PROJECT INFORMATION DOCUMENT (PID) CONCEPT STAGE Report No.: AB2102 Project Name. National Agency for Drug and Food Control Project Region

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1 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized PROJECT INFORMATION DOCUMENT (PID) CONCEPT STAGE Report No.: AB2102 Project Name National Agency for Drug and Food Control Project Region EAST ASIA AND PACIFIC Sector Health (100%) Project ID P Borrower(s) GOVERNMENT OF INDONESIA Implementing Agency National Agency for Drug and Food Control Jl. Percetakan Negara No 23 Indonesia Tel: +62 (0) Fax: +62 (0) Ministry of Finance Indonesia Ministry of Finance Jl. Lapangan Banteng Timur No 2-4 Indonesia Tel: +62 (0) Fax: +62 (0) Environment Category [ ] A [ ] B [ ] C [ ] FI [X] TBD (to be determined) Date PID Prepared January 18, 2006 Estimated Date of May 31, 2006 Appraisal Authorization Estimated Date of Board Approval October 3, Key development issues and rationale for Bank involvement Among the core public health functions, one of the most important is assuring food and drug safety, important contributors to good health. In Indonesia, diarrhea caused by unsafe food leads to substantial morbidity and mortality 1, intakes of toxic substances in food over long periods of time also cause disease, especially in vulnerable populations. The threat of avian flu has reinforced the importance of food safety, especially for food-borne zoonoses. Pharmaceuticals form an important, often life-saving, component of treatment for many diseases; treatment of various health conditions may be compromised by substandard (and counterfeit) drugs and, in the case of infectious diseases, may lead to drug resistance. Apart from their direct health effects, both food and pharmaceuticals make important contributions to the economy. The total value of the food sector, half of which is processed, is estimated at US$22 billion; food exports are US$3.7 billion; there are 5,922 large food 1 DHS 2003; Agtini et al (2005) The burden of diarrhea, shigellosis, and cholera in North Jakarta, Indonesia: findings from 24 months surveillance. BMC Infectious Diseases 2005, 5:89 1

2 processors, more than 1 million small and home food processing industries; and the industry employs in excess of 2.5 million people. Half total expenditure of the average Indonesian is on food and beverages, more than one-third of that amount on processed food. The total pharmaceutical market is estimated at US$2.3 billion of which US$1.4 billion is for prescription drugs; exports exceed US$100 million while imports are approximately twice that amount. The increased export and import of both food and pharmaceuticals has brought increased demands to facilitate trade through harmonization of standards and guarantees that food and drugs presented for export and import are of acceptable safety and quality. In recognition of the health and economic effects of food and pharmaceuticals and the importance of assuring food and pharmaceutical safety and quality in domestic and international trade, many governments, including GOI, set up agencies charged with the responsibility of ensuring food and pharmaceutical safety. In Indonesia, the government agency which carries the main responsibility for assuring the safety and quality of pharmaceuticals and food is the National Agency for Drug and Food Control (NADFC), a non-departmental agency created in 2001 which reports directly to the President 2. The NADFC works in collaboration with other ministries (especially Agriculture and Health), and levels of government which also have some responsibilities for control through, for example, licensing of factories, restaurants and apotiks and drug stores. The main challenges for the NADFC in meeting its objective of ensuring the safety and quality of the nation s supply of food and pharmaceuticals are: Responding to an increased regulatory workload which derives from o ongoing monitoring of those products already on the market - currently 37,000 food products and 6,000 pharmaceuticals sold through formal outlets (11,000 apotiks and registered drug sellers; food retailers and supermarkets); o the need to ensure that the Agency has an adequate laboratory capacity both at the center and in the provinces this requires ensuring that the laboratories are adequately equipped and staffed to meet the demands of both an increased work load and new analytic approaches as they are developed. o approvals for new products as they are developed and presented for registration - 20,000 food products registered between 2001 and 2005; 3500 new applications for o pharmaceuticals in 2004; the need to increase coverage of control activities to the informal market for food and pharmaceuticals, markets preferentially used by the poor, where the risk of substandard and contaminated products is greatest. There are no detailed data on the size of the informal market for drugs through private health practitioners and an unknown, but large, number of informal outlets for drugs; experienced observers estimate that it may be as much as half the size of the formal market for pharmaceuticals. For food, informal production and marketing is through the 1 million small and home food processing industries and the 2 million street vendors and village stores. Improving integration of control activities within the NADFC and between the NADFC and other ministries and levels of government to allow more accurate identification of critical safety and quality points in the production and distribution system and more costeffective control activities. While the main responsibility for food and pharmaceutical control 2 Details on the National Agency for Drug and Food Control are given in Annex 1. 2

3 lies with the NADFC, several other ministries and all levels of government are also involved. The need to clarify functions and further integrate control activities across ministries and levels of government was an important impetus to the creation of the NADFC. Greater involvement of the consumer in ensuring that the food and drugs consumed are safe and of good quality this is particularly important in addressing the safety and quality issues in the informal markets for both food and pharmaceuticals where demand side interventions have the greatest potential for improved food and pharmaceutical safety. Although both the food and pharmaceuticals sections of the NADFC have some activities directed to consumers they are limited and there are considerable opportunities for revising the approach and expanding the scope of these activities. The NADFC and Bappenas have requested the Bank to collaborate with NADFC to address these issues. Assisting the government in this way has strong links to the CAS in two ways: first, increasing control activities in the informal markets for both food and pharmaceuticals, markets preferentially used by the poor, is directly related to the CAS objective of making service delivery more responsive to the needs of the poor; second, assisting the NADFC to integrate and rationalize activities across ministries and other levels of government will contribute to the core issue of governance by clarifying functions for each level of government and reinforcing one of the main responsibilities of central government, delivering public goods through its regulatory function. The rationale for the Bank s involvement is fourfold: first, the government, although it has sought and received input from bilateral agencies, prefers to draw on more than one national model, an approach which is much easier under a project from the Bank which has broader access to international experience; second, most high income countries do not have to contend with issues related to informal markets and relevance to the poor this is an area in which the Bank has a broader and more relevant experience; third, the design, implementation and evaluation of large scale provincial pilots is also much more possible within the context of a Bank operation than it is in most bilateral projects; and fourth, there is little interest from bilaterals in the type of operation proposed here despite strong interest from the government. During an identification mission it was agreed to address the main food and pharmaceutical control issues through a project with the following objective: 2. Proposed objective(s) To improve the safety and quality of food and pharmaceuticals by strengthening the food and pharmaceuticals quality assurance management system. Project indicators will measure the proportion of food and pharmaceuticals complying with Indonesian standards (or other standards, where appropriate) using independent baseline, midterm, and end line surveys and agreed sampling procedures for each commodity class. 3. Preliminary description The project will be implemented through the central NADFC and, based on the main challenges faced by the Agency, will have four components as follows: (a) Strengthening the food and pharmaceuticals control systems: the objective of this component is to ensure the standard level of safety and quality is achieved. In response to the 3

4 rapidly increasing regulatory burden, on-going changes in production processes, and the continuing need to protect the public from substandard and contaminated products, some other national regulatory agencies have recently moved to risk-based approaches (risk assessment, risk management and risk communication) to food and pharmaceutical regulation. This has allowed the agencies to more effectively allocate their limited regulatory resources (for example, by prioritizing the overall balance between inspections of Good Manufacturing Practices (GMP) and/or Good Distribution Practices and laboratory testing, and selecting the manufacturing/processing sites to be selected for inspection) while keeping pace with advances in manufacturing and processing techniques. The NADFC has already moved to investigate these new approaches: in pharmaceuticals a recent consultancy described a quality system for GMP inspection; for food, recent collaboration with AusAID has described an approach to improved food safety using risk analysis principles. The next steps, for both food and pharmaceuticals, are to build on what has already been done. Through the project, the NADFC will: 3 3 Extend the risk analysis to cover the whole market, formal and informal Rationalize control activities based on priorities set using the risk analysis approach with the goal of improved cost-effectiveness while maintaining agreed levels of public safety. Realizing the benefits of this new approach will also require steps to 3 Integrate control activities for drugs and food within NADFC, across ministries and with other levels of government. Although the Agency has authority to inspect and test commodities at all levels of the food and drug system and to implement a range of remedies (e.g. recall of contaminated or substandard products), the authority for some remedies lies with other ministries and levels of government (e.g. with Agriculture for abattoirs; local government for restaurants) rather than the NADFC. The NADFC has made initial efforts to strengthen collaboration with provincial and district governments; what is needed now is a concerted effort to further develop and expand this approach (e.g. through sharing information, coordination workshops, training). This could most effectively occur through pilots in a small number of provinces with the aim of strengthened collaboration between districts, provinces and the center to improve food and pharmaceuticals safety at the district and household levels, which can be evaluated and then scaled up to include other provinces. 3 Implement the revised strategy on a much wider scale. (b) Strengthening laboratory analysis: the objective of this component is to strengthen, the contribution of laboratory analysis in the overall strategy of food and pharmaceuticals control. Laboratory analyses are an essential and integral part of food and pharmaceutical control activities. The task now is to determine the actual role of laboratory services in fulfilling the objectives of the agency under a risk-based approach, to develop a 10-year Master Plan for laboratories, and to purchase new equipment, train staff and, if indicated, build or renovate existing facilities in service of the revised strategy. (c) Involve the consumer in food and pharmaceuticals control. The objective of this component is consumer education to improve knowledge about, and the demand for, safer food and pharmaceuticals. This will involve the design and conduct of assessments of the role of consumer behavior in food and pharmaceuticals safety (including the responses to drug risk alerts); based on these assessments, conduct and evaluate pilot interventions to improve consumer involvement; and, based on results of the pilots, develop communication strategies, 4

5 expand implementation and evaluate interventions to increase involvement of the consumer in food and pharmaceuticals safety. (d) Institutional development. The objective of this component is to strengthen key institutional functions of the NADFC, including collaboration with other ministries and levels of government. These will involve strengthening the NADFC so it can better support the revised strategy by providing an improved information system, staff strengthening, planning and evaluation of control activities, institutional support for improved integration of control activities with other arms of government (including pilots in two provinces); and assessment of likely trends in food and pharmaceutical products and food borne diseases (including zoonoses such as avian influenza) in the next 10 years and their implications for the strategy of food and pharmaceuticals control. 4. Safeguard policies that might apply An Environmental Assessment may be required depending on the nature of the support for laboratory analysis. 5. Tentative financing Source: ($m.) BORROWER/RECIPIENT 10 INTERNATIONAL BANK FOR RECONSTRUCTION AND 40 DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION 10 Total Contact point Contact: Puti Marzoeki Title: Senior Health Specialist Tel: Fax: Location: Jakarta, Indonesia (IBRD) 5

6 Annex 1 The National Agency for Drug and Food Control (NADFC) Until 2000, regulatory control of the pharmaceutical and food sector was conducted by the Directorate General for Drug and Food Control, Ministry of Health (MOH). Presidential Instruction (Keppres) No.166/2000 established Badan Pemeriksaan Obat dan Makanan (National Agency for Drug and Food Control/NADFC) as a separate entity from the MOH responsible directly to the President, although MOH retains the responsibility for coordinating the formulation of policies with the other government agencies. A joint decree in 2003 between the MOH and the Ministry of State Apparatus (MenPAN) provides further clarification on the tasks and authorities of NADFC. In general, it is understood that in drug control, MOH is responsible for drug accessibility and affordability (particularly within the public sector), while NADFC is responsible for controlling drug quality, safety, and efficacy. MOH, for example, has the authority to license and revoke the license of drug manufacturers and wholesalers/distributors. An important stakeholder in drug control is the local government which issues license for pharmacies (apotiks) and drug stores, and conducts inspection of these retail outlets. A high number of private clinics, private practicing doctors and midwives dispense drugs in their practice. The licensing of these providers is also conducted by the local government through the District Health Office (Dinas Kesehatan Kabupaten). A major part of the responsibility in food safety control is with the NADFC, although the authority of food safety control along the entire food chain is shared by local governments and many ministries including Ministries of Agriculture, Marine Affairs and Fisheries, Health, Industry and Trade. The NADFC also collaborates with Majelis Ulama Indonesia (MUI) for the inspection of Halal products, and with the Standardization Agency of Indonesia (BSN) for the standardization of products. Within NADFC, control of the drug sector is conducted by the Division of Control of Therapeutic Products and Narcotics, Psychotropic and Addictive Substances (Deputy I), while the Division of Control of Food Safety and Hazardous Substances, also known as (Deputy III) is in charge of control of the food sector. NADFC has another division (Deputy II) which is in charge of the control of Traditional Medicines, Cosmetics and Food Supplements. In conducting their functions, the Divisions are supported by four centers: (i) the National Center for Quality Control of Drug and Food in charge of the NADFC laboratories, (ii) the Center for Drug and Food Investigation, (iii) the Center for Drug and Food Research, and (iv) the Drug and Food Information Center. In implementing its authority, the Agency is supported by regional offices (also known as the Balai POM) located in 26 provinces. Nineteen of the regional offices are Balai Besar POM indicating an office with larger capacity compared to the rest. NADFC is also establishing small offices also known as Pos POM, and they are located in new provinces, or in remote or border areas. At the moment, there are 15 Pos POMs with varying capacity according to their classification (A, B, or C). 6

7 Despite the numerous stakeholders involved in regulating the drug and food sector and the importance of communication for ensuring a coherent approach, information sharing among the different units within NADFC, between the center and the provinces, and among involved ministries/institutions, is less than optimal owing to an under developed information system characterized by incomplete data sets, and limited data analysis. The main functions of the NADFC are the following: Legislation, regulation and standardization; Certification of pharmaceutical industries based on Good Manufacturing Practices (GMP); Pre-market evaluation of products; Post marketing vigilance including product sampling and laboratory testing, inspection of production and distribution facilities, investigation and law enforcement; Pre-audit and post-audit of product advertisement and promotion; Research on drug and food policies implementation; Public communication, information and education including public warning. The workload of the Agency is increasing rapidly. In 2004, the NADFC registered around 3,550 new drugs and 4,300 food products including both domestic and imported products, through premarket evaluation. For drugs, this is an increase of more than 100% compared to those registered in the previous year. On post market evaluation, in the same year, around 28,700 drugs and more than 32,000 food products were tested by the NADFC laboratories. This means around 40% and 50% increase respectively for drug and food products, compared to testing conducted in the previous year. Testing of pharmaceutical and food products is conducted by a laboratory network consisting of one large central laboratory and 26 regional laboratories spread throughout the country. The bulk of analyses were conducted by the regional laboratories while, aside from analysis, the central laboratory also selects and evaluates new analytic methods, conducts training, and proficiency testing. A typical regional laboratory is not spacious, not over equipped, but is very productive in terms of numbers of samples per analyst. However, equipment in these laboratories is old, and there has not been an aggressive replacement program. As a part of post market evaluation, the NADFC also conducts inspection of drug manufacturers for their compliance to GMP, and of wholesalers/distributors/retailers for their compliance to Good Distribution Practices (GDP). As with testing, the volume of inspection activities increased steadily during the last five years. At the moment, NADFC has 158 certified drug inspectors and an equal number of uncertified inspectors. Given the number of manufacturers and distributors, and the current requirement to conduct one inspection per manufacturer per year, there seems to be inadequate numbers of certified drug inspectors. In 2004, the NADFC launched the Integrated Food Safety System (IFSS). The system provides a logical framework for strengthening the national food safety program. The IFSS consists of 3 main programs: (i) Food Watch to identify emerging food safety problems; (ii) Food Star Award (FSA) i.e., a 3-step voluntary food safety training covering basic food safety to HACCP; and (iii) Rapid Response through an integrated food safety emergency response team. The coverage of IFSS is still very limited. 7

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