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Legal Updates | Key Features of the Draft New Law on the Supervision of Food and Drugs

Indonesia has recently faced various healthcare issues resulting from a lack of proper supervision from the government and lack of specified regulations on the quality and safety of food and drugs that are circulated in the public market.

However, the main problem may not just be the implementation of the government supervision itself, but rather the lack of centralised regulations — currently there is no single regulation in Indonesia that generally governs on food and drugs.

In-line with the above and also as part of the 2015 — 2019 National Legislative Programme, the House of Representatives of the Republic of Indonesia (Dewan Perwakilan Rakyat Republik Indonesia or DPR) is currently discussing the Draft Law on Food and Drugs Supervision ("Draft Law"), which incorporates a total of 105 articles setting out a comprehensive umbrella arrangement of provisions related to the supervision of food and drugs.

From a hierarchical perspective, the Draft Law has a very interesting significance. Being a 'Law' (or Undang-Undang), the Draft Law is superior to all of the other more technical regulations on food and drugs. This means that all other 'lower ranked' regulations (which are typically issued by the Food and Drugs Supervisory Agency or Badan Pengawas Obat dan Makanan or "BPOM") must not deviate from the provisions in the Draft Law.

We have highlighted some of the notable features of the Draft Law below.

Scope of the Draft Law

The Draft Law does not cover only food and drugs, but also cosmetics. The Draft Law covers the following types of products:

  1. drugs
  2. drug ingredients
  3. natural-based drugs (which is a sub-category of drugs)
  4. natural-based extracts
  5. cosmetics
  6. health supplements
  7. processed food (FDC Products)

Categorization of Drugs

Among the other new features, the Draft Law finally provides a clear categorization for drugs, natural-based drugs and processed food (something which has never been done before in one regulation), as follows:

  1. drugs:
    1. prescribed medicine
    2. non-prescription medicine
  2. natural-based drugs (sub-category of drugs)
    1. Indonesian natural-based drugs
    2. foreign natural-based drugs
  3. processed food:
    1. ready-to-serve food
    2. packaged food

More specific requirements on drugs will be regulated in a Minister of Health regulation. Natural-based drugs and processed foods will be regulated further by a Head of BPOM regulation.

General Requirements

The Draft Law also regulates the requirements that will apply to all or some FDC Products:

  1. Manufacturing. Any parties that manufacture FDC Products must be equipped with the relevant manufacturing license. These licenses are:
    1. pharmaceutical manufacturing license
    2. traditional medicine manufacturing license
    3. natural-based drugs extract license
    4. pharmaceutical wholesaler (pedagang besar farmasi) license
    5. cosmetic manufacturing license

      The above licenses can be obtained from BPOM. However, the issuance of a manufacturing license for medium-sized traditional drugs companies, small traditional drugs companies and branch pharmaceutical wholesaler businesses will be within the authority of the regional government.

      All business actors are also prohibited from manufacturing fake or counterfeit FDC Products. Producers of FDC Products must also comply with the prevailing standards or guidelines for good production practice.
  2. Labelling. All of the FDC Products (including quasi-drugs) must also comply with the prevailing labelling requirements. In general, the labelling of any FDC Products must not contain any information that is not objective, or that is incomplete, inaccurate or misleading. The Draft Law provides general requirements for the labelling of FDC Products. Additional specific requirements on labelling will be regulated by more specific regulations on each of the relevant FDC Products.
  3. Marketing Authorisation. All FDC Products (except for drug ingredients) may only be distributed once they have obtained marketing authorisation. The marketing authorisation for any processed foods produced by a home food industry is issued by the municipal level regional government.
  4. Import. All FDC Products that will be imported into Indonesia must be equipped with the relevant importation explanation letter (Surat Keterangan Impor). Furthermore, all FDC Products (except for drug ingredients) that are imported into Indonesia must first be equipped with a marketing authorisation.

    There is no requirement under the Draft Law for the importer of the FDC Products (except for drug ingredients) to be the holder of a marketing authorisation document for such products. The Draft Law only provides that the importer must hold the necessary license or permit as an importer.
  5. Export. The exporter of the FDC Products must hold the necessary license or permit (including exportation explanation letter or Surat Keterangan Ekspor). The export of the FDC Products must be done in compliance with the import requirements in the country to which the products will be exported.
  6. Promotion and Advertisement. Under the Draft Law, FDC Products can only be advertised if those products have obtained marketing authorisation from BPOM. Prescribed drugs or medicines may only be advertised through medical or pharmaceutical scientific media.

Exemptions

The Draft Law provides several exemptions from the requirements for FDC Products.

For instance, the production of traditional herbs (i.e., Jamu Gendong and Jamu Racikan) and processed food which are made by individuals are exempted from the manufacturing license requirement and labelling requirements.

The following products are also exempted from having to obtain marketing authorisation:

  1. natural-based drugs, i.e., traditional medicine made by individuals
  2. natural-based drugs in the form of crude drugs (simplisia) and galenic (galenik) compound which are used for the purpose of producing traditional medicines
  3. drugs, natural-based drugs and health supplements for donation purposes
  4. drugs, natural-based drugs, cosmetic and health supplements that are used for research, samples for registration, showcase, and special use in a limited number and not for sale
  5. processed food which:
    1. has a storage life of less than seven days
    2. is imported in small amounts for the purpose of samples for registration, research and own consumption
    3. is used as raw materials and not directly sold to end consumers
    4. is directly sold and packaged in front of the end consumer in small amounts, based on consumers' requests.

      FDC Products (except for drug ingredients) may be imported without marketing authorisation, provided that they are imported in a specific type and amount, and for the following reasons:
  1. for clinical tests for registration purposes, product development and/or science development
  2. for donation for humanitarian and scientific purposes
  3. to be used for special therapy
  4. for the purposes of carrying out health programme
  5. for own consumption

Distribution Chain for Pharmaceutical Products

Under the Draft Law, the distribution of drugs may only be done by legal entities who engage in: (i) pharmaceutical manufacturing, (ii) pharmaceutical wholesale, or (iii) government-owned pharmacy storage facilities. Meanwhile, the distribution of drug ingredients may only be done by pharmaceutical businesses specialising in manufacturing drug ingredients and in pharmaceutical wholesale.

The distribution chain for drug products is as follows:

  1. pharmaceutical manufacturers can only distribute drugs to the following parties:
    1. pharmaceutical wholesalers
    2. government-owned pharmacy storage facilities
  2. pharmaceutical wholesalers can only distribute drugs to the following parties:
    1. other pharmaceutical wholesalers
    2. apothecaries
    3. government-owned pharmacy storage facilities
    4. pharmaceutical facilities in hospitals
    5. pharmaceutical facilities in clinics
    6. drug stores (only non-prescription drugs; prescription drugs should not be supplied to drug stores)
    7. scientific institutions
  3. government-owned pharmacy storage facilities may only distribute drugs to the following parties:
    1. other government-owned pharmacy storage facilities
    2. pharmaceutical facilities in government hospitals
    3. public healthcare centres (pusat kesehatan masyarakat or puskesmas)
    4. pharmaceutical facilities in government clinics

The distribution chain for drug ingredients are as follows:

  1. Pharmaceutical manufacturers may only supply drug ingredients to other pharmaceutical manufacturers and pharmaceutical wholesalers.
  2. Pharmaceutical wholesalers may only distribute drug ingredients to:
    1. pharmaceutical manufacturers
    2. other pharmaceutical wholesalers
    3. scientific institutions
    4. pharmaceutical facilities in hospitals which have drug manufacturing facilities for the purpose of healthcare in the relevant hospital
    5. apothecaries (for certain drug ingredients)
    6. certain institutions which have obtained a special license

      The Draft Law clearly states that all apothecaries, pharmaceutical facilities in hospitals, pharmaceutical facilities in clinics, public healthcare centres and drug stores are prohibited from distributing drugs and drug ingredients. However, they may distribute for specific cases, such as to supply drugs to remote areas or regions in Indonesia or to supply drugs to medical technicians. Pharmaceutical facilities in hospitals are also allowed to distribute drugs and/or drug ingredients to other hospital pharmaceutical facilities.

Drug Retail

Drugs (whether prescribed or not) can only be handed over to the end consumer (or patients) by the pharmacist (apoteker) at the relevant healthcare facility.

Prescribed drugs or medicines may only be handed over by the pharmacist based on a written prescription of the relevant medical worker, e.g., doctors or dentists. Non-prescription drugs or medicines may only be handed over by pharmacists or pharmaceutical technical assistants at the pharmaceutical facility.

Notwithstanding the above, narcotic and psychotropic drugs cannot be handed over or sold to the end consumer (even with a prescription). The handover or supply of narcotics and psychotropic types of drugs is very limited, i.e., it can only be done from an apothecary to other apothecaries, to hospitals and/or to clinics.

Supervisory Mechanism

The supervision of FDC Products in Indonesia will be done through the following mechanism:

  1. lab testing and sample collection
  2. product recall
  3. destruction of products

The government will carry out sample collections and lab tests periodically or if it receives new information or if there is a suspicion or indication that the FDC Products in the market are not in compliance with the prevailing standards and requirements.

If the lab test shows that the FDC Products are not in compliance with the standards and requirements, then the government will recall those products and later destroy them.

The government may also destroy expired FDC Products or FDC Products whose marketing authorisation has been revoked, or if the FDC Products are related to a criminal action.

Liability and Indemnity

Under the Draft Law, all manufacturers of FDC Products will be held responsible and will be considered to give an indemnity on the quality, safety and utility of the FDC Products that they produce. This responsibility extends to any unwanted or uninformed side effects.

The distributor of the FDC Products will be held liable and must indemnify other parties for the distribution process of the FDC Products, i.e., they will be held responsible if their practice is not in compliance with the prevailing standards and requirements for good distribution.

In addition, all business actors that hold marketing authorisation of the relevant FDC Products as well as the head of a healthcare facility (who hands over drugs with a medical prescription) must be responsible for and give an indemnity on the quality, safety and utility of the FDC Products that they hand over to others.

Hadiputranto, Hadinoto & Partners, Member of Baker & McKenzie International - 24th November 2016

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Indonesia Snapshot

Capital: Jakarta
Population: 259 million (2016)
Currency: Indonesian Rupiah
Nominal GDP: $936 billion USD (IMF, 2016)
GDP Per Capita: $3,620 USD at Current Prices (IMF, 2016)
GDP Growth: 5.0% (2016)
External Debt: 36.80% of GDP (BI, Q2 2016)
Ease of Doing Business: 91/190 (WB, 2017)
Corruption Index: 90/176 (TI, 2016)