Unbranded generic medicines
As noted, many unbranded generic medicines are manufactured and marketed by state-owned enterprises. Since the late 1980s, however, private companies, such as Dexa Medica, Hexpharm and others, have also produced and marketed generics. But the four state-owned companies in this market segment together command a higher market share than their private counterparts. Price levels of unbranded generics are regulated and not left to market forces, as is the case in some countries. The MOH determines the price level for generic products, and the maximum price ratio for branded generics is three times the price for unbranded generics for supply to governmental premises. The intention of the government to reduce the price of generics was demonstrated in the 2004-2007 period, when eight regulations on generics prices were introduced (DepKes, 2007). Although the prices of unbranded generics have long been regulated and tend to be lower than in other categories, their usage is very low, at around 10 per cent of total drug expenditure during the last decade (Data Compilation, 2011). When the national social security system is implemented in 2014, however, it is expected that the use of unbranded generics will increase.
The state-owned companies, which are the biggest suppliers of generics, have had difficulties in meeting profit targets laid down by the Ministry of State Owned Enterprises. As noted, branded generics companies can price their products maximally three times above the prices of non-branded generics, and have to print the price level (for better transparency) on the original boxes (DepKes, 2006b, 2007). Despite previous instructions from the MOH, the Minister in 2010 again had to urge doctors to prescribe unbranded generics, as their low market share continued to prevail (Bland, 2009). Opportunities to extend their market share (as is the case in many countries) may well be achieved through a focus on better supply chains and incentives for retailers by allowing higher margins (Babar et al., 2007; Narciso, 2005). It also seems that Indonesian regulators could do more to achieve greater accessibility to generics, but further changes seem necessary to match countries like China (Chui, 2009). The difference between China and Indonesia is largely a consequence of the greater availability in China of health insurance, which has not yet been developed in Indonesia. Similarly, in Japan, government support is expected to enable generics to reach 30 per cent of market share in 2013, and lessons for the Indonesian government in generics promotion are readily available from many other countries, including the mature generics markets in Europe (Simoens, 2009).
In Indonesia, as noted, the market share of generic products is still very low. During the period 2005-2009 the market share for generics decreased from 10 per cent to 7.2 per cent of the total market, or from IDR 2.5 trillion to IDR 2.4 trillion of a total market of IDR 23.5 trillion to IDR 32.9 trillion (Ditjen Binfar dan Alkes: Informasi Program and Kegiatan, 2010). For this market segment to gain ground would need better regulatory support and better promotion to resistant consumers to correct information asymmetries. Ahlquist et al. (2010), for example, argue that consumers need to be educated effectively about the value and costs of their drug purchasing decisions. In modifying purchasing behaviour, carrots (incentives and transparent information) often work better than sticks (restrictions and fines). Despite this, to date few such programmes have been undertaken in Indonesia to educate patients or improve health literacy measures, which would allow patients to understand more about healthy living and drug use in general, and the use of generics specifically. One programme being enacted by the MOH, however, is the promotion of self-medication of some medicines for common indications. These medicines are offered in packs of limited quantities and priced cheaply, at around ten US cents per pack (Ananto, 2007).
As already noted, prices of pharmaceutical products are regulated. During registration, companies must supply the prices of their own and competing products. The aim is that patients should benefit not only from better efficacy offered by a new product, but also financially. The Association of Pharmaceutical Enterprises of Indonesia was successful in introducing a price calculation that considered a ratio between the factory gate and margins for the distributor, and other ratios for the mark-ups of distributors and pharmacists. Margins for pharmacies are commercially viable, as long as the price level is high. There is also a regulation pertaining to clear printing of prices on packages to provide transparency for the consumer (DepKes, 2006b). Because the government reduced the price level of generics on eight occasions between 2004 and 2007, however, official prices are now so low as to leave insufficient margins in real terms for pharmacies. This is not the situation in many other countries with price controls, where such calculations allow reasonable pharmacy margins (Babar et al., 2007). It is, therefore, not surprising that many Indonesian pharmacists are reluctant to handle generic products as compared with higher-priced branded generics.
In the context of health insurance, the state insurance body Askes has introduced a system of price standardization of products after a stringent process of screening for the drug formulary in the so-called List and Ceiling of Drug Prices (DPHO) (PT Askes (Persero), 2005). As detailed above, however, people covered by Askes make up a small percentage of the Indonesian population. Most people not covered by any insurance scheme pay for medicines from their own pockets and usually do so at the 10,000 pharmacies and 7000 plus health centres.
