# On paper; in practice: measuring compliance with official pricing policies in a large field study of essential medicines in Indonesia

## TL;DR

This study examines how well Indonesian medicine manufacturers and retailers followed a government policy to print maximum retail prices on medicine packaging and whether this helped make medicines more affordable.

## Contribution

The study provides empirical evidence on compliance with Indonesia's MRP policy and evaluates its effectiveness in improving medicine affordability.

## Key findings

- 99.4% of sampled medicines had visible MRP on packaging, indicating high transparency compliance.
- Unbranded generics had poor compliance with permitted MRP, with a median ratio of 3.5 times the allowed price.
- 33% of samples were sold above the printed MRP, with hospitals showing the lowest compliance.

## Abstract

In 2015, Indonesia Ministry of Health (MoH) issued a decree to ensure the affordability of medicines by providing transparent prices which obliged all manufacturers to print a maximum retail price (MRP) on medicine primary packaging. We measure the compliance of manufacturers and retailers with the regulation stated in the decree and estimate the retailers’ profit.

Five essential medicines (allopurinol, amlodipine, amoxicillin, cefixime, dexamethasone) were purchased from randomly selected health facilities, retail pharmacies and online outlets in Indonesia. We recorded retailer’s selling price and product’s MRP. We also sourced product’s list price and sales volume from pharmaceutical market data. We conducted an MRP policy implementation analysis by evaluating three indicators (retail price transparency, permitted MRP and permitted sales price). We also estimated the retailers’ profit by taking into account the profit margin and sales volume.

Of 1249 sampled medicines, nearly all samples (99.4%) had visible MRP on their packaging indicating high transparency compliance. For unbranded generics, none complied with permitted MRP with a median ratio of printed MRP to permitted MRP being 3.5 (IQR 2.6–7.9), whilst higher compliance (11.2%) was observed for branded generics (IQR 1.1–1.7, median 1.1). 33% of the samples were sold above the printed MRP with the lowest compliance to actual selling price being documented in hospitals. Branded generics accounted for 79% of the product value across the study medicines and generated more profits than the unbranded versions.

The transparency implementation through printed MRP and the compliance with permitted sales price regulation contribute to retailer accountability. Rules restricting permitted MRPs for unbranded generics, irrational since their inception, while they never set any limits at all on the price of branded medicines. This showed not enough evidence that the policy contributed to its objective of ensuring affordability.