Chain gang

Good Distribution Practice in rural Indonesia. Photo: Elizabeth Pisani

Getting medicines to patients across Indonesia’s 13,000 islands: what could possibly go wrong?

Medicine supply chains are more of a tangled web at the best of times. In Indonesia, with its 13,000+ islands scattered across three time zones, more so than most. Add to that a complex mix of pharma regulations designed to apply uniformly across one of the most diverse countries on earth; a rapidly-expanding but underfunded national health insurance system; and a fiercely competitive medicine market with hundreds of producers and thousands of small distributors. What could possibly go wrong?

This was the implicit question behind our recent research into incentives in the medicine supply chain in Indonesia (pdf). It built on an earlier, but recently-published study, led by Amalia Hasnida, which looked at the factors that create markets for low quality and fake medicines in Indonesia. We interviewed distributors, medicine company sales staff, procurement officials, doctors, midwives and pharmacists, in shops as well as hospitals and primary care centres, in two quite different areas of Indonesia. Relmbuss Biljers Fanda talked to people in the remote eastern Indonesian district of Timor Tengah Selatan, only a stone’s throw from the north coast of Australia. Aksari Dewi, meanwhile, interviewed people in Malang district, in the heartland of Indonesia’s most populous island, Java. (Both also collected information on sales prices, both directly from supply chain actors, and through mystery shopper surveys).

The market dynamics were actually quite similar in both areas — the nature of business is that more or less anyone in a for-profit enterprise will try to maximise those profits by keeping spending and other costs low, while selling at the highest prices the client will bear. Similar market regulations, on the other hand, impact different areas rather differently. For example, rules that restrict who can buy and sell medicines are designed to protect patients from medicines that might have been handled improperly and thus be degraded, or even fake. But in remote areas, enforcing those rules would effectively mean that patients have no access to any medicines at all. So the rules get bent, often for very good reasons.

If the profits from expensive products sold to rich patients subsidise cheaper quality-assured medicines for poor patients, great. If they only subsidise private jets for pharma shareholders, not great.

It’s hard to reduce something as complex as the medicine supply chain to a few bullet points. But if we had to, we’d note the following key lessons from the research:

  • Regulators protect product quality, while manuacturers, distributors, pharmacists and many hospitals and health care providers protect profits. If a rule meant to protect quality eats into profits, the market will probably find a work-around.
  • The price charged by one actor in the supply chain obviously affects the profits made by the next link in the chain. Where the loss-avoiding incentives of Actor 1 (say, a producer) enhance the profit-making incentives of Actor 2 (perhaps a distributor), the product will fly through the supply chain, whatever its quality. A great pathway for substandard medicines. If the two are in conflict, the more likely result is shortages. A market opportunity for fakes.
  • In a diverse country, rules must be applied flexibly. In under-resourced areas, sticking too closely to the rules can reduce patients’ access to any medicine at all.
  • Prices for similar products vary hugely. That’s not a problem, as long as poorer patients can afford the medicines they need. If the profits from expensive products sold to rich patients subsidise the production of cheaper quality-assured products for poor patients, great. If they only subsidise private jets for shareholders of pharma companies, not great — it means the cheaper drugs may well be substandard.
  • Institutional incentives are also important in shaping behaviour in medicine supply chains in Indonesia, especially in the public sector. Sometimes, well-intentioned efforts to curb corruption or increase oversight makes civil servants and others risk-averse in ways that leave patients without medicine.

If you’re interested in what we think this means for policy-makers, please read the full report. We’re keen to hear your thoughts, especially on how similar or different the dynamics are in other countries.

We thank the Global Health Supply Chain Summit for funding the bulk of this research. Thanks are also due to Australia’s Australia’s National Health and Medical Research Council/The George Institute for Global Health, which supported Aksari Dewi, and USP Quality Institute, which supported Amalia Hasnida.

This report is a first draft; we aim to finalise it after getting feedback from a number of supply chain actors in Indonesia. An Indonesian language version will be available soon. Terima kasih atas kesabaranya.

Author: Elizabeth Pisani

Dr. Elizabeth Pisani is the convenor of the MedsWatch group. She’s an epidemiologist by training and a political economist by persuasion, and is most interested in the messy places where biomedical evidence clashes with politics, money and culture.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.