Taxing cancer drugs in Indonesia

Pradono Handojo, Jakarta

After cancer diagnosis, being told the high cost of cancer drugs comes as a second blow.

For those 14 to 15 million civil servants who have health insurance, cancer is more of a health than a financial issue. But for the rest of the population, with an average income of less than US$150 per household, the cost of drugs may inform decisions about cancer treatment.

A breast cancer patient typically requires $1,500 per chemotherapy session for at least six sessions. So a lot of cancer patients or members of their immediate families sell their house, land or car in Indonesia to afford treatment.

One could call this the "good old family values" of supporting a family member in need, I beg to differ and choose to call this a fracture in the government's obligation to fulfill its duty to provide cancer patients with the drugs they need.

There are import taxes, duties and levies for imported raw materials. Then, there is the imposition of value-added tax (VAT) of 10 percent of the pharmacy's net price. So when a patient forks out $10,000 for cancer drugs, she or he pays more than $900 to the state coffers.

So a sick and poor breast cancer patient who sold their family's land has in effect subsidized the Republic of Indonesia. Financial constraints are the number one reason why many people with cancer do not go to hospital until the cancer has already spread.

Cancer drug sales totaled Rp 240 billion (equivalent to $24 million) in 2005. This translated into Rp 24 billion rupiah (or $2.4 million) in VAT revenue

Should the government tax cancer drugs?

Cancer patients have limited options. This is vastly different from, say, tobacco tax/duties, where people are healthy and have a choice to smoke or to kick the habit.

Most cancer patients are depressed, some are suicidal. Close relatives often feel helpless and ignorant when it comes to therapies/treatment options. To tax patients an additional 10 percent for a drug that might save or prolong their life is unethical and even cruel.

Singapore has a GST of 5 percent for drugs but Indonesians can get this 5 percent refunded at Changi airport. Thus, patients pay only the net price. It is no wonder that rich cancer patients go to Singapore for chemotherapy while not-so-rich cancer patients opt for local remedies such as buah merah (red fruit) from Papua or virgin coconut oil -- I am not against buah merah or virgin coconut oil, by the way.

Are any drugs eligible for tax exemption?

Fortunately yes, during the transition from Megawati Soekarnoputri to Susilo Bambang Yudhoyono as president last October some AIDS drugs were exempted from value-added tax.

Sadly, lobby groups have not been as successful in demanding the government ease the financial burden of cancer patients. Cancer can be fatal and often the death occurs much sooner than with HIV/AIDS. People diagnosed with terminal lung cancer usually do not survive past 12 months but people living with HIV/AIDS can remain active and productive for years.

Obviously, the amount of VAT from cancer drugs the government acquires is minuscule. However, it is cancer patients who must shoulder the VAT. Exempting cancer drugs from tax would make treatment more affordable. Compared to tobacco levies, the VAT income from cancer drugs is negligible.

The writer is an alumni of the University of Indonesia's school of medicine, whose father died of cancer and whose mother is a cancer survivor. He can be reached at jackpradono_md@yahoo.com.