Government to Control Medicine Market

The Jakarta Globe, Dessy Sagita, January 17, 2009

Health Minister Siti Fadillah Supari on Friday announced that the government would impose strict terms on pharmaceutical companies that wanted to do business with the government to make generic medicines more accessible to the public.

Siti Fadillah said pharmaceutical companies, state owned or private, would be allowed to buy raw materials for the production of generic medicines at government-subsidized prices, but would be required to abide by a series of regulations.

Companies that wanted to buy their raw materials elsewhere could do so, but would not be allowed to sell their products in government health facilities or under state health programs, the minister said.

“If they want to buy their materials elsewhere, it is up to them, but they will have to find their own market,” she said.

The supply of raw materials for generic medicines has so far been provided by private distributors.

Siti Fadillah said that losing the government market, estimated to be worth about Rp 4 trillion ($360 million) annually, would present a huge loss for pharmaceutical companies as the government covered all state-run hospitals, regional hospitals, state-run drug stores and community-based insurance programs.

Earlier this week, Siti Fadillah announced that the ministry had earmarked Rp 280 billion in 2009 to subsidize the purchase of raw materials for generic medicine to stabilize prices amid the global financial crisis. Pharmaceutical companies would only be allowed to buy the subsidized raw materials if they have received approval from the ministry and if they sold their products at government-set prices.

The approval would be based on recommendations by the National Food and Drugs Monitoring Agency, or BPOM, after it observed the variances between the amount of raw material purchased and the amount of medicine produced.

The subsidized raw materials could only be used to produce subsidized generic drugs, or OGS, and subsidized brand-named drugs, or OGSM, Siti Fadillah said, adding that OGSM should not be sold at more than three times the price of its OGS version.

The drugs produced should be “fast-moving” medicines, such as antibiotics and pain relievers, as well as life-saving drugs like heart and cancer medications.

She also said that institutions using funds from the state budget or local budgets must only purchase drugs manufactured with the subsidized raw materials, which would consequently make medicine procurement by tender at a regional level unnecessary.

Siti Fadillah said that such tenders often prompted local administrations to choose more expensive drugs as the practice allowed them to obtain commissions from sellers.

She said the ministry was considering establishing a quota wherein 60 percent of each pharmaceutical companies’ production and sales was devoted to OGS, and the rest to OGSM.

“We have to set the quota and the ratio, otherwise every company will only focus on selling OGSM because it’s more expensive,” Siti Fadillah said.