, citizens, and healthcare innovations are shifting towards better access to affordable healthcare services.
- The government mandates that healthcare facilities prioritize domestic pharmaceutical and medical devices.
- Pharmaceutical and medical device producers in Indonesia are required to prioritize domestic raw materials.
Additionally, the 2021 relaxation of foreign investment restrictions is expected to continue attracting significant foreign investment, especially in underserved areas and specialized services. Together, these recent regulatory changes in Indonesia have created a more conducive environment for healthcare investment and innovation.
Tackling our greatest challenges
Indonesian healthcare is entering a renaissance in its utilization of technology. To solve Indonesia’s most pressing healthcare challenges, we need innovations that change how we diagnose and treat diseases and deliver health. We see opportunities where healthtech startups can significantly improve healthcare outcomes in three key areas: cost, intuitiveness, and non-communicable diseases (NCDs).
1. Cost-effectiveness
For decades, healthcare delivery costs have risen globally. In Indonesia, healthcare expenditure accounted for 3.41% of GDP in 2020. This level of spending has meant that citizens often bear a significant portion of their medical expenses. In the same year, 31.78% of Indonesia’s total health expenditures are out-of-pocket (OOP), above the World Health Organization’s recommended maximum of 20%. While the current state of Indonesia’s healthcare system shows progress, there is potential for improvement to reduce financial burdens and enhance health outcomes.
- Automation & efficiency: Digital health technologies can automate administrative tasks such as appointment scheduling, billing, and insurance claims processing. This reduces the need for extensive administrative staff and lowers operational costs.
- Health monitoring devices: Wearable health monitoring devices and apps help in the early detection of potential health issues, allowing for timely intervention, which can reduce the long-term costs. One of our portfolio companies, Aevice Health, develops devices for monitoring chronic respiratory diseases such as asthma and COPD. These devices help patients monitor their conditions at home, track their response to treatment, and communicate more effectively with healthcare providers, ultimately reducing the need for costly repeated hospital visits and improving health outcomes.
- Data analytics: Big data analytics in healthcare can identify patterns and predict disease outbreaks, enabling healthcare systems to allocate resources more effectively and avoid costly emergency responses. Mesh Bio, another portfolio company, uses data analytics to enhance clinical decision-making and provide predictive analytics for diabetes care. With their HealthVector® Diabetes, type II diabetes patient care can be improved with risk stratification of potential chronic kidney disease, allowing patients to reduce risk factors and avoid costly future treatments.
2. Intuitiveness
One of the large-scale responses to the COVID-19 pandemic is that the line between consumer and patient is blurring, and consumers want more transparency and personalization from their doctors. Going forward, the healthcare sector will need more innovations to keep pace with the demand for transparency and intuitive healthcare delivery.
Digital health technologies, such as patient portals and mobile health apps, can offer user-friendly interfaces that enhance patient engagement and self-management. These tools allow for easy scheduling of appointments, viewing test results, accessing health information, receiving medication reminders, and communicating with healthcare providers from home. Additionally, advances in genomics enable personalized care plans based on individual patient history, risk, and need, further improving patient satisfaction and health outcomes.
3. Tackling noncommunicable diseases
NCDs, which include cardiovascular diseases, chronic respiratory diseases, diabetes, and cancer, are the leading cause of death in Indonesia, accounting for the biggest portion of total BPJS spending. In 2022, NCDs incurred costs up to Rp 24.06 trillion, with a total of 23.27 million cases. According to the WHO, the best way to address NCDs is through prevention, early identification, and effective treatment. With healthcare innovations, including genomics, patients are more likely to receive the correct diagnosis and treatment plan earlier.
Our portfolio companies, Nusantics, NalaGenetics, PathGen, and Mesh Bio are making significant strides in reducing the impact of NCDs. Nusantics and PathGen use biotechnology to create test kits for early detection of cancer and other diseases. NalaGenetics leverages biotechnology and data to enhance patient outcomes and reduce costs. Mesh Bio’s HealthVector® Diabetes service improves type II diabetes care by predicting the potential of complications such as Chronic Kidney Disease, allowing patients to make crucial lifestyle changes to prevent disease progression.
East Ventures’ healthcare focus
In 2023, East Ventures announced our first healthcare-focused fund, amounting to US$30 million, dedicated to supporting innovative healthcare solutions in Indonesia. As part of the East Ventures ecosystem, our healthcare portfolio companies will benefit from additional strategic value to scale their businesses in Indonesia.
Even before the creation of this fund, East Ventures had been actively investing in healthcare startups and companies in the region. Today, we have a portfolio presence throughout the end-to-end healthcare vertical. East Ventures has been at the forefront of genomics-related ventures since 2018, when it was a relatively novel area. We invested in startups such as NalaGenetics and Nusantics, which are now leading the commercialization of genomics-based healthcare solutions in Indonesia and Southeast Asia.
Beyond genomics, our healthtech portfolio includes companies such as Intellect, Diri Care, Mindtera, Riliv, FitHub, Klar, Amili, and Etana. These companies are pioneering advancements in mental health, personalized care, fitness, diagnostics, biotechnology, and other areas of focus. What began as an emerging thesis for East Ventures in 2013 has evolved into a core pillar and area of expertise, from funding to large-scale initiatives.
We are optimistic that the application of technology in healthcare will be one of the most significant opportunities for Indonesia in the next decade. If you are a startup founder building in the healthcare sector, send us your pitch here.
By Maria Marcia, Investment Professional at East Ventures.
