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4 1. Introduction People have more chance to treat their health care problems if medicines are available at an affordable price (Everard, 2003). In fact, one third of the population lack access to medicine and face financial constraints paying for them (WHO, 2000). High medicine pricing can lead to impoverishment, especially in Low Middle Income Countries (Niens et al., 2010). The price of medicines in Indonesia as a middle-income country is high. The most recent snapshot survey conducted in 2010 showed that the price of an insulin injection in Indonesia was almost as high as the price in developed countries such as the US and Austria (HAI, 2010). Moreover, the survey results in 2004 showed that the price of medicines in Indonesia both in the public and private sector were high. Doctors tend to prescribe branded generic or Innovator Brand (IB) medicines even though Lowest Price Generics (LPG) are available. In turn, people have to pay more for branded and IB medicines. The price of IB medicines in Indonesia is high, often 22 to 26 times higher than the Interantional Reference Price (IRP). Although branded generic medicines are less expensive than IB medicines, they still cost 6 to 7 times the IRP (Siahaan et al., 2004). In fact, branded generic medicines dominate Indonesia s pharmaceutical market. Furthermore, IB medicines also have significant market share in Indonesia (Rokx et al., 2009). This condition could affect access to affordable medicines such as LPGs. As well as price, availability is also an important factor influencing people s access to medicines. For example, the availability of LPG medicines in the public sector in Indonesia is lower than that in the private sector (47% and 62%, respectively). The rate of availability of LPG medicines both in the public and in the private sectors is still suboptimal. IBs are more often found in the private sector (26%) compared with in the public sector (6.7%) (Siahaan et al., 2004; Dylst and Simoens, 2010). The Indonesian government has long been aware of the high price and low availability of medicines. To solve these problems, it has implemented several policies to regulate medicine prices. The evaluation or monitoring of policies is required. The criteria could be used to evaluate health care resources including the effectiveness, efficiency, equity

5 and quality of the health policy. The effectiveness of the medicine pricing policy could also be evaluated by determining the impact of the policy in the field (Mrazek and Mossialos, 2002) as long as reliable and valid data on processes and outcomes are available (Mossialos and Mrazek, 2002). There is little reliable information on the effectiveness of mark-up regulation in LMIC (Ball, 2011). In Indonesia, reliable, valid and updated data on the impact of the medicine pricing policy are also limited. The MoH does not publish the results of its monitoring. In Indonesia, the most comprehensive study of the price, availability and affordability of medicines was conducted in 2004 (Siahaan et al., 2004) before the implementation of the generic medicine pricing policy. From 2005 till 2010, a number of medicine pricing policies have been launched by the government. The implementation of the policy may have influenced the price, availability and affordability of medicines and the data might have changed. The price implementation of generic medicine pricing policy should have a positive impact and benefits on the community, which should be able to access medicines easily with high availability and at affordable price. Even though the Indonesian government has implemented medicine pricing policies, their effectiveness is unclear. The issue of the high price and low availability and unaffordability of medicines is often released in newspapers and in public discussions. The effectiveness of the implementation medicine policy in Indonesia is unknown Based on the background described above, the objectives of the study was to assess the procurement price of medicines in the public sector. Thus, the results of the study are important information to the government. The use of scientific data for policy development might produce an appropriate policy. Therefore, it is important to know their impact by using an appropriate methodology. The results could also provide latest evidence on the price, availability and affordability of medicines in Indonesia.

6 2. Study Design This study used a cross-sectional survey design. The second edition of the WHO and HAI methodology was used to determine the price, availability and affordability of medicines in four provinces in Indonesia (WHO and HAI, 2008). 2.1 Ethical approval and consideration Before data collection could take place, the researcher applied for ethical approval through the following stages. At the national level, as the study was conducted in four provinces, permission needed to be sought from the Indonesia Ministry of Internal Affairs and National Ethics Committee. To obtain ethical clearance, the research proposal was submitted to the National Ethics Committee under the National Institute of Health Research and Development, MoH for review. The approval also obtained from the Provincial Development and Planning Agency (Bappeda) and provincial Health Office (Dinas Kesehatan Provinsi), and continue to the District Government Office and District Health Office. The approval letter from the District Health Office could be used directly to conduct research in health care centres and private pharmacies. However, a specific approval letter from each district hospital and NGO hospitals was needed. 2.2 Study period and locations of research This study was conducted from April to September Four provinces representing three regions of Indonesia were purposively selected based on population density and distance from the capital city. The provinces selected were South Sumatera, Jakarta, Yogyakarta and South Sulawesi. South Sumatera represents the western part of Indonesia (Region I). Jakarta is the capital city of Indonesia. Jakarta and Yogyakarta represent Region II. South Sulawesi is an important urban centre or business capital in the east (Region III) (see Figure 3.1). In each province, survey areas involved one municipality and one district. Sectors Surveyed namely public sector procurement prices. Procurement prices were surveyed at 22 public facilities to determine the procurement price. Data were collected from two municipality health offices, four district health offices, seven municipality public hospitals, three district hospitals and six health care

7 centres (PUSKESMAS) in Jakarta. In general, municipalities or district health offices in Indonesia procure medicines for primary health care centres, except in Jakarta. Primary health care centres in Jakarta have the authority to procure medicines to the wholesaler, as the volume purchased is larger than that procured in other districts/municipalities in other provinces. In all provinces including Jakarta, procurement was conducted using an open tendering system. Public hospitals have the authority to procure medicines directly to the wholesaler. A summary of procurement price facilities is shown in Table 1. Table 1. Public sector procurement prices: facilities surveyed Name of research area Procurement Type and number of facilities price facilities 1. SUMATERA SELATAN Municipality : Palembang 1 Public hospital District : Prabumulih 2 1 Health office and 1 public hospital 2. JAKARTA Municipality : Jakarta Selatan 5 5 Health centres Municipality: Jakarta Timur 4 2 Health center and 2 public hospitals 3. YOGYAKARTA Municipality : Yogyakarta 2 1 Health office and 1 public hospital District : Bantul 2 1 Health office and 1 public hospital 4. SULAWESI SELATAN Municipality : Makasar 3 1 Health office and 2 public hospitals District 1 : Pare-pare 1 Health office District 2 : Watampone 2 1 Health office and 1 public hospital Total Medicines surveyed According to WHO and HAI guidelines, 50 medicines were surveyed, all of which are registered in the country. Each medicine is described by the INN of its active ingredient, strength and dosage. From each active ingredient, IB and LPG medicines were selected (WHO and HAI, 2008). The criteria used to select medicines were based on WHO/HAI recommendations, local importance, disease burden and therapeutic group. The selected medicines were: 14 medicines from a global core list recommended by WHO/HAI, 14 medicines from a regional core list (Southeast Asian region; SEAR) recommended by WHO/HAI and 22 medicines are supplementary medicine.

8 2.4 Operational definition of variables (i) LPGs are defined as the generically equivalent product with the lowest unit price in each medicine outlet (e.g., health centre, private pharmacy) in the research (WHO and HAI, 2008). (ii) The MPR is the median local cost (in rupiah) divided by International reference unit price (IRP) in 2009 (WHO and HAI, 2008). On the first day of data collection, the local price was converted into U$. The exchange rate was 9172 IDR (April 2010). MPR = Median local unit price International reference unit price (IRP) (iii) International reference unit price (IRP) is the international not-for-profit or tender listed in the International Indicator Guide published by MSH. The IRP are obtained from recent procurement or tender prices offered by for profit and not-for profit suppliers. Median supplier unit price was used as the reference. Median agency unit prices were used as references, if supplier prices were unavailable the buyers price could be used (MSH, 2009). In this study, The comparison between the Indonesian price and international price used IRPs (2009 edition). 2.5 Data Collection Procedures Medicine prices data were collected by data collectors using a standardised data collection form. Data collectors were selected from each area. To enable data collection, the data collector was a pharmacist who was selected from provincial and district health office in each area. Trained data collectors visited the sample of facilities in the area and recorded information on the price and availability of selected medicines. Government procurement price was collected in public facilities. During these visits, data were recorded on standardised data collection forms. 2.6 Data management and analysis Data analysis was performed using the standardised WHO/HAI Excel Workbook 2009 version. This workbook automatically generates an analysis of the survey data. The

9 results were presented as descriptive statistics. The MPR of public sector procurement price were automatically generated by the WHO and HAI workbook. 3. Results Procurement prices were collected from six district health offices, seven primary health care centres in Jakarta and nine public hospitals. Table 2 shows that 36 of the 50 LPG medicines surveyed were found in at least four facilities. Table 2. MPRs of public sector procurement prices Number of medicines in 4 tenders Median MPR 25%ile MPR 75%ile MPR Innovator brand (IB) 0 Lowest price generic (LPG) The MPR was 1.34 with quite a large variation. The procurement price of IB medicines was not found in the public sector. Analysis was also conducted to compare the variation in the procurement price at each type of public facility. The number of medicines available in public hospitals was higher than that in health care centres and district health offices. The comparison of the MPRs of the public sector procurement price is shown in Table 3. Table 3 MPRs for each type of public sector procurement prices MPRs District health offices (n=6) Health care centers (n=7) Public hospitals (n=9) Number of medicines in 4 tenders Innovator brand (IB) Lowest price generic (LPG)

10 The results of MPRs showed that there are small differences in the procurement price between public hospitals and health care centres (1.34 and 1.22, respectively). The lowest procurement price for LPGs was in district health offices (1.05). Table 4 shows that of the 36 LPG medicines, 25 had MPRs for the public sector procurement price that were higher than the IRP. Table 4. MPRs of the public sector procurement prices for LPG medicines Medicine MPRs Medicine MPRs Acyclovir 1.08 Folic acid 3.50 Allopurinol 0.37 Furosemide 1.41 Amitriptyline 1.76 Gentamicin eye drops 1.57 Amlodipine 8.67 Glibenclamide 1.60 Amoxicillin 1.02 Hydrochlorothiazide 0.75 Amoxicillin suspension 1.37 Ibuprofen 1.81 Captopril 1.23 Metformin 1.31 Carbamazepine 1.64 Metoclopramide 1.77 Ceftriaxone injection 1.61 Metronidazole 1.62 Ciprofloxacin 0.87 Omeprazole 1.38 Chloramphenicol 1.47 Paracetamol 1.31 Co-trimoxazole 1.08 Paracetamol suspension 0.80 Co-trimoxazole suspension 1.23 Phenobarbital 0.57 Dexamethasone injection 0.82 Phenytoin 2.46 Dexamethasone tablet 0.45 Ranitidine 0.93 Diazepam 0.53 Rifampicin 0.71 Diclofenac 3.98 Salbutamol 3.98 Doxycycline 1.85 Simvastatin 0.89 For those medicines that had MPRs greater than the IRP, they generally ranged from 1 to 2. Four medicines had MPRs that were 3 to 8 times the IRP. The highest MPR was found for amlodipine (8.67). The MPR of public sector procurement price was still high. According to the Gelders (2006), the MPR of public sector procurement price should be 1. The procurement price in the public sector were then compared with the patient prices of LPG medicines to determine the differences. The results are shown in Table 5 indicates that the MPRs of prices charged to patients were highest in the private sector (2.00), followed by NGO hospitals (1.86) and the public sector (1.76).

11 Table 5. Comparison of the procurement price ratio with the patient price ratios of LPG medicines Price to patients Public sector procurement Public Private NGO sector sector Sector MPRs of LPGs Discussion Most of the MPRs of procurement prices in the four provinces in Indonesia were higher than the IRP. However, they were close to 1. The MPRs of procurement prices in 2010 were lower than those in 2004 (1.34 and 1.74, respectively). The ratio means the price in 2010 was 34% above the IRP, whereas in 2004 the procurement price was 74% of the IRP (Siahaan et al., 2004). In 2010, there was an improvement in the procurement price in the public sector. This could have been caused by the decreasing price set in medicine pricing policies and intensive monitoring by the MoH. However, based on considerations from WHO and HAI, the procurement price in the four provinces in Indonesia on 2010 was still inefficient. Public sector procurement is efficient if the MPRs of the procurement price are 1 (Gelders et al., 2006). The addition of a 10 to 15% mark-up on the international price is still acceptable. This addition is to cover the cost of distribution (MSH, 2009). According to this evidence, the MPRs of the procurement price in Indonesia should be able to reach 1 to 1.15%. In comparison with the procurement prices in other countries such as India and China, it could reach less than 1, such as 0.96 in Rajasthan, India (Kotwani et al., 2009) and 0.74 in Hubei, China (Yang et al., 2009). Moreover, a large country such as Indonesia should be able to achieve a more efficient procurement price due to large procurement volumes. The efficiency of public procurement affects people's access to medicines. A good medicine procurement system would decrease the price of medicines, especially in large volumes (Mrazek, 2002; MSH, 2009). A joint procurement mechanism in Jordan reduces the price of medicines (Al-Abbadi et al., 2009; Kotwani, 2011).

12 The impact of large procurement volumes on price was shown in this study. The MPRs of the procurement price of LPG medicines in district health offices was less expensive than those in health care centres and public hospitals (1.05 vs vs. 1.34). District health offices and health care centres in Jakarta procure medicines for health care centres in a district through a tender mechanism with large volumes. The procurement price in district health offices is similar to the IRP. District health office procurement prices are efficient, due to the procurements conducted at large volumes. By contrast, procurement carried out directly by each health care facility such as a hospital or health care centre would lead to inefficiency. For example, the volume of medicines procured by health care centres in Jakarta was less than that by district health offices in other provinces. Therefore, the procurement price at health care centres in Jakarta was higher than that in district health offices. In district public hospitals, several medicines were procured by a tender mechanism and several others by direct procurement from the wholesaler. A small volume of procurement could lead to weak bargaining power for the wholesaler. The procurement price at public hospitals in Indonesia was more expensive than that in Burkina Faso. The MPRs were 1.34 and 1.12, respectively (Saouadogo, 2011). The MoH sets the maximum price for procurement and retail prices. Most facilities complied with the MoH-MRP 2010 edition. The prices of some medicines were even less expensive than the prices set by the government. This condition was caused by discount competition between manufacturers. Discount competition between manufacturers has also occurred in France, the Netherlands and the UK (Simoens, 2008). 4. Conclusion The public sector procurement price is still inefficient, in health care centres and public hospitals, and the MPR of the procurement price is higher than the IRP. Procurement in district health offices was found efficient, as the MPR is similar to the IRP. The prices of LPG medicines were found to be consistently lower in the public sec

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