Easy Read- Indonesia\’s Pharmaceutical Industry

So Expensive..Why?

Like a breath of fresh air, when people are complaining about the high price of medicine in this country, GP Farmasi announced that they would cut the price of 1000 branded generic drugs, not just a little cut but up to 50-60 % cut. That put branded generic drugs price only 3 times higher than the non -branded ones (Kompas 20 May 2006)

Well yes, still expensive

By the way before going any further, banded generics are still generic drugs, with brands. Probably given brands for commercial reasons, but the quality should be the same.

You won’t believe how little you know about medicine in general. You might not even care about it until something happens to you or to your love ones (knock on wood), and after all the emotional crisis you’ve gone through in the end or sometimes in the middle you are faced with another bitter experience called paying the bill.

The biggest part of the bill you pay be it for the hospitalized patient or out patient, is usually for the medicines. And why medicines are so expensive?

There are several reasons, here are some among others:

  1. Expensive Research and development (R&D) cost. This is especially for patented drugs. Because to come up with one drug, a pharmaceutical company has to do the R&D for about 12 years and that costs them about $800 million (Parulian Simanjuntak, Executive Director of IPMG)
  2. Marketing Cost, this one is pretty obvious
  3. Import Raw Material. About 90% of raw materials for medicines in Indonesia are imported. Now, it would help a lot if we develop our pharmaceutical upstream industry so we can provide the raw materials with in the country.
  4. 10% Value added Tax Indonesia. Indonesia VAT imposed on drugs is one of the highest among the region.
  5. High Distribution Margin : Indonesia is a big country, distribution can cost a lot of money.

But basically, the most thing that cause drugs being so expensive is the R&D cost. The pharmaceutical company needs to gain back this more- less $800 million research cost so they can continuously conduct research for other drugs. That’s sort of understandable. But what about generic drugs, why are they so expensive in Indonesia? What’s their excuse? Because they don’t spend much on R&D, generic drugs, branded or non branded are only copies of the patented drugs.


Though R&D is actually the key to successful drug manufacturing, domestic companies only set aside an average of 1 percent from their revenue on product development as compared to at least 10 percent allocated by companies in developed countries

“R&D is an expensive and speculative investment. That is why local companies prefer to just manufacture drugs from already licensed formulas,” state-owned pharmaceutical company PT Kimia Farma president director Gunawan Pranoto said. (Jakarta Post March 20, 2006)

The answer to the questions above could lead to a loooong discussion or more likely debate and might reach a conclusion in the end. Which we all would love to know…..


July 1, 2006 - Posted by | Simple writings

1 Comment »

  1. Terus terang saya nggak yakin obet generik kualitasnya sama dengan obat paten krn pengalaman berkali2 minum generik sembuhnya lama banget dibanding obat paten, terutama antibiotik …

    Comment by Azalea Samsudin | September 3, 2015

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