There are several key takeaways to be considered from the new MOI Regulation 16:
- Although MOI Regulation 16 does not regulate certain local content thresholds to be fulfilled, the Indonesian government will consider the local content level in procuring goods and/or services (including pharmaceutical products).
- As mandated by Presidential Regulation No. 16 of 2018 on the Procurement of Government Goods/Services ("PR 16"), the Indonesian government must prioritize the use of local products and resources. Consequently, in participating in the government's procurement of pharmaceutical products, pharmaceutical manufacturing companies should consider the local content level of their pharmaceutical products.
- There is no specific action that is required from pharmaceutical manufacturing companies at the moment, as there is no specific approval in relation to the local content. However, this new regulation will certainly have a big impact on pharmaceutical manufacturing companies that gain profit mostly from sales through e-catalogues or government tenders.
In Depth Summary of New Local Content Calculation for Pharmaceutical Products
Calculation of Local Content of Pharmaceutical Products
There are layers of calculation to determine the final percentage of the local content level of a pharmaceutical product. The location of the manufacturing activities has a major impact on the calculation result. MOI Regulation 16 regulates several items to determine the local content level of pharmaceutical products:
- raw materials (50%), which must be proportionally valued for the following contents:
- active raw materials (65%)
- additive raw materials (35%)
- research and development process (30%), which must be proportionally valued for the following processes:
- new drugs development (25%)
- clinical trial (30%)
- formulation (35%)
- bioavailability/bioequivalence ("BA/BE") (10%)
- production process (15%), which must be proportionally valued for the following processes:
- mixing process (60%)
- dosage forming process (40%)
- packaging process (5%), which must be proportionally valued for the following processes:
- batch release process (50%)
- primary packaging process (40%)
- secondary packaging process (10%)
We set out below a summary of layers of local content calculation for pharmaceutical products:
There are several main variables to be considered in calculating the local content level of local pharmaceutical manufacturing activities:
- the nationality of the employees
- the ownership of the manufacturing facilities
- the use of local materials
Attachment I and Attachment II of MOI Regulation 16 set out further details of the calculation methods.
Procedures to Obtain a Pharmaceutical Local Content Certificate
The final output of the pharmaceutical product local content certification procedures is the issuance of a pharmaceutical local content certificate (sertifikat TKDN produk farmasi). To obtain a pharmaceutical local content certificate, pharmaceutical companies must calculate their own local content level and report it to the MOI.
The following is the procedure to obtain a local content certificate for pharmaceutical products:
- The company calculates the local content level of its pharmaceutical products.
- The company submits the following documents to the MOI:
- industrial business license (Izin Usaha Industri)
- company profile, organizational structure and production data of the company
- local content self-assessment report
- production certificate issued by the Ministry of Health.
- annual production and marketing realization report as required by the Drug and Food Supervisory Agency
- The MOI assesses the submitted documents.
- The MOI issues a local content calculation approval.
- The company submits the local content calculation approval to an independent verifier.
- The independent verifier verifies and re-calculates the local content level of the pharmaceutical product.
- The company submits the verification and calculation report to the Head of the Local Product Development Center (Kepala Pusat Peningkatan Penggunaan Produk Dalam Negeri).
- The Head of the Local Product Development Center issues the pharmaceutical local content certificate.
The pharmaceutical local content certificate is valid for two years.
References to Foreign and Indonesian Companies
MOI Regulation 16 uses the terms 'foreign companies' (perusahaan luar negeri) and 'domestic companies' (perusahaan dalam negeri) when referring to business players or stakeholders of this regulation, but neither term is defined under MOI Regulation 16. It is thus unclear whether these terms are referring to the capital investment nature of the company or the ownership of property (e.g., manufacturing facilities). This is one of the items that are still left unclear under MOI Regulation 16 and it may be clarified in other regulations that will be issued.
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