Pharmaceutical industry: Torn between business and conscience

T. Hidayat, Contributor, Jakarta

Medicines are bitter, so goes one Indonesian saying. However, the makers of medicines -- the pharmaceutical industry -- is having a sweet time businesswise.

The industry was even unaffected by the economic crisis that hit the country in 1997. The Rp 4 trillion sales figure of 1997 increased by 25 percent to Rp 5 trillion in 1998. Another increase of 20 percent took the sales figure to Rp 6 trillion in 1999, while the year 2000 saw an enormous increase of 50 percent to Rp 9 trillion. The number has been on the rise ever since with sales for this year estimated to reach above Rp 17 trillion (about US$2 billion).

Compared to total sales worldwide -- US$400 billion -- the country's market is currently only 0.5 percent, while the actual potential for pharmaceutical sales in Indonesia is estimated at about 3.5 percent. If this estimate is correct, then it is only good news for manufacturers here, theoretically at least, to continue partying.

However, they are fully aware of the harsh reality that may not accelerate sales as expected. One of the hindering factors is spending per capita allocated for health in Indonesia is only US$5 annually, which is lower than Malaysia's US$12 and even much lower than the neighboring city-state Singapore where it is US$40. Next to consumers' low purchasing power, the government is also expected to improve its programs to provide health care for the people, especially the poor. That will help turn the wheels of the pharmaceutical business faster.

In spite of the discrepancies or limitations, more than 200 manufacturers are competing locally. Some local companies are even innovative enough to turn out new and alternative medicines.

"I'm glad that locally owned manufacturers haven't lost their creativity," said Sofiarman Tarmizi, secretary general of the Indonesian Association of Pharmaceutical Manufacturers.

Even state-owned companies, like Indofarma, are in high spirits. In cooperation with Oxford University, England, Indofarma has launched various modern jamu (herbal medicines), like Prolipid, with aggressive advertising. Worldwide the market for herbal medicines is growing, as indicated by these sales figures: in Germany 4.5 billion Euro, in the United States US$4.4 billion and in the country famous for herbal medicines, China, it is the highest, US$6 billion. In Indonesia it is still hovering at only US$120 million.

Just like their counterparts, the non-prescription over-the- counter medicines, herbal medicines are also marketed the way consumer goods are, using modern marketing methods that include creative and smart advertising. This indicates the readiness of manufacturers of herbal medicines to compete in an open market.

For manufacturers, though volumewise the market of over-the- counter products is huge, larger profits lie in those that are prescribed by doctors, the ethical medicines. Over-the-counter medicines enjoy 60 percent of total sales, however the revenue contributed by ethical products is higher, 65 percent. So, obviously, companies rely on the ethical drugs for their fat margin.

Promotion costs for ethical products are comparatively low, as no conventional advertising on a massive scale is necessary. However, the only promotion method allowed -- directly to the doctors -- has raised some dubious business practices. The power in a doctor's hand -- to prescribe a certain drug -- has inevitably created a symbiotic, mutually beneficial relationship between the doctor and the company. This unethical conduct has led to the exorbitant price tags of numerous ethical medicines in the country.

Though admitting that things have not improved much, Sofiarman believes that the association is getting results from its lobbying the member companies to eradicate illegal conduct. After all, he added, medicine is associated with health and health is a basic human right.

Another factor to be taken care of by pharmaceutical companies is good manufacturing methods. Reintroduced here in 1990, the implementation by a number of companies is yet to reach the set standards as indicated by data available from the Food and Drug Supervising Agency (BPOM) in regards to quality of raw materials, product-stability test and so on.