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The New Drug Policy is languishing in a labyrinth

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Drug Price Control has remained the key feature of all Drug Policies of India, since their inception in early 70’s. Most of these policies continued to remain behind their times consistently, without any exception.

That said, the Drug Policy 1994 and the consequent Drug Price Control Order 1995 (DPCO  ’95) have now become the largest ‘Dinosaur’ of all Drug Policies. However, the most intriguing point though, both these have still been kept operational by the government and the very concept of a new and a more contemporary one is languishing in a labyrinth since over a decade, for reasons of anybody’s guess.

Drug Price Control system in India:

It appears that the drug price control system in India is here to stay, at least in the short to medium term and that too in a seemingly best case scenario.

The key reasons:

As we know, the key reasons of price control for pharmaceuticals in India are the following:

  • To contain cost of medicines, particularly the essential ones, at a reasonably affordable level, which is a very important part of the total healthcare expenditure of the common man.
  • To provide greater access to medicines to all, especially in view of very high  ‘out of pocket expenditure’ for health for a vast majority of population in the country.

The economic factors:

Some of the economic factors, which may cause impediments in achieving these objectives are the following:

  • Sub optimal public healthcare infrastructure, leaky delivery system and high cost of  private healthcare services
  • This is fueled by, as stated above, unabated increase in ‘out-of-pocket expenses’ on healthcare in general and medicines in particular at 78 per cent, as compared to 61 per cent in China, 53 per cent in Sri Lanka, 31 percent in Thailand, 29 per cent in Bhutan and 14 per cent in Maldives (Source: The Lancet)
  • High expenses on drugs for outpatient care

Though very important, drug cost alone, however, does not determine quality of access to healthcare.

Global scenario for drug price control:

As per published reports, all 34 developed nations of the world have ‘Universal Health Coverage’ mechanism in place in various different forms, including mandatory medical insurance requirements, to effectively address the issue of high access to healthcare including pharmaceuticals in their respective countries, significantly reducing ‘out of pocket expenses’ towards health.

All these 34 countries belong to ‘Organization for Economic Co-operation and Development (OECD)’, the governments of which, in some way or the other control and regulate drug prices.

The Governments/payors of most of these countries implement the price control measures by playing the role of a dominant market force directly, while negotiating a favorable price from the manufacturers, which are much lower than their equivalent free market prices.

Many other OECD governments set the drug reimbursement prices right at the time of introduction of new drugs through hard negotiation, which are also well below free market prices and acts as the bench mark market prices, in many ways.

In addition to all these mechanisms, the governments in many OECD countries periodically reduce the prices of already marketed drugs quite significantly.

A contrarian view on Drug Price Control:

Some industry experts feel that there is a hidden consequence for the ‘Drug Price Control System’, especially with the cost based one.

The cost based price control as is currently practiced by the government in India compels the pharmaceutical manufacturers to restrict to:

  • Minimum acceptable quality standard rather than maximum possible quality standards for the patients
  • Does not encourage innovation in formulation development like novel galenic formulations for better patient acceptance and compliance
  • Indirectly discourage innovation in product packaging
  • Ceiling Price mechanism does not encourage advanced anti-counterfeit measures for patients’ safety

These experts also feel that adverse consequences of price control will have a significant negative impact on the pharmaceutical players to plough back fund towards R&D projects to meet the unmet needs of the patients and thereby reducing the range of treatments that could be made available to the patients in the years ahead.

What is China doing?

On March 28, 2011 Reuters reported that China had cut the maximum retail price for more than 1,200 types of antibiotics and the drugs for the circulatory system by an average of 21 percent.

It has also been reported that the Chinese Government has put a cap on the prices of about 300 drugs featuring in their ‘National List of Essential Medicines (NLEM).’

Supreme Court directive on ‘Price Control’ of ‘Essential Medicines’:

It is worth noting in this context that in 2003, the Supreme Court of India, while setting aside the Drug Policy 2002 directed the government to work out effective mechanism to bring all essential and life-saving medicines under price control.

HLEG recommends ‘Price Control’ of ‘Essential Medicines’:

Even in its report the ‘High Level Expert Group (HLEG)’ on ‘Universal Health Coverage (UHC)’ in India, set up by the Planning Commission of India under the chairmanship of the well-known medical professional Prof. K. Srinath Reddy, under recommendation no. 3.5.1, postulated price control and price regulation on essential drugs, which is quite in line with the draft National Pharmaceutical Pricing Policy 2011 (NPPP 2011).

The HLEG report says:

“We recommend the use of ‘essentiality’ as a criterion and applying price controls on formulations rather than basic drugs. Direct price control applied to formulations, rather than basic drugs, is likely to minimize intra-industry distortion in transactions and prevent a substantial rise in drug prices. It may also be necessary to consider caps on trade margins to rein in drug prices while ensuring reasonable returns to manufacturers and distributors. All therapeutic products should be covered and producers should be prevented from circumventing controls by creating nonstandard combinations. This would also discourage producers from moving away from controlled to non-controlled drugs. At the same time, it is necessary to strengthen Central and State regulatory agencies to effectively perform quality and price control functions.”

Types of drug price regulations in India:

  1. Cost based price control: e.g. as specified in the Drug Price Control Order 1995 (DPCO 95)
  2. Marked based price control: e.g. as was suggested by ‘The Pronab Sen Committee’ in 2005
  3. Price Monitoring with a cap on annual price increase: e.g. as is currently followed by the National Pharmaceutical Pricing Authority (NPPA) for all products which are outside DPCO ’95

The weaknesses of cost based pricing mechanism:

The key criticism of cost based pricing mechanism flows from the following arguments:

  • This system is not followed by any developed or developing countries worth mentioning, which follow drug price control mechanism in any form
  • A Complex, intrusive and inefficient system of pricing medicines
  • Does not consider important variations in the level of GMP standards and the quality of input costs
  • The conversion cost and packing norms are determined through a sample survey of less than one per cent of pharmaceutical manufacturing units

Pronab Sen Committee report – the basis of price control in the draft NPPP 2011:

The draft NPPP 2011 is based on the ‘Recommendations of the Task Force constituted under the Chairmanship of Dr. Pronab Sen to explore issues beyond Price Control to make available Life-saving Drugs at reasonable prices’ to all.

‘Pronab Sen Committee’ suggested the following principles of Price regulation to achieve part of the above objective:

1.       The National List of Essential Medicines (NLEM) should form the basis of drugs to be considered for intensive price monitoring, ceiling prices and for imposition of price controls, if necessary.

2.       The government should announce the ceiling price of the drugs contained in the NLEM (other than the drugs procured by hospitals directly and which an individual does not have to purchase from the market) on the basis of the weighted average prices of the top three brands by value of single ingredient formulations prevailing in the market as on 01.04.2005. In cases where there are less than three brands, the weighted average of all the existing brands would be taken. The Org–IMS data set can be used for this purpose initially with a 20 per cent retail margin provided. There is, however, a need to improve the available data coverage, which should be taken up with ORG-IMS or any other data provider.

3.       For drugs which are not reflected in ORG-IMS data, the NPPA should prepare the necessary information based on market data collection.

4.       During the transition period (i.e. till the time ceiling prices are fixed and notified) prices of all essential drugs may be frozen.

5.       The Government should specify the reference product in terms of strength and pack size for each product which would form the basis for price determination. The price ceiling would be specified on a per dosage basis, such as per tablet/per capsule or standard volume of injection. Where syrups and liquids are sold in bottles the ceiling price may be fixed on individual pack size.

6.       Price relaxations may be permitted for non-standard delivery systems, packaging and pack sizes through applications to the negotiations committee, which should become applicable for all similar cases.

7.       In the case of formulations which involve a combination of more than one drug in the NLEM, the ceiling price would be the weighted average of the applicable ceiling prices of its constituents.

8.       For formulations containing a combination of a drug in the NLEM and any other drug, the ceiling price applicable to the essential drug would be made applicable. However, the company would be free to approach the price negotiations committee for a relaxation of the price on the basis of evidence proving superior therapeutic effectiveness for particular disease conditions.

9.       In order to determine the reasonableness of the ceiling prices fixed as above, the prices quoted in bulk procurement by Government and other designated agencies may be examined for use, provided that the system of bulk procurement meets certain minimum prescribed standards. Recognizing that retail distribution has costs not reflected in bulk procurement, a markup of 100 per cent over this reference price is recommended.

10.    NPPA should set up a computer based system which would scan the price data provided by companies against the ceiling prices determined as above and identify formulations which breach the relevant price ceiling. The company manufacturing or marketing such a product would be required to reduce its price or to face penal action.

11.    Companies should be permitted to represent for any price increase on valid grounds, which should then become applicable to the entire class of products.

12.   The NLEM should be revised periodically, say every 5 years, in order to reflect new drugs and significant changes in pattern of drug sales within the therapeutic categories. However till the time the new list is finalized the existing list will continue to be valid for the purpose of price control.

13.   In the case of drugs not contained in the NLEM, intensive monitoring should be carried out of all drugs falling into a pre-specified list of therapeutic categories. Any significant variation in the prices (say above 10 per cent) would be identified for negotiation.

The stakeholders’ comments on NPPP 2011:

About 60 stakeholders have commented by now on the draft NPPP 2011. The views are quite divergent though. It is interesting to note that the new draft pricing policy, in its current form, has been rejected by all key stakeholders, like the Industry, Ministry of Health, Expert Groups, WHO, NGOs and reportedly even by the Economic Advisory Council of the Prime Minister, on quite different grounds.

As widely reported in the media, the pharmaceutical industry, though in favor of the marked based pricing  mechanism, feels that the draft NPPP 2011 will increase the span of drug price control to over 60 per cent of the Indian Pharmaceutical Market (IPM). This means over eight times increase in the span of price control from its current level, making the task unwieldy for even the NPPA.

Majority of other stakeholders including the Ministry of Health, on the contrary, are arguing in favor of cost based price control. They commented that the price control system of the draft policy would give legitimacy to high drug prices in India, leading to increase in the overall prices of medicines. This group feels that the top three brands in majority of cases will be the most expensive ones.

Two interesting observations by the World Health Organization (WHO) on ‘Trade Margin’:

The WHO  in their observations on the draft NPPP 2011 has made the following interesting comments:

  1. “The new price regulation uses a margin of16% to calculate the retail prices. This is a lower margin than currently – based on the market data 1.1 and 3.3 I calculated a current retail margin of 22%. So the new price regulation implies a margin reduction of 6%, alternatively the CP might be set at a 6% lower price than currently is the case.”

If the WHO observation is correct, there is a scope to reduce the price of essential medicines by 6 per cent only through proper regulation of the trade margin.

  1. WHO also comments that IMS data, the basis of all such calculations by the NPPA, has severe limitations as “Their data does not take into account the discounts, rebates and bundling deals and when the data is collected at the level of the wholesaler they estimate the retailer and patient prices”.

If such is the case, what could possibly be the basis of all calculations as captured in the draft NPPP 2011? 

Observation of a distinguished Parliamentarian: 

Dr. Jyoti Mirdha , a Member of the Lower House of the Parliament (Lok Sabha) commented as follows:

“Under this policy the weighted average of three top selling brands will be the ceiling price. There is no logic in restricting the formula to just three brands. Why not five? Why not 10 to arrive at a more representative and reasonable figure? Besides why base on sales figures? In any pricing policy the parameter should be the price. Why not weighted average of 10 least priced brands?”

This could well be a pertinent question.

How to break the logjam now?

Taking on from Dr. Mirdha’s argument , WHO observations and Pronab Sen Committee report, one could possibly try to resolve this logjam by exploring various other available alternatives like for example, the following broad points, to ascertain whether a win-win situation can be created for all through the new drug policy:

  1. What happens if ‘Weighted Average Price’ is calculated based on all brands, instead of top three or bottom three with some exclusion criteria, if required?
  2. When inclusion criteria for price control in the new draft NPPP 2011 is ‘essentiality’ of drugs, it sounds logical that price control should be restricted to National List of Essential Medicines 2011 (NLEM 2011). Only possible extension could perhaps be taking the entire molecule, instead of specified strengths of the same molecule.
  3. Enough non-price control checks and balances to be put in place to ensure proper availability of NLEM 2011 drugs to the common man and avoidance of any possible situation of shortages for such drugs.
  4. As commented by WHO, trade margin should be rationalized, the MRP needs to be reduced accordingly and the consequential benefits to be passed on to the patients.

Conclusion:

The issue of the new National Pharmaceutical Pricing Policy should be resolved sooner than later and that too by conforming to the directive given by the Supreme Court on essential medicines. At the same time, all the stakeholders must feel comfortable with the new drug policy.

The four points, as mentioned above, are just an illustration for choosing an alternative solution. If it works, let us move on. If it does not, let us search for the pathfinder who can break the decade old labyrinth rather quickly, without losing the way yet again.

However, the bottom-line remains that the solution should be a win-win one, both for the patients and the industry alike, benefiting the healthcare space of the country in the years ahead.

By: Tapan J 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.

e-healthcare: A new vista to improve access to quality and affordable healthcare in India

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The concept of e-healthcare started germinating in India since 1999, when the ‘Indian Space Research Organization (ISRO)’ initiated its pioneering step towards telemedicine in the country by deploying a SATCOM-based telemedicine network. This network is currently playing a key role in the evolution and development of e-healthcare in the country. ISRO, with its fine blending of application of world class satellite communication technology with modern medical science and information technology (IT), has engaged itself very seriously to ensure availability of quality and affordable specialty healthcare services right at the doorsteps of a vast majority of population living even in the distant and remote places of the rural India.

However, despite telemedicine gaining slow momentum in India, there is no law in place for ethical, affordable and patient friendly use of e-healthcare facilities in the country.  Considering its vast scope of improving access to healthcare, cost effectiveness and a convenient ways to deliver e-healthcare services to a very large number of patients, especially, located in the distant locations of the country, the law makers should urgently ensure that this important healthcare service is not misused or abused by unscrupulous elements, in any way.

Very recently, taking into consideration this critical legal requirement the Medical Council of India (MCI) has decided to soon forming a panel to address the ethical issues related to e-healthcare in India.

Delivery of e-healthcare through telemedicine:

The World Health Organization (WHO) has defined telemedicine as follows: “The delivery of healthcare services, where distance is a critical factor, by all healthcare professionals using information and communication technologies for the exchange of valid information for diagnosis, treatment and prevention of disease and injuries, research and evaluation, and for continuing education of healthcare providers, all in the interests of advancing the health of individuals and their communities.”

As stated above, telemedicine is gradually gaining popularity in India, like in many other countries of the world. This emerging e- healthcare service has the potential to meet the unmet needs of the patients located in the far flung areas, by providing access to medical specialists for treatment of even tertiary level of their ailments, without requiring traveling outside their villages or small towns where they reside.

The key objectives of e-healthcare:

1. To provide affordable quality healthcare services even to those places where these are not available due to lack of basic healthcare infrastructure and delivery issues.

2. Speedy electronic transmission of clinical information of both synchronous and asynchronous types, involving voice and data transfer of patients to distantly located experts and get their treatment advice online.

3. To effectively train the medics and the paramedics located in distant places and proper management of healthcare delivery/service systems.

4. Disaster management.

The Process:

The process can be: – ‘Real time’ or synchronous when through a telecommunication link real time interaction between the patients and doctors/experts can take place. This technology can be used even for tele-robotic surgery. – ‘Non-real time’ or asynchronous type when through a telecommunication link, stored diagnostics/medical data and other details of the patients are transmitted to the specialists for off-line assessment and advice at a time of convenience of the specialists.

These processes facilitate access to specialists’ healthcare services by the rural patients and the medical practitioners alike by reducing avoidable travel time and related expenses. At the same time, such interaction would help upgrading the knowledge of rural medical practitioners and paramedics to hone their skill sets.

The Promise:

e-healthcare is capable of taking modern healthcare to remote rural areas using Information Technology (IT), as specialists are mostly located in the cities. As majority of the diseases do not require surgery, e-healthcare would prove to be very conducive to such patients and economical too.

Relevance of e-healthcare in India:

With its over 1.2 billion population and equally huge disease burden, spreading across distant semi-urban and rural areas, where over 70 per cent of the population of the country lives, India should focus on e-healthcare to meet unmet healthcare needs of the common man, at least, located in far-flung areas. e-healthcare, therefore, is very relevant for the country, as it faces a scarcity of both hospitals and medical specialists. In India for every 10,000 of the population just 0.6 doctors are available.

According to the Planning Commission, India is short of 600,000 doctors, 1 million nurses and 200,000 dental surgeons. It is interesting to note that 80 percent of doctors, 75 percent of dispensaries and 60 percent of hospitals, are situated in urban India.

Progress of e-healthcare in India:

Equitable access to healthcare is the overriding goal of the National Health Policy 2002. e-healthcare has a great potential to ensure that the inequities in the access to healthcare services are adequately addressed by the country.

Very encouragingly, a good number of even super-specialty hospitals like, Apollo Group of Hospitals have unfolded the launch plan of ‘Healthcare India Pharmaceutical Registry (HIPAAR)’, which is an electronic drug database for reference by the doctors and patients.  Apollo Group feels that HIPAAR module will enable the patients to know whether right medications have been used or not to treat the ailment that the concerned patient is suffering from along with the information of possible adverse effects of the medicines prescribed to them.

Currently, in the dedicated e-healthcare centers of ‘Narayana Hrudayalaya group’ pioneered by Dr Devi Shetty, patients from far-flung areas can have consultations with doctors in Bangalore.

Similarly, Asia Heart Foundation (Kolkata) and Regional Institute of Medical Science (Imphal, Manipur) are currently providing multi-specialty e-healthcare through telemedicine to 10 district hospitals, which will be extended to 75 District Hospitals, shortly. At the same time, some Government hospitals also have started extending e-healthcare through telemedicine facilities, which among others will handle e-transfer of medical data of patients like, X-ray, CT scan and MRI for not only diagnosing the disease, but also for treatment and medical consultation. Department of telemedicine of Sir Ganga Ram Hospital of New Delhi is one such example.

Well reputed cancer hospital of India, Tata Memorial Hospital (TMH) of Mumbai is now well connected with B.Barooah Cancer Institute of Guwahati, Assam and K.L Walawalkar Cancer Center of Chiplun, Maharashtra. Over a short period of time TMH plans to connect with 19 such regional cancer institutes.

Today the Center for Health Market Innovations (CHMI), a global network of partners that seeks to improve the functioning of health markets in developing countries to deliver better results for the poor, profiles more than 55 telemedicine programs globally including 24 in India.

Public Private Partnership:

As the Ministry of Health and Family welfare has now constituted a ‘National Telemedicine Taskforce’, some private healthcare institutions, as mentioned above, and various State Governments like, Tamil Nadu, Andhra Pradesh, Kerala and West Bengal have started taking admirable initiatives to translate the concept of e-healthcare into reality, especially for the rural India. Subsequently, private e-healthcare solution providers have also started coming-up, though in a sporadic manner.  Active participation of the civil society and meaningful Public Private Partnership (PPP) projects are essential not only to get engaged in creating awareness for e-healthcare within India, but also to ensure that required blend of a high quality technical and medical manpower that the country currently possesses are effectively utilized to establish India as a pioneering nation and a model to emulate, in the field of e-healthcare.

The market of e-healthcare in India:

Frost & Sullivan (2007) estimated the e-healthcare (telemedicine) market of India at US$3.4 million is expected to record a CAGR of over 21 percent between 2007 and 2014.

More fund required for e-healthcare:

e-healthcare shows an immense potential within the fragile brick and mortar public healthcare infrastructure of India to catapult rural healthcare services, especially secondary and tertiary healthcare, to a different level altogether. Current data indicate that over 278 hospitals in India have already been provided with telemedicine facilities. 235 small hospitals including those in rural areas are now connected to 43 specialty hospitals. ISRO provides the hospitals with telemedicine systems including software, hardware, communication equipment and even satellite bandwidth. The state governments and private hospitals are now required to allocate adequate funds to further develop and improve penetration of Telemedicine facilities in India.

Issues with e-healthcare in India:

– Telemedicine will not be immune to various complicated legal, social, technical and consumer related issues.

- Some government doctors could feel that for e-healthcare they need to work extra hours without commensurate monetary compensation

- The myth created that setting up and running any e-healthcare facility is expensive, needs to be broken, as all the related costs can be easily recovered by a hospital through nominal charges to a large number of patients, who will be willing to avail e-healthcare facilities, especially from distant parts of India.

- Inadequate and uninterrupted availability of power supply could limit proper functioning of the e-healthcare centers.

- High quality of telemedicine related voice and data transfer is of utmost importance. Any compromise in this area could have a significant impact on the treatment outcome of a patient.

- Lack of trained manpower for e-healthcare services needs to be addressed quickly by making it a part of regular medical college curriculum, just as the University of Queensland in Australia has it for their Graduate Certificate in e-Healthcare (GCeH). A pool of competent professionals for e-healthcare services in the country will be a step in the right direction.

- Reimbursement procedure of e-healthcare treatment costs by the medical insurance companies needs to be effectively addressed.

Conclusion:

For an integrated and sustainable healthcare delivery model covering the entire population of the country, a robust e-healthcare strategy is absolutely essential.  Three critical success factors for e-Healthcare initiatives may be considered as follows:

  1. A comprehensive government policy
  2. Increasing level of literacy
  3. Power and telecommunications infrastructure

Unlike common perception, for greater effectiveness and better acceptance of any sustainable e-healthcare service project, the focus should be the same or rather a little more on non-technological areas like consumer mindset and competent healthcare providers than technological factors such as biomedical engineering or information technology.

A very large rural population of India living in remote areas could get access to affordable and quality health related services through e-healthcare facilities, which, I reckon, should be made to play a very special and critical role to address the healthcare needs of the common man. With its gradually increasing coverage, it is imperative that required regulatory standards and guidelines for e-healthcare are put in place across the country, sooner. Technological expertise to make e-healthcare successful is already available in India. The pioneering role that ISRO has been playing in this field is still not known to many.

Thus, to make e-healthcare successful, the country needs to create an appropriate groundswell for the same. All powerful and effective ‘Fourth Estate’ of the country should demonstrate greater interest to initiate a healthy discussion on e-healthcare by all stakeholders and play the role of a facilitator to ensure access to quality and affordable healthcare to all the people of India.

By: Tapan J 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.

Creating an IPR friendly robust ‘Echo-System’ and ‘Improving Access to Affordable Medicines’ are not either/or situation in India

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Last year, though the growth of the Global Pharmaceutical Industry with a turnover of US$ 752 billion significantly slowed down to just 6.7% due to various contributing factors, the Indian Pharmaceutical Industry continued to maintain a robust of growth of 18% with a turnover of US$ 8.1 billion (IMS 2009).

Need to invest more in R&D:

On a longer term perspective, the domestic industry growth will be significantly driven by the newer products, which will be the outcome of painstaking innovative research and development initiatives. Keeping this point in mind, the fact that today India accounts less than one per cent of over US$130 billion of the worldwide spending on research and development for pharmaceuticals, despite its known strength in process chemistry and abundant talent pool, has started attracting attention of the government.

Robust IPR regime and addressing the needs of the poor both are equally important:

The Prime Minister of India, Dr Manmohan Singh in his address at the Fortune Global Forum in New Delhi in October, 2007 clearly enunciated, “We have affirmed our commitment to the protection of intellectual property rights. But, the global economy, the global community cannot afford the complete privatization of research, of knowledge generation, especially in fields like medicine. We need to evolve mechanisms that protect intellectual property and at the same time, address the needs of the poor”.

Thus encouragement, reward and protection of IPR and addressing the crying needs of the poor are definitely not an either/or situation. The country needs to address both with equal importance and focus.

‘Vision 2020’ of the Department of Pharmaceuticals:

It is encouraging to note that the Department of Pharmaceuticals (DoP) of the Government of India through its ‘Vision 2020’ initiatives is planning to create a new echo-system in the country to promote new drug discovery platforms. This is expected to catapult the country as one of the top five global pharmaceutical hubs, by 2020 attracting additional investments of around US$ 20 billion to the GDP of the country.

The Primary role of the Pharmaceutical Industry in India, like in many other countries of the world, is to make significant contribution to the healthcare objectives of the nation by meeting the unmet needs of the ailing patients, with innovative affordable medicines. This role can be fulfilled by developing newer medicines through painstaking, time-consuming, risky and expensive basic research initiatives. To help translate this vision into reality appropriate echo-system needs to be created in the country, urgently, for the Pharmaceutical Industry in India to commit themselves to its one of the prime functions of discovering and developing newer medicines not only for the patients in India but for all across the world.

Ongoing efforts in Research & Development (R&D) would require a robust national policy environment that would encourage, protect and reward innovation. Improving healthcare environment in partnership with the Government remains a priority for the Research based Pharmaceutical Companies in India.

Need to tighten the loose knots:

However, in the new paradigm, which has been designed to foster innovation in the country, there are still some loose knots to be tightened up to achieve the set objectives for the nation, in the longer term perspective.

Uncertainty over weak enforcement of patent in the country should be dispelled, with efficient administration of the new patent regime. Regulatory Data Protection should be introduced to spur R&D investment and global collaborative opportunities. This will, in turn, help improving the competitiveness of India vis-à-vis countries like China to attract appreciable investments towards R&D of pharmaceutical and bio-pharmaceutical products. It is believed that the capacity of our judiciary should be expanded and specialized courts that can enforce Pharmaceutical patents be provided with requisite technical expertise.

How to address the core issue of ‘availability of quality medicines at affordable prices’?

India needs to address the root cause of the ‘pricing issue’ affecting ‘access to quality medicines at affordable prices’ to a vast majority of its population, in a holistic way, rather than superficially with a piecemeal approach, as is being done since long.

The policy of ‘stringent price control of medicines’ of the government since 1970, has certainly enabled India to ensure availability of medicines at the lowest price in the world, lower than even the neighbouring countries like, Pakistan, Bangladesh and Sri Lanka. However, the core issue of ‘affordability of medicines’ has still remained elusive and will remain so, if we continue to tread this much beaten path, though not so successful in the perspective of the core issue, even today.

This is mainly because, around 40% of our population still costitutes of ‘Below the Poverty Line (BPL)’ families, who, very unfortunately, will not be able to afford any price of medicines. This is vindicated by the WHO report, quoted by even our government that 65% of Indian population has no access to modern medicines, as against 15% in China and 47% in Africa, despite medicines prices being the cheapest in India.

In such a situation, even if prices of all drugs featuring under the National List of Essential Medicines (NLEM), anti-cancer and other drugs are brought under stringent price control, the same ‘affordability of medicines’ issue will continue to linger.

Moreover, the recent announcement by the National Pharmaceutical Pricing Authority (NPPA), “as per the Secondary Stock Audit Report of ORG-IMS for the month of April 2010, which covers 60,000 packs, in the non-schedule category, the percentage of packs whose prices have increased on monthly basis during 2009-10, is only in the range of 0.0003 to 4.75%, while the remaining have shown stable to declining prices,” clearly vindicates that unusual price increase of medicines is also not a problem either, in India.

Considering all these points, as I have been suggesting since long, the government should, at least now, allocate adequate fund to cover all BPL families under “Rashtriya Bima Yojona’ and ensure its effective implementation by creating adequate healthcare infrastructure and measurable/transparent delivery systems. Similarly, the rest of the population of the country should be covered by encouraging opening-up and deep penetration of a variety of medical insurance products to suit all pockets together with appropriate tax incentives, as is currently being extended to the ‘Mediclaim’ policy holders.

In all developed countries and many emerging markets like China (where about 85% of the population are covered by different types of healthcare expenditure reimbursement schemes), the issue of ‘affordability of medicines’ has been addressed with such type of approach and other social security measures by their respective governments.

 

“Employers must take health cover for staff or lose tax gains”: Montek Singh Ahluwalia

It is indeed quite encouraging to note from the report of The Hindu Business Line dated September 9, 2010, as this critical issue is being regularly deliberated through this column, the Deputy Chairman of the Planning Commission, Mr Montek Singh Ahluwalia, has “mooted denial of tax deductibility on wage payment if the employer in the organised sector does not take steps to enrol the employee in a group health insurance scheme. Mr Ahluwalia said employers in the organised sector should be encouraged to make it compulsory for their employees to join a group health insurance scheme, in which the employer and the employee make contributions. As an incentive for this, the insurance premium that is paid can be exempt from tax as India will never be able to expand insurance for which people pay unless an element of incentive-cum-compulsion is introduced”. Mr. Ahuluwalia further commented, “If you leave it to people, only rich people will buy insurance, even middle class people will not buy insurance,” He insisted that “his proposal is feasible and the Government should give it a very serious consideration”.
High incidence of mortality and morbidity burden of India can only be addressed by improving ‘Access to Healthcare’:

Therefore, improving access to healthcare in general and medicines in particular should be on the top priority agenda of the policy makers in our country. High incidence of mortality and morbidity burden in a country like ours can only be addressed by improving Access to healthcare through a concerted partnership oriented strategy. Thus, Pharmaceutical Industry in India should be committed to actively support all efforts from all corners towards this direction to improve Access to Medicines to a vast majority of population in India. Although sporadic, efforts to this direction are being made through various laudable Corporate Social Responsibility (CSR) Initiatives by both local and global pharmaceutical companies within the country.

Pharmaceutical Industry also needs to behave as a responsible corporate citizen:

Another area of focus should be on good corporate governance. This encompasses adherence to high ethical standards in clinical trials, regulatory and legal compliance, working to prevent corrupt activities, high ethical standard in promotion of medicines and addressing all other issues that support good healthcare policies of the Government. In addition, the Pharmaceutical Industry should take active measures to involve all concerned to fight the growing menace of counterfeit and spurious medicines which significantly harm the patients all over the country.

Conclusion:

It is obvious that the Pharmaceutical Industry alone will have a limited role to address the key healthcare issues of our nation. All stakeholders like the government, corporate and the civil society in general must contribute according to their respective capabilities, obligations and enlightened societal interests to effectively address these pressing issues.

However, it is worth reiterating that the Pharmaceutical Industry in India should continue to act responsibly and demonstrate commitment to work closely in collaboration with all stakeholders to make newer innovative medicines both preventive and therapeutic available and accessible adequately at an affordable price to the ailing population of the nation. Thus, in my view, for the progress of the nation, creating a robust IPR friendly ‘Echo System’ and ‘Improving Access to Quality Medicine at an Affordable Price’, are certainly not an either/or situation for the astute policy makers in India, as is being made out to be at some quarters.

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.

Making quality medicines available at an affordable price – Are we ‘missing woods for the trees’?

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On August 4, 2010 the Parliamentary standing committee for Health and Family Welfare in its 45th report, recommended the following to the ‘Rajya Sabha’ of the Parliament of India for ‘Making quality medicines available at an affordable price’ to the common man:

1. Blanket caps on the profit margins of all medicines across the board, as these are the ‘only items’ where the purchasing decision is taken by a doctor – a third party and not by the patients who will actually pay for such medicines. In such a situation, a possible’ unholy nexus’ between the prescribing doctors and the pharmaceutical companies could put the patients at a disadvantage and in a helpless situation.

2. This blanket cap on profit for ALL drugs will discourage pharmaceutical companies to shift the balance of their product portfolio from schedule (price control) to non-schedule (outside price control) formulations.

3. This action will make the administration of the ‘Price Control’ mechanism by the Government much simpler by eliminating the current practice of price monitoring and the government preference of substitution of generic drugs for the branded pharmaceuticals

4. MRP of ALL medicines should be determined by the NPPA based on an open and transparent process and considering interests of all stake holders, as is currently being followed in other areas like, electricity tariff, bus, auto rickshaw and taxi fares, insurance premiums and various interest rates.

5. The Department of Health and Family Welfare and the Department of Pharmaceuticals should work out a system through the Inter-Ministerial Coordination Committee to put a blanket cap on profit margins of ALL drugs across the board, immediately.

6. Despite amendment of the MCI guidelines for the doctors in December 2009, banning the acceptance of all kinds of gifts, trips to foreign destinations and availing various types of hospitality by them from the pharmaceutical companies, nothing much has changed on the ground related to such ’unethical practices’. Since MCI has no jurisdiction over the pharmaceutical companies, the government should formulate similar punitive steps through the DCGI, CBDT etc. against the erring pharmaceutical companies.

7. The Committee indicated that it desires to be kept apprised of the action taken in this regard by the Government.

The key factors influencing affordability of medicines:

All the above steps will remain as good intent by the policy makers, if the issue of access to medicines is not addressed simultaneously. As we know that affordability will have no meaning, if one does not have even access to medicines.

In my view, there are five key factors, which could ensure smooth access to medicines to the common man across the country; affordable price being just one of these factors:

1. A robust healthcare infrastructure
2. Affordable healthcare costs including pharmaceuticals
3. Rational selection and usage of drugs by all concerned
4. Availability of healthcare financing system like, health insurance
5. Efficient logistics and supply chain support throughout the country

High out of pocket expenditure could push a section of population below the poverty line:

In India ‘out of pocket expenditure’ as a percentage of total healthcare expenses is around 80%, being one of the highest in the world.

A study by the World Bank conducted in May 2001 titled, “India – Raising the Sights: Better Health Systems for India’s Poor” indicates that out-of-pocket medical costs alone may push 2.2% of the population below the poverty line in one year.

‘Missing woods for the trees’?

Affordability is indeed a relative yardstick. What is affordable to an average middle class population may not be affordable to the rest of the population even above the poverty line. Similarly, below the poverty line population may not be able to afford perhaps any cost towards medicines. In a situation like this, putting a blanket profit cap on all medicines will not be just enough. There is a crying need to put in place an appropriate healthcare financing model by the policy makers, covering all sections of the society. Are we then ‘missing woods for the trees’?

Create a robust healthcare provider group through Public Private Partnership (PPP) initiatives to offer quality healthcare at an affordable price:

To resolve the issue of affordability of healthcare in general including medicines, the policy makers should take immediate steps to put in place the ‘Healthcare Financing’ initiatives through a robust PPP model in the country. A highly competitive ‘Health Insurance’ sector, created through PPP, could emerge as a powerful and key healthcare provider in the country. The power that such stakeholders will then assume in deciding for their respective clientele, types of doctors, hospitals, diagnostic labs and even what types of medicines that will be dispensed to them to offer quality healthcare at an affordable price, could indeed be a game changer having an immense influence in bringing the cost of overall healthcare for the common man, including medicines, very significantly.

The ‘Health Insurance’ companies can then decide through the Third Party Administrators (TPA), based on public interest, what types of fees should be charged by the following to offer quality healthcare services at an affordable price to their clientele, if these groups would like to avail the huge business potential for a long period of time:

1. Doctors
2. Hospitals
3. Diagnostic laboratories
4. Other related service providers

For making centralized purchase of medicines, these insurance companies or payors may enter into a hard negotiation with the pharmaceutical companies directly to bring down the price of medicines for the use of their respective clientele.

A recent incident:

To illustrate the above point let me quote an important and related news item, which was published in almost all the leading national daily newspaper, just in the last month.

In July 2010, it was reported that about 18 health insurance companies, who were providing cashless services to the policy holders at over 3,000 hospitals across India, found out that only 350 of them constituting around 11% of the total, were consuming more than 80% of the total claims.

It was also reported that the patients were overcharged by these hospitals for each hospitalization irrespective of the treatment provided and were left with them very little funds for their next treatment. This prompted the said insurance companies to bring some order out of the chaos, as it were.

As a result, at least 150 hospitals only from Delhi and the National Capital region were taken out of their designated list for the cashless facility, keeping the facility available at around 100 hospitals where none belonged to any corporate chain. Similar action was taken against hospitals in other cities, as well.

Thereafter, these insurance companies also decided to convey to the invidual policy holders the fresh list of hospitals for cashless facilities, working out new treatment packages depending on the quality of available healthcare infrastructure of each hospital and a lower or a higher rate was worked out for implementation, accordingly.

This illustration will vindicate how powerful and assertive the health insurance companies could be with the effective use of the TPAs for the sake of public health interest, if they wish to and at the same time to protect their respective bottom lines, creating a win-win situation for all.

Conclusion:

It is indeed an irony that despite being the 4th largest producer of pharmaceuticals and catering to the needs of 20 per cent of the global requirements for the generic medicines, India is still unable to ensure access to modern medicines to around 650 million population of the country (The World Medicine Report, WHO 2004). Like in many other emerging economies of the world, in India too, access to modern medicines along with their affordability, is the key macro healthcare issue of the nation.

In a situation like this, as stated above, when the payors or health insurance companies will start exerting immense performance pressure to all concerned to provide quality healthcare at an affordable price, even the alleged ‘unholy nexus’ between the pharmaceutical companies and the medical profession, perhaps will not have any practical relevance.

It is worth pondering, whether the Government is now sending confusing signals to the civil society at large by propagating ‘non-regulated pricing’ for Petroleum Products and ‘regulated pricing’ for pharmaceutical products?

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.

 

The traditional ‘Business Models’ of R&D focused Global Pharmaceutical majors are undergoing a metamorphosis

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Mounting pressure on the P&L account, as the products go off patent:

Patented new products are the prime growth driver of the research based pharmaceutical companies of the world. Since last few years, because of various reasons, the number of launch of such products has been greatly reduced. To add fuel to the fire, 2010-12 will witness patent expiries of many blockbuster drugs, depleting the growth potential of the most of the research based pharmaceutical companies.

The existing model of growth engine needs a relook:

The blockbuster model of growth engine of the innovator companies effectively relies on a limited number of ‘winning horses’ to achieve the business goal and meeting the Wall Street expectations. In 2007, depleting pipeline of the blockbuster drugs hit a new low in the developed markets of the world. It is estimated that around U.S. $ 140 billion of annual turnover from blockbuster drugs will get almost shaves off due to patent expiry by the year 2016. IMS reports that in 2010 more than U.S. $ 30 billion will be adversely impacted because of patent expiry. Another set of blockbuster drugs with similar value turnover will go off patent the year after i.e. 2011. It will not be out of context to mention, that last year around U.S. $ 27 billion worth of patented drugs had gone off-patent.

Decline in R&D productivity is not related to investments:

The decline in R&D productivity has not been due to lack of investments. It has been reported that between 1993-2004, R&D expenditure by the pharmaceutical industry rose from U.S.$ 16 billion to around U.S.$ 40 billion. However, during the same period the number of applications for New Chemical Entities (NCEs) filed annually to the U.S. FDA grew by just 7%.

Total global expenditure for pharmaceutical R&D was reported to have reached U.S. $ 70 billion in 2007 and is expected to be around U.S. 90 billion in year 2010. 75% of this expenditure was incurred by the U.S alone. It is interesting to note that only 22 NMEs received marketing approval by the US FDA during this period against 53 in 1996, when R&D expenditure was almost less than half of what was incurred in 2007 towards R&D.

Be that as it may, the pressure on the P&L (Profit and Loss) accounts of these companies is indeed mounting.

The silver linings:

However, there seem to be following two silver linings in the present scenario, as reported by IMS:

1. Number of Phase I and Phase II drugs in the pipeline is increasing.

2. R&D applications for clinical trials in the U.S. rose by 11.6% to a record high of 662 last year.

Significant growth of generic pharmaceuticals is expected in near future, far surpassing the patented products growth:

Patent expiry of so many blockbusters during this period will fuel the growth of generic pharmaceutical business, especially in the large developed markets of the world. The market exclusivity for 180 days being given to the first applicant with a paragraph 4 certification in the U.S. is, indeed, a very strong incentive, especially for the generic companies of India.

Healthcare reform of March/April 2010 in the USA is expected to give a further boost to this trend.

Pressure on traditional Marketing strategies:
The marketing expenditure for pharmaceutical of the global pharmaceutical companies as reported by Scrip is U.S. $ 57.5 billion. However, an industry association reported that research based pharmaceutical companies in the U.S. spent $ 29.4 billion on R&D and $ 27.7 billion on promotional activities.

New Product Differentiation could be a big issue:

Products in R&D pipeline could face problems of ‘differentiation’ in terms of value offering to the patients, once they are launched. This issue is expected to surface especially with products in the oncology disease area. IMS Health reports that about 55 oncology projects are now in Phase III and 8 in the pre-registration stage. Thus about 50 new oncology products are expected to hit the market by end 2010. Many experts anticipate that there may not be significant brand differentiation between the brands of the ‘same basket’, leading to cut-throat competition and further pressure on expenditure towards marketing of brands.

The changing business strategy of global pharmaceutical companies during this trying time:

In this trying time, the global pharmaceutical companies are resorting to an interesting strategy, combing both old and the new ones. I shall touch upon the following seven strategies:

1. Mergers and Acquisitions (M&A):
Mega M&A strategies are still being actively followed by some large Pharmaceutical companies mainly to enrich R&D pipeline and achieve both revenue and cost synergies.
However, some of these large global companies have started realizing that ‘powerhouses’ created through past mega mergers and acquisitions have now become too large to manage effectively for various reasons. Mismatch between two different organization cultures also throws a great challenge to obtain desired output, many a times. Moreover, the merged R&D set up could become too large to manage, impacting the R&D productivity very adversely.

2. Extension of the Product Life Cycle and Effective Product Life Cycle Management:
Many global pharmaceutical companies are now engaged in ‘product life cycle management’ of their existing products by extending the ‘product life cycle’, effectively. In that process they are trying to maximize the brand value of these products in the international markets. For example, AstraZeneca has developed once daily treatment with their anti-psychotic drug Seroquel XR. This extended-release formulation of the same drug will help patients avoid 5 to 7-day titration required with the immediate-release version.
Towards similar initiative, Pfizer has also recently set up a dedicated “Established Product Business Unit” within worldwide pharmaceutical operations, to hasten business growth in the international markets.

3. OTC Switch:
Prescription to ‘Over the Counter’ (OTC) switch is another business strategy that many innovator companies are now imbibing, at a much larger scale.

This strategy is helping many global pharmaceutical companies, especially in the Europe and the U.S to expand the indication of the drugs and thereby widening the patients base.

Recent prescription to OTC switches will include products like, Losec (AstraZeneca), Xenical (Roche), Zocor (Merck), etc.

4. Emerging of Preventive Therapy, like Vaccines:
Many large global companies, like GSK, Sanofi Aventis and Merck are getting attracted by the emerging opportunities in the fast developing vaccines market. This trend has been triggered primarily by heightened awareness and greater focus on preventive medicines almost all over the world. It is estimated that in 2011, the vaccines market will grow from U.S.$ 13 billion to U.S.$ 30 billion registering a growth of 18% each year during this period. PricewaterhouseCoopers (PwC) estimates vaccine market to be U.S. $ 42 billion by year 2015 based on data of 245 pure vaccines and 11 combination vaccines currently under clinical development. It is interesting to note that 90 of these are therapeutic vaccines for cancer.

5. Entry into highly contentious market of Biosimilar drugs:
The Generic Pharmaceutical Association (GPhA) has estimated that it is possible to save US$ 10 billion – 108 billion over a period of 10 years with biosimilars in the top 12 categories of biological drugs. Some of these biological are already off patent and for others the patents will expire shortly.
Only a few biosimilar drugs have reached the global markets as on date because of their regulatory restrictions in most of the developed markets of the world. Even those biosimilar drugs, which have since been launched in Europe like, human growth hormone (HGH) Somatropin and Epoetin alfa for anemia, are yet to make a mark in the market place.

IMS Health reports that Omnitrope (somatropin) of Sandoz, the first biosimilar drug launched in the developed world, has registered less than 1% of the U.S. $ 831 million HGH market in Europe. Moreover, the launch of 3 more biosimilar versions of epoetin alfa in 2007, made almost negligible impact in the market. Such a low acceptance of biosimilars in the western world, so far, could well be due to lingering safety concern of the medical profession with such types of drugs.

Currently, Japan and USA are working on formal guidelines for biosimilar drugs, whereas Health Canada has already issued draft regulatory guidelines for their approval in Canada.

In April 2010, Reliance Life Science has already announced its intent to enter into the Biosimilar market of the EU in not too distant future.

6. Entry into Generic Markets:

Some large global pharmaceutical companies have already made a firm commitment to the generics market. Novartis paved the way for other innovator companies to follow this uncharted frontier, as a global business strategy. Last year the generic business of Novartis (under Sandoz) recorded 19% of their overall net sales, with turnover from generics registering U.S$ 7.2 billion growing at 20%.

Keen business interest of Sanofi Aventis to acquire Zentiva, the generic pharmaceutical company of Czechoslovakia; it’s very recent acquisition of the generic pharmaceutical company Laboratorios Kendrick of Mexico and Shantha Biotech in India and acquisition of Ranbaxy Laboratories of India by Daiichi Sankyo, will vindicate this point.

Pfizer has also maintained its generics presence with Greenstone in the U.S. and is using the company to launch generic versions of its own off patent products such as Diflucan (fluconazole) and Neurontin (gabapentin).

7. Collaboration with the Indian Companies:

Another emerging trend is the collaboration of MNCs with the Indian pharmaceutical companies to market generics in the global market, like, Pfizer with Aurobindo and Claris, GSK with Dr. Reddy’s Laboratories (DRL), Astra Zeneca with Torrent. I guess that similar trend will continue, in future, as well.

Conclusion:
Another ‘new pharmaceutical sales and marketing model’ is gradually emerging in the global markets. This model emphasizes partnership by bundling medicines with services. The key success factor, in this model, will depend on which company will offer better value with an integrated mix of medicines with services. PwC indicates that in this ‘new pharmaceutical marketing model’, besides required medicines, the expertise of a company to effectively deliver some key services like, patient monitoring and disease management could well be the cutting edge for future success.

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.

Access to affordable healthcare to 65% of Indian population still remains a key issue even after six decades of independence of the country.

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Despite so much of stringent government control, debate and activism on the affordability of modern medicines in India, on the one hand, and the success of the government to make medicines available in the country at a price, which is cheaper than even Pakistan, Bangladesh and Sri Lanka, on the other, the fact still remains, about 65% of Indian population does not have access to affordable modern medicines, as compared to just 15% in China and 22% in Africa.The moot question therefore arises, despite all these stringent price regulation measures by the government and prolonged public debates over nearly four decades to ensure better ‘affordability of medicines’, why then ‘access to modern medicine’ remained so abysmal to a vast majority of the population of India, even after sixty years of independence of the country?This vindicates the widely held belief that in India no single minister or ministry can be held accountable by the civil society for such a dismal performance in the access to healthcare in the country. Is it then a ‘system flaw’? May well be so.

Poor healthcare infrastructure:

As per the Government’s own estimate, India falls far short of its minimum requirements towards basic public healthcare infrastructure. The records indicate, as follows:

1. A shortage of 4803 Primary Health Centres (PHC)

2. A shortage of 2653 Community Health Centres (CHC)

3. No large Public Hospitals in rural areas where over 70% of the populations live

4. Density of doctors in India is just 0.6 per 1000 population against 1.4 and 0.8 per 1000 population in China and Pakistan respectively, as reported by WHO.

The Government spending in India towards healthcare is just 1.1% of GDP, against 2% of China and 1.6% of Sri Lanka, as reported by the WHO.

Some good sporadic public healthcare initiatives to improve access:

The government allocation around US$2.3 billion for the National Rural Health Mission (NRHM), is a good initiative to bring about uniformity in quality of preventive and curative healthcare in rural areas across the country.
While hoping for the success of NRHM, inadequacy of the current rural healthcare infrastructure in the country with about 80 percent of doctors, 75 percent dispensaries and 60 percent of hospitals located only in the urban India may encourage the skeptics.

PPP to improve access to medicines:

At this stage of progress of India, ‘Public Private Partnership (PPP)’ initiatives in the following four critical areas could prove to be very apt to effectively resolve this issue

1. PPP to improve affordability:

It appears that in earlier days, the policy makers envisaged that stringent drug price control mechanism alone will work as a ‘magic wand’ to improve affordability of medicines and consequently their access to a vast majority of Indian population.

When through stricter price control measures the access to medicines did not improve in any significant measure, the industry associations reportedly had jointly suggested to the government for a policy shift towards public-private-partnership (PPP) model way back in December 2006. The comprehensive submission made to the government also included a proposal of extending ‘concessional price for government procurement’ under certain criteria.

In this submission to the government, the industry did not suggest total price de-regulation for the pharmaceutical industry of India. Instead, it had requested for extension of the price monitoring system of the ‘National Pharmaceutical Pricing Authority (NPPA)’, which is currently working very effectively for over 80 percent of the total pharmaceutical industry in India. Balance, less than 20 percent of the industry, is currently under cost-based price control.

However, the argument of the NPPA against this suggestion of the pharmaceutical industry is that the market entry price of any formulation under the ‘price monitoring’ mechanism is not decided by the government. Hence without putting in place any proper price control/negotiation system to arrive at the market entry price of the price decontrolled formulations, the existing ‘price monitoring’ mechanism may not be as effective, as in future more and more high price patented non-schedule formulations are expected to be introduced in the market.

However, the government seems to have drafted a different drug policy, which has now been referred to a new Group of Ministers for approval. It is worth noting that to make the PPP proposal of the industry effective, the Ministry of Health, both at the centre and also at the state levels, will require to quickly initiate significant ‘capacity building’ exercises in the primary and also in the secondary healthcare infrastructural facilities. FICCI is reported to have suggested to the Government for an investment of around US$ 80 billion to create over 2 million hospital beds for similar capacity building exercises.

Frugal budgetary allocation towards healthcare could well indicate that the government is gradually shifting its role from public healthcare provider to healthcare facilitator for the private sectors to help building the required capacity. In such a scenario, it is imperative for the government to realize that the lack of even basic primary healthcare infrastructure leave aside other financial incentives, could impede effective penetration of private sectors into semi-urban and rural areas. PPP model should be worked out to address such issues, as well.

2. PPP to leverage the strength of Information Technology (IT) to considerably neutralize the healthcare delivery system weaknesses:

Excellence in ‘Information Technology’ (IT) is a well recognized strength that India currently possesses. This strengths needs to be leveraged through PPP to improve the process weaknesses. Harnessing IT strengths, in the areas of drug procurement and delivery processes, especially in remote places, could hone the healthcare delivery mechanism, immensely.

3. PPP in ‘Telemedicine’:

‘‘Telemedicine” is another IT enabled technology that can be widely used across the nation to address rural healthcare issues like, distant learning, disease prevention, diagnosis and treatment of ailments.
Required medicines for treatment could be made available to the patients through ‘Jan Aushadhi’ initiative of the Department of Pharmaceuticals (DoP), by properly utilising the Government controlled public distribution outlets like, ration shops and post offices, which are located even in far flung and remote villages of India.

4. PPP in healthcare financing for all:

Unlike many other countries, over 72 percent of Indian population pay out of pocket to meet their healthcare expenses.

While out of a population of 1.3 billion in China, 250 million are covered by insurance; another 250 million are partially covered and the balance 800 million is not covered by any insurance, in India total number of population who have some healthcare financing coverage will be around 200 million and the penetration of health insurance is just around 3.5% of the population. India is fast losing grounds to China mainly due to their better response to healthcare needs of the country.

As the government has announced ‘Rashtriya Swasthaya Bima Yojna (RSBY)’ for the BPL families, an integrated and robust healthcare financing model for all, is expected to address the affordability issue more effectively.

According to a survey done by National Sample Survey Organisation (NSSO), 40% of the people hospitalised in India borrow money or sell assets to cover their medical expenses. A large number of population cannot afford to required treatment, at all.

Conclusion:

An integrated approach by creating effective healthcare infrastructure across the country, leveraging IT throughout the healthcare space and telemedicine, appropriately structured robust ‘Health Insurance’ schemes for all strata of society, supported by evenly distributed ‘Jan Aushadhi’ outlets, deserve consideration of the government to improve access to affordable healthcare to a vast majority of population of the country, significantly.

Well researched PPP models in all these areas, involving the stakeholders, need to be effectively implemented, sooner, to address this pressing issue.

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.

Collaborative commercialization of inexpensive smaller incremental innovation in Chemistry will play an important role in bringing affordable new drugs or new drug delivery systems

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It started in the 17th century:

Alchemy, a medieval chemical science and speculative philosophy aiming to achieve the transmutation of the base metals into gold, searching for a universal cure for disease and indefinitely prolonging life, not considered a science by many, gradually became the basis for the development of chemistry into the 17th century. However, perceivable impact of chemistry on humanity, through its smaller incremental innovation, started being felt only in the second half of the 19th century.

Chemistry – an interface between the physical world and humanity:

Experts in this field often opine that the current form of human civilization has been made possible, to a great extent, through significant advancement of such innovation in chemistry and its role in modern technology. Chemistry is indeed an interface between the physical world on the one hand and the humanity on the other.

Getting a perspective of resource and time requirements for such initiatives:

Is there any similarity between development of pharmaceutical chemistry and IT software?

Now a days, one finds a striking similarity between small incremental innovation in IT software and the same in pharmaceutical chemistry. Both are creative and belong to the knowledge economy. Scientists in both the communities try to generate innovative ideas, which can lead to their effective commercialization.

Resource requirements for these two are strikingly different:

However, the nature of the commercialization process of these two sciences, though seemingly similar in terms of innovativeness, is indeed quite different. In the software community, two people can implement an idea with minimal resource requirement and could end up with a profitable commercialized product, without much difficulty. In contrast, two chemists may come up with a brilliant idea, which in many cases, may require significant investment of resources much before to even think to get the initial product commercialized. Subsequent steps of scaling up will be a separate issue altogether, with more resource commitment.

The process of commercialization of smaller incremental innovation in pharmaceutical chemistry is much longer:

As we all know, the process of commercialization of incremental innovation in chemistry takes a much longer time scale, as these are not usually spare time projects, unlike computer softwares. The cost involved in testing out and implementing a new idea in chemistry is very high and may not even be possible without any robust institutional backing.

Target inexpensive smaller incremental innovation in pharmaceutical chemistry:

Some illustrative examples of such smaller incremental innovation in chemistry are as follows:

1. Development of pharmaceutical co-crystals

2. Merger of chemistry of traditional and modern medicines for synergy in both efficacy and safety

3. Chemical technology switch: taking technology of one field and transferring it to a different field to get a new drug substance

4. Application of polymorphic chemistry in drug discovery.

The process has begun:

International experience:

The chemistry department of Oxford University, U.K, which is incidentally the biggest chemistry department of the western world, has made significant advances in commercializing incremental innovation in chemistry. Among many, they created and commercialized the following three entities through such incremental innovation:

• Medisense

• Oxford Molecular

• Oxford Assymetry

The Indian experience:

Despite all challenges, in India, as well, the commercialization process of smaller incremental innovation in chemistry has already begun. The Chemistry Department of the University of Delhi has developed 11 patentable technologies for improved drug delivery system using nano-particles. One of such technologies was development of ‘smart’ hydrogel nano-particles for encapsulating water-soluble drugs. This technology was sold to Dabur Research Foundation in 1999.

Another nano-particle drug delivery technology in opthalmogy area was also commercialized by transferring it to Chandigarh based Panacea Biotech Ltd.

Conclusion:

This process is expected to gain momentum in our country too, contributing significantly to the progress of the healthcare sector of the nation. “Commercializing smaller incremental innovation in Pharmaceutical Chemistry”, I reckon, will play a key role in providing affordable modern medicines to a vast majority of the population, as India transforms itself into a knowledge superpower.

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.

India urgently needs a total overhaul and reform of its public healthcare system with a holistic approach – NRHM and RSBY are laudable initiatives.

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Over a period of time India had made significant improvement in various critical health indicators despite frugal public health spending by the government, which is just around 1 percent of GDP of the country. Such a low government spend towards public health takes India to the bottom 20 percent of countries of the world, in this respect.Overall progress of the country’s public healthcare system is, consequently, commensurate to the nation’s spending towards this vital sector. Only 35 percent of country’s population has now access to affordable modern medicines. Even many ASEAN countries are far ahead of India in their achievements towards public healthcare services. Such a grim scenario prompts us to understand the infrastructural and financial dimensions of the public healthcare system of the country to enable us to suggest appropriate reform measures for this sector to the policy makers.Very recently, the Prime Minister of the country Dr. Manmohan Singh indicated the intent of his government to raise the government spending towards public health to around 3 percent of the GDP. Health being a state subject in India, both the State and Central Governments will need to take their best foot forward towards this direction.

Fund Allocation towards public healthcare:

In the Eleventh Five Year Plan, the fund allocated by the government towards public healthcare shows a significant increase. The launch of ‘National Rural Health Mission (NRHM)’, which emphasizes community based monitoring along with decentralized planning and implementation augers well for the nation and vindicate, at least, the resolve of the government towards this direction.

Impediments to make NRHM a great success:

There are some serious infrastructural requirements to scale-up NRHM and make it successful. These are as follows:

1. More number of specialists, doctors, nurses and paramedics

2. More medical colleges and nursing schools

3. Less developed states should be financially and technologically helped to create public healthcare infrastructure

4. The student teacher ratio to be enhanced in specialties and super specialties from the current level of 1:1 to 2:1

5. Capacity building at the Medical colleges of the State Governments needs to be considered without further delay

6. The number of post-graduate medical seats needs to be increased, all over the country.

It is envisaged that all these critical steps, if taken with missionary zeal, will help increasing the number of post-graduate specialists from the existing level of 13000 to 18000, in the next five years.

Healthcare delivery:

Even if all these are achieved public healthcare delivery will still remain a key issue to achieve the country’s objective to provide affordable healthcare to all. The poor and marginalized people of our society must be covered adequately by the public healthcare system to the best extent possible.

Improving access:

To improve access to public healthcare services for the common man, India very badly needs structural reform of its public healthcare system, with a clear focus on preventive healthcare. This will in turn help the country reduce the burden of disease.

Healthcare financing:

In 2001 The Journal of Health Management in a study using National Health Accounts (NHA) as a tool of analysis reported:

“76 per cent of health sector revenues come from private sources, of which almost 50 per cent go to private providers and 21 per cent are spent on drugs. Further, 7 per cent of household out-of-pocket expenditure is used as non-drug expenditure for using government facilities for out-patient and in-patient treatment. This has important policy implications for the government.”

Along with increasing healthcare needs across all sections of the society, especially in the low income and the backward states, a very high percentage of out-of-pocket household expenditure towards healthcare, low public budgetary allocations and sluggish health outcomes, are calling for a robust healthcare financing model for the country.

Why is healthcare financing so important in a developing country like, India?

The largest number of poor population of the world resides in India. It has been reported that around three-fourth of over one billion population of the country earns less than two dollars a day. Coupled with poor hygienic condition this section of population is more prone to various illnesses, especially tropical diseases. India is one of those very few emerging economic super powers where around 90 percent of its population is not covered by any form of health care financing.

Under such circumstances, it has been widely reported that the poor very often will need to borrow money at a very high rate of interest or sell whatever small assets they own, further eroding their capability to come above the poverty line, in the longer term.

Thus to provide adequate health insurance cover to the marginalized section of the society including a large number of the rural population, the country is in a dire need to develop a workable and tailor-made healthcare financing model instead of pushing hard the existing ones. This tailor-made model should also include the domiciliary treatment, besides costs of hospitalization.

New healthcare reform process in India should include the healthcare system in its entirety with a holistic approach, starting from access to healthcare to its management and delivery, strengthened by a robust micro-healthcare financing system.

Rashtriya Swasthya Bima Yojna (RSBY): A good initiative by the government:

To partly address the above issue, on October 1, 2007 the Government of India announced a health insurance scheme for the Below Poverty Line (BPL) families in the unorganized sector called Rashtriya Swasthaya Bima Yojna (RSBY).

In RSBY, BPL families are entitled to more than 700 in-patient medical procedures with a cost of up to 30,000 rupees per annum for a nominal registration fee of 30 rupees. Pre-existing medical conditions are covered and there is no age limit. Coverage extends to the head of household, spouse and up to three dependents.

RSBY appears to benefit those people who need it the most. However, how effective will be the implementation of this scheme, still remains a key question. If implemented exactly the way the scheme was conceived, it has the potential to address the healthcare financing issue of around 28 percent of the population currently living below poverty line.

The initial response of RSBY has been reported to be good, with more than 46 lakh BPL families in eighteen States and Union Territories having been issued biometric smart cards, so far.

Conclusion:

To provide affordable healthcare services to all, India urgently needs a total overhaul and reform of its public healthcare system with a holistic approach. The steps so far taken by the government with the launch of NRHM and RSBY are laudable, but are these enough?

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.