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)