Undoing the Trap of Imported Pharmaceutical Raw Materials
If phytopharmaceuticals are developed more seriously, including market certainty, good prospects lie ahead for Indonesia to be able to reduce dependence on imported BBO or finished pharmaceutical products.
President Joko Widodo is irked by Indonesia’s huge dependence on imports for drugs, pharmaceutical raw materials, and medical equipment. He wants to not just reduce the imports, but stop them altogether.
"Speaking about health equipment, drugs and raw materials for medicines, we have to stop importing these items. We must produce them ourselves in our [own] country," the President said on 27 Dec. 2021 at the groundbreaking ceremony for the Bali International Hospital in Denpasar.
Of course, we must support this good intention, but apart from medical equipment, do we have the capacity to stop importing raw materials for manufacturing drugs? Can we rely on our upstream pharmaceutical industry?
Indeed, for finished pharmaceutical products (FPP), the domestic pharmaceutical industry has been able to meet around 90 percent of the nation’s demand for medicinal drugs.
However, the demand for pharmaceutical raw materials (BBO) still highly depends on imports. In fact, the country’s dependence on imports for BBO and medical equipment has been extremely stifling.
Industry Ministry data show that demand for BBO in 2020 was largely met by imports at 92 percent, most of which came from China and India. The figure is a 2.72 percent decrease from that in 2019.
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This means that 94.72 percent of the BBO demand in 2019 was imported, with only 5.26 percent catered to by drug manufacturers in the country.
Referring to global data provider CEIC Data, from January to September 2020 during the COVID-19 pandemic, Indonesia imported BBO amounting to US$4.89 billion, or around Rp 70.9 trillion (at a rate of $1 to Rp 14,500).
The figure comprised HS Code 28 (chemicals and inorganic materials, under the Harmonized Commodity Description and Coding System, or HS) worth Rp 16.5 trillion and HS 29 (organic chemicals) totaling Rp 54.2 trillion. With additional imports of HS 30 (pharmaceutical products), pharmaceutical imports in January-September 2019 totaled Rp 83.375 trillion, equivalent to $5.75 million.
Specifically for drugs and pharmaceutical products, the volume of imports has continued to increase sharply. In 2003, imports of drug and pharmaceutical products totaled $147 million. In 2003-2020 annual imports averaged around Rp 6.5 trillion. In 2019, around Rp 8.7 trillion in pharmaceutical imports were recorded. And in 2020, to face the Covid-19 pandemic, imports shot up to Rp 10.9 trillion.
The rather encouraging news was that BBO imports are showing a downward trend even though the decline has been meager. In 2020, BBO imports were 92 percent, down 2.72 percent compared to 2019. The decline in imports is expected to continue, as long as investments increase in the upstream pharmaceutical sector, especially in BBO production.
Muhammad Taufik, the Industry Ministry’s director of the downstream chemical and pharmaceutical sector, has estimated a further decrease in BBO imports, which reached just 74 percent in 2021.
In line with the government policy on BBO demand, state-owned Kimia Farma formed PT Kimia Farma Sungwoon Pharmacopia (KFSP) in 2016, in cooperation with a South Korean drug maker.
The joint venture has built a BBO production facility with an installed output capacity of 4.2 metric tons (MT) for simvastatin, 0.7 MT for atorvastatin, and 7.6 MT for clopidogrel as well as entecavir.
Meanwhile, the two BBOs with the largest production capacity are PVP iodine (84.83 MT) and rifampicin (67 MT), of which production for both will start in 2023.
US, China, India also importers
Indonesia imports the largest volume of BBOs from China and India, which are known as BBO production giants. China is not only a leading producer of BBO, but also a supplier of finished pharmaceutical products, including phytopharmaceuticals, or herbal medicines.
China is the leading producer and exporter of active pharmaceutical ingredients (APIs), accounting for 20 percent of total global API production. At present, China produces more than 2,000 APIs at a production capacity exceeding 2 million tons per year. Its API export market even includes its rival, India.
However, like India, Chinese manufacturers are beginning to shift their production from APIs to FPPs because the turnover margin for FFPs is reportedly higher than for APIs.
While it is a large API producer, China is also a large importer of APIs for use in domestic formulations, with the United States being its largest supplier. China’s API imports in 2014 were valued at around Rp 185 trillion. The high cost was primarily caused by the price of patented drug products.
In 2015, China imported APIs worth $8.5 billion and $4.9 billion in biochemical materials. Imports of Western medicines totaled $26.2 billion. (https://www.who.int/phi/publications/2081China020517.pdf)
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Apart from China, we also import large quantities of BBOs from India. On the other hand, India has turned to China to meet 68 percent of its API demand in at least the last three years.
In 2018-2019, India imported API worth $2.4 billion from China, or 67.56 percent of its total imports valued at $3.56 billion (https://timesofindia.indiatimes.com). Likewise, certain antibiotics, such as cephalosporins, azithromycin, and penicillin were also imported from China to meet up to 90 percent of domestic demand.
So, Indonesia imports BBOs from China and India, but apparently India also imports certain pharmaceuticals products from China. Likewise, China still depends on imports from the US for certain products.
This shows that no large country is able to meet 100 percent of their demand for BBOs, APIs, and FPPs through domestic production. Each is dependent on other countries at varying degrees.
To reduce Indonesia’s dependence on health imports, the Industry Ministry has issued Ministerial Regulation (Permenperin) No. 16/2020, which regulates the local content requirement (TKDN) for labor, machinery, and materials, which is given more weight in terms of value relative to the investment value.
Raw materials weigh in at 50 percent, research and development 30 percent, production up to 15 percent, and packaging 5 percent.
This ministerial regulation is expected to encourage the growth of the national BBO industry and reduce the country’s dependence on imports. In general, the ministerial regulation states that domestic industrial products containing 40 percent TKDN must be absorbed through the national procurement mechanism, which is funded by the state budget (APBN) or regional budgets (APBDs).
The ministerial regulation deserves appreciation, but needs to be supported by a mechanism that will ensure that pharmaceutical products with 40 percent TKDN have a domestic market, purchased by government hospitals, health centers, and other healthcare facilities, and that they are included in the procurements list of the National Health Insurance. (JKN).
This is in line with the aspirations of the Indonesian Pharmaceutical Manufacturers Association (GPFI), whose chairman Tirto Kusnadi has stated that one way to encourage upstream investment in the pharmaceutical industry was to guarantee a market.
Pharmaceutical products with local content above 40 percent will certainly help expand the domestic market for BBOs. GPFI consumes BBOs in the range of 3-6 percent of total global production. The US accounts for 5-6 percent. However, foreign pharmaceutical industries would be impacted if the BBO industry in Indonesia grew big and strong, because it would reduce the volume of their exports to Indonesia.
State-owned Enterprises (SOE) Minister Erick Thohir said to suppress imports of BBO and finished pharmaceutical products, state-owned Indofarma would develop the herbal medicine (phytopharmaceutical) industry.
Data shows there are at least 23 items of phytopharmaceuticals or Indonesian Modern Medicines (OMAI) on the market. Among them are DISOLF (Lumbrokinase), a substitute for clopidogrel whose raw material is earthworms from Sukabumi; INLACIN, which is extracted from Lagestroemia speciosa and Cinnamomun burmanii; metformin substitute from Kerinci, Jambi; as well as celery extract (Apii herba) and kumis kucing [lit. cat whiskers] extract (Orthosiphon folium) for mild hypertension.
The State-owned Enterprises Ministry under Erick has merged a group of state-owned health entities in an effort to improve the company's resilience and self-sustainability. Bio Farma is now the holding company that oversees Kimia Farma, Indofarma, and a number of hospitals under the umbrella of the Indonesia Health Care Corporation (IHC).
As the holding company, Bio Farma is expected to be able to open up opportunities in the health industry, such as vaccine industry that Bio Farma has been engaging in for a long time.
It should be noted that Bio Farma is already known as a world-class vaccine producer. The Merah Putih vaccine first developed by Bio Farma in mid-December has already started clinical trials.
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With the production expected to begin in July, there will be 77 million doses of the Merah Putih vaccine by the end of the year so that our country does not need to import anymore.
While Bio Farma can become a world-class vaccine producer, Indofarma should also be developed into becoming a world-class producer of herbal medicines or phytopharmaceuticals.
As a huge tropical country, Indonesia is known as the number two country in the world with biodiversity after Brazil.
With this huge potential, the sources of raw materials for phytopharmaceuticals are abundant. Unfortunately, our phytopharmaceutical industry is still lagging behind in terms of research and development, industrial infrastructure, and supporting regulations.
Dexa Laboratories of Biomolecular Sciences (DLBS) executive director Raymond Tjakrawinata once disclosed that the use of herbal medicines in Germany reached 53 percent.
In China, which is known as the largest producer in herbal medicines, the use of herbal medicines is still 30 percent and South Korea, which is famous for its ginseng, 20 percent. Indonesia as a tropical country rich with medicinal ingredients in nature still lags far behind.
Then-research and technology minister Bambang Brodjonegoro (2020) once said that one way to reduce Indonesia’s dependence on imports was to promote herbal medicines, or Indonesian Modern Medicines (OMAI).
He deplores medical doctors in Indonesia were not used to prescribing herbal medicines for their patients because they had long been accustomed to chemical drugs.
If doctors are still reluctant to use OMAI and disinclined to propose it to be included in the list of reference drugs as part of the National Health Insurance (JKN), the herbal medicine industry will also be lukeworm about increasing investment in research and development.
OMAI has yet to be made a JKN reference drug because it is not included in the Health Minister regulation No. 54/2018. Hence, the Healthcare and Social Security Agency (BPJS Kesehatan) does not take claim for disbursement for the purchase of herbal medicines.
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This is what has made herbal medicines not optimally developed, as it is treated only as a supplement. With it not being on the JKN policy, it is difficult to compete with chemical drugs whose raw materials are still dependent on imports.
Entrepreneurs appreciate the issuance of the Health Minister regulation No. 153/2020, which provides incentives in the form of tax cuts for the herbal medicine industry. However, with the ministerial regulation still fledging, it needs a process to allow the Indonesian Doctors Association (IDI) and the Medical Herbal Doctors Association (PDHMI) to actively get involved in the OMAI promotion. The most effective way is for it to be entered in the realm of JKN.
Herbal medicines that can be approved by the Food and Drug Monitoring Agency (BPOM) are those classified as standardized herbal medicines (OHT), which are processed according to pharmacological standards and medical testing for their efficacy and safety.
Doctors and pharmacologists generally think that the healing process of herbal medicines are still low, giving effects not as fast as chemical drugs.
However, standardized herbal medicines are believed to have far lower contraindications and side effects and are therefore generally safer than chemical drugs.
Thus, if this phytopharmaceuticals are developed more seriously, including market certainty for possible entry to JKN, good prospects lie ahead for Indonesia to be able to reduce dependence on imported BBO or finished pharmaceutical products.
And, our biodiversity will certainly lead Indonesia to become a world-class producer of phytopharmaceuticals. Hopefully!
Djoko Santoso, Professor of Medicine at Airlangga University, chairman of the MUI Health Board, East Java
This article was translated by Musthofid.