Reform to make pharmaceutical firms efficient

Reform to make pharmaceutical firms efficient

JAKARTA (JP): The deregulation of the pharmaceutical industry
will not bring down drug prices but will surely make local
pharmaceutical industries more efficient, industry executives
claim.

Chairman of the Association of Indonesian Pharmaceutical
Companies, Anthony Ch. Sunaryo, said on Tuesday that if the
deregulation does not force down the prices, it would at least
keep drug prices stable.

"If the prices of drugs do not increase for a certain period
of time, it means that we have already lessened prices because we
import more than 90 percent of the raw ingredients," Anthony said
after opening a seminar on the pharmaceutical industry at Hotel
Horison.

He added that the government's reduction of import tariffs on
a number of drug ingredients will not significantly affect the
prices of drugs.

"Before the government took the last deregulatory measures,
import tariffs on most drug raw materials, especially those which
are not produced locally, are already very low, in the range of
zero to five percent," Anthony said, referring to the
deregulation package announced on May 23.

Import tariffs

The deregulation package cut the import tariffs on drug
ingredients by an average of five percentage points to 20
percent, especially for ampicillin and amoxycillin, and 15
percent for paracetannol.

The package also cut import tariffs on pharmaceutical products
to a maximum 30 percent from the previous maximum of 40 percent.
The highest tariffs of 30 percent will be cut further to 20
percent by 1998 and to 10 percent by 2003.

Minister of Health Sujudi noted in his keynote speech that
Indonesia's pharmaceutical industry will have to be ready to face
global competition by 2003.

"That's why we have to condition them to sell their products
below international prices, so that by the time the real
competition is unleashed they will be able to compete with
foreign markets," Sujudi said.

The minister noted that some local companies have actually
been able to compete globally. He cited as an example the state-
owned pharmaceutical company Perum Bio Farma which won an
international tender worth US$2.3 million for the supply of polio
vaccine to Unicef.

The Bandung-based Bio Farma, which produces intravenous
solutions and diagnostics in addition to vaccines, is the only
company appointed by the government to supply polio vaccine worth
some Rp 30 billion (US$13.5 million) for the national vaccination
weeks in September and October.

Anthony said the new deregulation package which practically
liberalized the domestic drug market in Indonesia will create
fiercer competition in the Indonesian drug market.

"Foreign-owned pharmaceutical companies will bring more of
their products into domestic markets, and therefore competition
will become fiercer and it will force locally-owned entities to
improve their efficiency," Anthony said.

Barriers

According to Presidential Decree No. 31/1995, which is part of
the deregulation package, the drug formulation industry is
excluded from the negative investment list, meaning that foreign
investors may enter the sector without any barriers.

Andayaningsih, director of drug administration at the Ministry
of Health, said that foreign pharmaceutical companies were
formerly required to export 65 percent of their products. The
deregulation package, however, removed the export requirement and
new drug makers can now sell all their products locally.

Foreign pharmaceutical companies are trying hard to seize a
bigger portion of the local drug market, worth about US$700
million.

"The use of drugs in Indonesia is the lowest among the
Association of Southeast Asian Nations, amounting to only US$5
per capita for last year," said J.R. Kosasih of the association.
(rid)