Innovative Public Private Partnership (PPP) in Healthcare Financing is the way forward to improve ‘Affordability’ and ‘Access’ to Healthcare’ in India

Despite various measures taken by the Government of India (GoI), around 65% of the population do not have access to modern medicines in the country. Such medicines do not include treatment just for ‘Tropical Diseases’ like, Malaria, Tuberculosis, Filariasis or Leishmaniasis or even anaemia in women. These medicines, in fact, cover much wider spectrum of the primary healthcare needs of the country and include antibiotics, anti-hypertensive, anti-diabetics, anti-arthritic, anti-ulcerants, cardiovascular, oncology. anti-retroviral etc. Many stakeholders in the country, including the policy makers feel that the reason for poor access to medicines to a vast majority of Indian population is intimately linked to the affordability of medicines.

A bold public measure to achieve the dual objectives:                           To make medicines affordable to the common man and at the same time to create a robust domestic pharmaceutical industry in the country, the Government took a bold step in early 1970 by passing a law to abolish product patent in India.

The changed paradigm, encouraged domestic pharmaceutical companies to manufacture and market even those latest drugs, which were protected by patents in many countries of the world, at that time. This policy decision of the GoI enabled the domestic players to specialize in ‘reverse engineering’ and launch the generic versions of most of the New Chemical Entities (NCEs) at a fraction of the innovators price, in India.
Simultaneously other low cost ‘essential medicines’ continued to be produced and marketed in the country.

‘Reverse Engineering’ – a huge commercial success in India:
From 1972 to 2005 domestic Indian pharmaceutical companies were replicating most, if not all the blockbuster drugs of the world, to their low price generic substitutes, just within a year or two from the date of their first launch in the developed markets of the world. These innovative drugs include quinolones. H2 Receptor anatagonists, proton pump inhibitors, calcium channel blockers, ace inhibitors, Cox2 inhibitors, statins, anti-coagulants, anti-asthmatic, anti-cancer, anti-HIV and many more.

In 1970, the Market share of the Indian domestic companies, as a percentage of turnover of the total pharmaceutical industry of India, was around 20%. During the era of ‘reverse engineering’, coupled with many top class manufacturing and marketing strategies, domestic Indian pharmaceutical companies wheezed past their multinational (MNCs) counterparts in the race of market share, exactly reversing the situation in 2010.

‘Reverse engineering’ was indeed one of the key growth drivers of domestic pharmaceutical industry. In its absence, during this period, the growth rate of branded generic industry may not be as spectacular.

India – now the ‘Eldorado’ of the pharmaceutical world:
This shift in the Paradigm in 1970, catapulted the Indian domestic pharmaceutical industry to a newer height of success. India in that process, over a period of time, could establish itself as a major force to reckon with in the generic pharmaceutical market of the world. Currently, the domestic pharmaceutical industry in India caters to around one third of the global requirement of generic pharmaceuticals and is a net foreign exchange earner for the country.

Currently, within top ten pharmaceutical companies of India, eight are domestic companies. All those global pharmaceutical companies who had left the shores of India and many more, have returned to the country after India signed the WTO agreement in January 1995 with great expectations.

Government feels quite confident and exudes a sense of accomplishment with its pharmaceutical policies:
The government therefore believes that a combination of these policy measures resulting in the stellar success of the domestic pharmaceutical companies since last four decades has helped the country earning the global recognition as one of the most attractive emerging pharmaceutical markets of the world, with commensurate and sustainable ascending growth trend.

Has stringent Price Control/Monitoring of Medicines worked in India?
Be that as it may, from 1970 to 2005, India could produce and offer even the latest NCEs at a fraction of their international price, to the Indian population. There are as many as 40 to over 60 Indian branded generic versions for each successful blockbuster drug of the world. Competition has been intense and cut-throat, which keeps the average price well within the reach of common man. Average price of medicines in India is even lower than that of Pakistan, Bangladesh and Sri Lanka. Thus the combination of price control, price monitoring, fear of price control and cut throat competition within branded generics have been able to drive down the prices of medicines in India.

Has the focus mostly on ‘Price’ been able to resolve the issue of poor access to modern medicines by the common man?                       Although the GoI should be complemented for the above measures and putting in place the Product Patents Act in India effective January 1, 2005, the issue of access to modern medicines to the common man has still remained unanswered in the country. Why then access to medicines in India is confined to just to 35% of the population even after 62 years of Independence of the country? Comparable figures of access for Africa and China are 53% and 85%, respectively. This is indeed an abysmal failure on the part of the government to achieve the core healthcare objective of the nation.

Strategy adopted to address the core issue of ‘affordability’ and ‘access’ to healthcare and medicines are grossly inadequate:
Despite the stellar success of the pharmaceutical industry in India thus far, there is a pressing need for the government to address this vexing problem without further delay. The situation demands from the policy makers to put in place a robust healthcare financing model in tandem with significant ‘capacity building’ exercise, initially in our primary and then in the secondary and tertiary healthcare value chain.

Towards this direction, the Federation of Indian Chambers of Commerce and Industry (FICCI) has suggested to the Government for an investment of around US$ 80 billion to create over 2 million hospital beds.

Government changing its role from ‘Healthcare Provider’ to ‘Healthcare Facilitator’:
Frugal budget allocation (0.9%) by the GoI towards healthcare as % of GDP of the country and its other healthcare related policy statements suggest that government is changing its role in this area from a healthcare provider to a healthcare facilitator for the private sectors to develop the healthcare space of the country adequately.

In such a scenario, it is indeed imperative for the government to realize that the lack of even basic healthcare financing model and primary healthcare infrastructure in many places across the country, leave aside other fiscal incentives, will impede the penetration of private sectors into semi-urban and rural areas. Innovative PPP model should be worked out to address such issues, effectively.

Laudable projects like NRHM and ‘Jan Aushadhi’ must deliver:
Over 70% of Indian population are located in rural India. A relatively recent study indicates that despite some major projects undertaken by the Governments, like National Rural Health Mission (NRHM), about 80% of doctors, 75% dispensaries and 60% of hospitals are located in urban India.

Another recent initiative taken by the Department of Pharmaceuticals (DoP) called ‘Jan Aushadhi’ is also orientated towards urban and semi-urban India. Unfortunately even in those areas the scheme has failed to deliver against the objectives set by the department of pharmaceuticals (DoP) themselves.
The net result of such a lack of firm intent to deliver by all concerned denies 65% of Indian population from having access to modern medicines and other basic healthcare services within the country.

Address the issue of ‘Affordability’ and ‘Access’ to medicines and healthcare with a robust ‘Health Insurance’ model for all:
While trying to find out a solution to these critical issues, by restricting the focus only on the ‘prices of medicines’ for several decades from now, the Government is doing a great disservice to the common man.
Let me hasten to add that I am in no way suggesting that the prices of medicines have no bearing on their ‘Affordability’. All I am suggesting here is that the issue of ‘Affordability’ and ‘Access’ to modern medicines could be better and more effectively addressed with a robust ‘Health Insurance’ model for all, in the country.

Sporadic initiatives towards this direction:

We find some sporadic initiatives in this direction for population below the poverty line (BPL) with Rashtriya Swasthya Bima Yojana (RSBY) and other health insurance schemes through micro health insurance units, especially in rural India. It has been reported that currently around 40 such schemes are active in the country. Most of the existing micro health insurance units run their own independent insurance schemes.

Some initiatives by the State Governments:

Following initiatives, though quite limited, are being taken by the state governments:

1. The Government of Andhra Pradesh has planned to offer health insurance cover under ‘Arogya Sri Health Insurance Scheme’ to 18 million families who are below the poverty line (BPL).

2. The Government of Karnataka has partnered with the private sector to provide low cost health insurance coverage to the farmers who previously had no access to insurance, under “Yeshaswini Insurance scheme”. This scheme covers insurance cover towards major surgery, including pre-existing conditions.

3. Some other state governments have also started offering public health insurance facilities to the rural poor, but not in a very organized manner. In fact, some private health insurers like Reliance General Insurance and ICICI Lombard General Insurance have been reported to have won some projects on health insurance from various state governments.
Covering domiciliary treatment through health insurance is important:

Currently health insurance schemes mostly cover expenses towards hospitalization. However, medical insurance schemes should also cover domiciliary treatment costs and loss of income, along with hospitalization costs.

Government policy reforms towards health insurance are essential:
Currently Indian health insurance segment is growing over 50% and according to PHD Chamber of Commerce and Industries the segment is estimated to grow to US$ 5.75 billion by 2010. Even this number appears to be much less than adequate for a country like India.

It is high time that the Government creates a conducive environment for increased penetration of health insurance within the country through innovative policy measures. One such measure could be by making health insurance cover mandatory for all employers, who provide provident fund facilities to their employees.

It is a pity that the concept of health insurance has not properly taken off in our country, as yet, though shows immense growth potential in the years to come. Innovative policies of the government towards this direction along with increasing the cap on Foreign Direct Investment (FDI) for health insurance will encourage many competent and successful global players to enter into this market.

With the entry of efficient and successful global players in health insurance segment, one can expect to see many innovative insurance products to satisfy the needs of a large section of Indian population. Such an environment will also help increasing the retail distribution network of health insurance with a wider geographic reach, significantly improving the affordability and access to healthcare in general and medicines in particular, of a large number of population of the country.

By Tapan Ray

Disclaimer: The views/opinions expressed in this article are entirely my own, written in my individual and personal capacity. I do not represent any other person or organization for this opinion.