Pharmaceutical industry: Torn between business and conscience

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.