National pride vs. common sense

The Jakarta Post
Opinion News - Thursday, October 25, 2007
By: Joshua Livestro, Amsterdam

Indonesia is facing a serious and growing HIV/AIDS challenge. HIV prevalence is increasing strongly, particularly in areas like Papua, Bali and Jakarta. As elsewhere in Southeast Asia, sex workers, their clients and drug users are most at risk. In the latter group, transmission of the virus has increased eightfold since 1998.

The total number of HIV cases in the country is estimated at around 170,000. Of those, approximately 15,000 people with the virus are currently in need of anti-retroviral therapy (ARV). Unfortunately, the Indonesian government and international agencies -- chiefly the World Health Organization and Doctors Without Borders -- are currently only able to provide treatment for 10,000 people. How to bridge the gap?

Originally, Jakarta's preferred approach was to negotiate with western pharmaceutical companies in order to obtain substantial price reductions for patented ARV drugs. This strategy proved quite successful in the 1990s. In 1999, for instance, Indonesia's Working Group on AIDS negotiated a price reduction of around 30 percent from several patent-holding companies.

The turn of the century, however, saw a significant shift in strategy. This change in approach followed a concerted campaign by the National Movement for Improved Access to HIV/AIDS Treatment to shift the government's focus from negotiating price reductions with patent holders to opening the Indonesian market to generic alternatives. Then health minister Achmad Sujudi used the 2003 World AIDS Day to officially mark this change in approach by launching the first permit for the distribution of generic ARVs in the country.

Indonesia has justified this shift in HIV drug policy mainly by using the cost argument. Using generic medicines instead of their patented alternatives would help save precious resources. It's unclear, however, if the data bear out the government's claims. It certainly doesn't in the case of its decision to expropriate a number of existing ARV drug patents.

In 2004 the government invoked the World Trade Organization's "government use" provisions to announce the expropriation of the patents for the ARV-drugs lamivudine and nevirapine. As a result, the government's recommended first-line treatment, a triple fixed-dose combination of zidovudine, lamivudine and nevirapine can now be produced by the state-owned pharmaceutical company Kimia Farma.

The cost per patient per year for this locally produced combination drug is approximately US$430. By comparison: through open markets, Indonesia would have been able to buy the equivalent patented products for $500. Since Kimia Farma is currently only able to produce enough ARV treatments for 2,000 people with HIV, total annual gross savings to the Indonesia treasury amount to no more than $140,000.

With prices for the patented originals falling by more than $850 over the past six years, however, there is every reason to assume the real savings will soon approximate zero. And whatever savings remain in the long run will then have to be used to invest in equipment, training and wages in order to facilitate the continued production of the Indonesian ARV alternative.

Indonesia is rightly proud of its advanced medical science infrastructure. But national pride is a poor substitute for common business sense. If it is cheaper to import life-saving drugs from abroad, then that's where the drugs should come from.

Instead of promoting costly local solutions, the Indonesian government would do better to consider how to make imported drugs available more cheaply. One measure that would increase availability of affordable drugs from abroad virtually overnight is to cut the tariff and tax burden currently imposed on all foreign-produced ARV's.

British health policy expert Roger Bate estimates that Indonesian drug prices currently stand 14.1 percent above original import prices. These tariffs and taxes imposed by the Indonesian government effectively serve not as a burden on pharmaceutical companies, but as a tax on the sick. Together with non-tariff barriers like lengthy registration periods for medicines and laborious custom clearance procedures, they seriously limit patients' access to life-saving medicines.

Indonesia's policy-makers must choose. They can either continue the current course of pricing foreign patented ARV drugs out of the market in return for a mere 0.006 percent of additional government revenue, relying instead on costly locally produced alternatives. Or they can do the right thing by abolishing the existing tariffs, taxes and non-tariff barriers, giving an immediate boost to the survival chances of all Indonesian people living with HIV/AIDS.

The writer is an independent health policy expert and a columnist with Dutch newspaper De Telegraaf.

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