Pharmaceutical Advocate
    Category: Health is Wealth By : Sonya Angraini Read : 1261 Date : Tuesday, August 11, 2015 - 19:57:00

    Santirta Martendano for Forbes Indonesia

    Indonesia is a big country, but in terms of the pharmaceutical industry, it has lagged behind neighboring countries, such as Malaysia and the Philippines. Consumption per capita of medicine is just $117, while Malaysia spends around $551 per person and the Philippines $133 per person. The pharmaceutical market in Indonesia last year was about Rp 58 trillion, with a 70% market share for local companies and 30% for international companies. Annually, the industry growth is around 12%. While the growth has been good, there is still much potential, says Parulian Simanjuntak, executive director at the International Pharmaceutical Manufacturers Group (IPMG), a trade body for international pharmaceutical firms in Indonesia. However, there are some barriers faced by international pharmaceutical companies that need to be addressed first, he says.

    There are many grey areas in pharmaceutical regulation, as well as unnecessary protection of local pharmaceutical firms, according to Parulian. The regulations have many loopholes, thus IPMG is proposing to revise the regulations. One of them is the negative investment list. Being on the list, the ownership of foreign investment in pharmaceutical firms is limited to 85%, as part of the government effort to spur cooperation between international and local companies. Parulian thinks otherwise. According to him, the partnership is hard to implement because most pharmaceutical companies are mature, so they already have their own business plans in the pipeline. “There are many things to consider. There is the issue of intellectual rights as well,“ says Parulian.

    International companies are also required to establish a factory if they want to register and market the products in Indonesia—another move from the government so that Indonesia does not only function as a market, but also a producer. It is a good thing, but Parulian sees the decision as promoting inefficiency. “Currently, the Indonesian market is too small for each company to have a factory,” he says. To comply with the regulation, companies that don’t have factory use third parties to register their products. Parulian notes that it will increase production costs, which lead to higher prices for medicine.

    To avoid higher prices, the government finally agreed that companies that are already in Indonesia before the regulation came into effect are exempted from the obligation. “There is always an exit clause in every regulation,” says Parulian. While it may look like a good thing, he notes that the clause implicates ambiguity and caused uncertainty.

    Another concern is the Halal certificate for medicine. Parulian claims that this regulation cannot be implemented due to the definition of Halal itself. In the regulation, Halal is defined as something that does not contain, come from and is not in contact with banned components. He explains that the test results for medicine do not show the use of banned components, so there is no guarantee that the production or the distribution process complies with the regulation. Parulian notes that Halal certificate is intended only for food and beverages. “We can choose freely which food we want to eat, but we can’t choose our medicine because it is prescribed by physicians,” he adds.

    Excessive protection is another concern of IPMG, especially in the implementation of the national health insurance (JKN) program. Parulian notes the JKN program requires pharmaceutical firms to sell generics in a certain price range determined by JKN. International pharmaceutical firms are best known for their branded medicine, which have higher prices. With the implementation of JKN, these international pharmaceutical companies must create generics. Parulian says that these companies can create medicine with lower prices, but it will have no label. “Unfortunately, this is not allowed in Indonesia,” he says. “If lower price is the criteria, why can’t we offer our products?’

    The existence of international pharmaceutical companies has raised several questions, one of them being on the establishment of R&D facility. Parulian explains that R&D in product development can take years, as it requires clinical trials, even after the medicine is launched in the market. It is also very expensive. The research for one new product can be $2.4 billion, according to Parulian. “Our market is only around $5 billion, so there is no way we can bear the cost of R&D in Indonesia,” he says. He also adds that most international pharmaceutical firms allocate 15% of their sales to R&D, while local companies allocate no more than 5%. Good R&D needs good researchers, which are very difficult to find in Indonesia. Physicians can do their own research, but it will likely lower their income. Parulian says there should be an incentive to motivate people to become a researcher.

    Last but not least is the distribution of counterfeit medicine in the market. Parulian says that counterfeit medicine is an international phenomenon. The business is very lucrative, but the players only get light punishment. “A $1 investment in drugs and narcotics brings less profit than a $1 investment in fake medicine,” he says. Counterfeit medicine is also difficult to trace. To know whether it is a counterfeit or not, the medicine must be tested in a laboratory. IPMG realizes that it cannot control the supply chain of fake medicine, but it can affect the demand by increasing awareness through seminars, education and training. Parulian adds that a lack of supervision is the main cause for increasing amounts of counterfeits. “There should be a good paper trail on the production and the distribution of medicine, until it reaches end users,” he says.