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Reducing Pharmaceutical Tariffs to Invigorate Indonesia’s Economy

The COVID-19 pandemic has demonstrated the important roles both innovation and international trade play in addressing public health concerns. Global collaboration and trade cooperation is essential to delivering breakthrough medicines. Trade barriers, such as high tariffs, make addressing public health concerns more costly for patients. Tariffs are essentially taxes that are levied when a product enters the country.

Indonesia’s current average tariff on medicines is 4.4%, which is high when compared globally and regionally.

For example, seven countries and the 27 countries who make up the European Union have all signed on to the WTO’s pharmaceutical agreement and have tariffs of zero percent on medicines.

Indonesia also has a high tariff rate compared to other countries in the region. The Philippines imposes an average tariff of 2% on medicines. Other regional neighbors Vietnam and Malaysia have a 0.5% tariff on medicines and zero tariffs respectively.

In Singapore, which does not apply tariffs to medicines, government leaders have strongly prioritized pharmaceutical growth through policy action, leading to major investments from global pharmaceutical companies to collaborate and partner with local stakeholders to bolster manufacturing and medicine availability. Through these collaborations and policy actions, the pharmaceutical industry’s economic impact is nearly $7.6 billion in Singapore, contributing to the country’s robust economy.

Accessibility and affordability of medicines remain major challenges for Indonesian patients due to high import tariffs.

Tariffs are one of the primary trade barriers responsible for inflating consumer prices on medicines. A recent analysis found that import tariffs drove up the price of medicines by up to 80%. Tariffs must be reduced to improve accessibility and affordability of medicines and vaccines to patients across Indonesia.

Indonesia should join the World Trade Organization’s pharmaceutical agreement, which would decrease tariffs on medicines. By decreasing pharmaceutical and pharmaceutical product tariffs, Indonesia can help its economy, strengthen its health infrastructure, and increase accessibility for patients in need.

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