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Just 16% Of Indian Population Has Access To Free Or Partially-Free Health Care?

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Is health care currently a low priority area for the Government of India? Probably yes, and thus it is worth trying to fathom it out.

Besides planned frugal spending on overall public health in 2015-16, even as compared to the past trend, two other health related budgetary decisions of the Government are indeed baffling, at the very least.

As many of you, I too know that the incumbent Government in its first full-year budget of 2015-16 has sharply reduced the budgetary allocation on many important health related other projects, such as:

- Union budget allocation for the National Rural Drinking Water Program (NRDWP) that aims at providing safe drinking water to 20,000 villages and hamlets across India, has been drastically reduced this year. Curiously, this decision has been taken at a time, when India loses 200 million person days and Rs 36,600 crore every year due to water-related diseases.

- The Integrated Child Development Services (ICDS) scheme, which provides food, preschool education, and primary health care to children under 6 years of age and their mothers, has also been hit by a 54.19 percent budget cut this year. This decision too of cutting public expenditure on food, nutrition and health care for children to more than half, defies any logic, especially when 40 percent of growth stunted children in the world are reportedly from India, exceeding the number of even sub-Saharan Africa.

I hasten to add that the Union budget 2015-16 has indicated, as the states’ share in the net proceeds of the union tax revenues has increased, as per recommendations of the 14th Finance Commission, these central Government programs will now be run with a changed funding pattern between the Union and states. However, according to financial experts in these areas, regardless of devolution, the total money available to run these critical projects is sharply decreasing.

That said, on the other pages of the same Union Budget, public funding in the current fiscal year for bridges and roads has more than doubled. The budgetary allocation for these two areas now stands more than even education.

I deliberated on similar subject of access to health care in my blog of March 16, 2015, titled, “With Frugal Public Resource Allocation Quo Vadis Healthcare in India?”

Health care sector is important for job creation too:

According to the World Health Organization (WHO), health care sector is one of the largest job creators, not just in India, but globally. Thus, Indian health care industry being one of the fastest growing industrial turf in the country with a reasonable base, deserves a sharper focus of the Government.

Additionally, the socio-economic benefits that this sector provides in creating a sustainable, healthy and highly productive work force, has been well documented and can’t just be wished away, in any case.

The neglect is intriguing:

Currently, total healthcare spend of India is no more than 4.2 percent of the GDP with public spending being just 1.2 percent of it. Other BRICS nations are way ahead of India, in this area too. To set a direction on country’s public healthcare spend, breaking the jinx of a long period of time, the draft National Health Policy 2015 of the Government aimed at initial increase in health expenditure to 2 percent of the GDP.

As a result of the legacy of neglect over a long period of time, which continues albeit more blatantly even today, only 16 percent of the Indian population declares today that they have access to free or partially-free health care. I shall dwell on this area subsequently in this article.

Keeping these in perspective, it was intriguing, when the union budgetary allocation for health care in 2015-16 was kept at Rs. 297 billion or U$4.81 billion for its main health department, almost the same outlay as in the previous budget.

When compared against public fund allocations, such as, US$ 93 billion for highway projects or US$ 7.53 billion for 100 smart cities in the country, one will get a realistic perspective of this meager health budget allocation, in terms of effectively addressing the health care needs of around 1.25 billion people of India. Over 70 percent of this population live in the hinterland.

Agreed that the Government focus on these ‘infrastructure projects’ are not unimportant by any means. Nevertheless, the above comparison only highlights how much priority the Government assigns to the health care sector of India and for the health of its citizens. This issue assumes even greater significance in combating several challenging health situations, such as, ongoing fight against increasing incidence of life-long chronic ailments and deadly life-threatening diseases like, cancer, fueling already high rate of morbidity and mortality in the high country.

A quick glimpse on a few outcomes of neglect:

The Working Paper No. 1184 dated January 8, 2015, titled “Improving Health Outcomes And Health Care In India” of the Organization for Economic Co-operation and Development (OECD), highlights some interesting points, as follows:

  • Chronic diseases are the biggest causes of death and disability accounting for 50 percent of deaths, with cardiovascular diseases and diabetes, respiratory conditions and cancers figuring most prominently.
  • Preventive interventions such as improving access to a clean water supply, reducing the spread of HIV/AIDS through better sexual education, and vaccination campaigns for other diseases will each deliver more significant returns in life years.
  • Vaccination rates for diphtheria, tetanus and pertussis, for measles and for hepatitis B are all much lower than in OECD and peer countries.
  • Minimal access to free or partially-free health care.

It is an irony that ‘life expectancy’ in India still remains well below the countries at a similar level of development.

Abysmal overall hygienic conditions:

The OECD survey brings to the fore  abysmal hygienic conditions still prevailing in India. It can only be improved through active intervention of the Government with necessary budgetary allocations, sans photo ops for some celebrities and most politicians. Sincere support and participation of the civil society and intelligentsia, in general, are also equally important.

The paper underscores, among others, the following extremely unhygienic conditions still prevailing both in urban and rural India:

  • Most households in rural India do not defecate in a toilet or latrine, which leads to infant and child diseases (such as diarrhea) and can account for much of the variation in average child height. Even today the sight of poor children defecating openly in the streets, that too in a city like Mumbai, is also not very uncommon.
  • The burning of solid fuels in particular (undertaken by more than 80 percent of the population in cooking) is a major risk factor behind ischemic heart disease, lower-respiratory tract infections and chronic obstructive pulmonary diseases and could also increase cataracts and stroke.
  • Exposure to air pollution is a significant problem.
  • Many of the poor continue to smoke heavily.
  • 11 of the lowest income quintile did not undertake sufficient physical activity, compared with 16 percent in the highest income quintile.

India provides minimal access to free or partially-free health care:

As I mentioned above, India provides minimal access to free or partially-free healthcare to its citizens, as compared to all the BRICS nations, many other countries in South East Asia and even in Africa.

The above OECD paper states that with poor health intertwined with poverty, the greatest gains lie with policies that address the social conditions which enable combating communicable and non-communicable diseases.

Among BRICS countries, India provides least access to ‘Free or Partially-Free Health Care’ Services to its general population. This is despite being the largest democracy in the world, which is now striving hard to emerge as an economic and military superpowers.

The following study shows that only 16 percent of the Indian population declares having access to free or partially-free health care from the government:

BRICS Countries % surveyed said ‘Yes’ to the question: “Does your household have access to free or partially free health care from the State”
India 16
Brazil 24
China 73
Russia 96
South Africa 62

Source: Credit Suisse Research Institute, Emerging Consumer Survey Databook 2014.

As the OECD paper states, in this study approximately 1500 respondents were surveyed in each country, with India and China both having larger sample size of 2500. The male-to-female split between respondents was roughly 50:50 in all cases with rural-to-urban split varying by country.

Poor satisfaction level with existing health care services:

This is very important; as public facilities are the predominant source of qualified health professionals in rural areas where much of the Indian poor reside. In addition, significant population growth is occurring in urban slums, where urban public health care facilities are struggling to provide basic services. In a situation like this, slum dwellers face challenging economic barriers to accessing expensive private health care services (MoHFW, 2012).

The OECD survey indicates that 41 percent of those in rural areas and 45 percent in urban areas were not satisfied with treatment by their doctors or facility.

The reason attributed to this dissatisfaction are as follows:

  • Distance was cited by 21 percent of people in rural areas and 14 percent in urban areas.
  • Public health care centers remain closed more than half the time and lack basic medical supplies, such as stethoscopes and blood pressure scales.
  • Non-availability of required services was cited by 30 percent of people in rural areas and 26 percent in urban areas.

This is quite credible, as according to the Government’s own estimates:

- 10 percent of primary health care centers are without a doctor

- 37 percent are without a laboratory technician

- 25 percent without a pharmacist (MoHFW, 2012)

The above picture is quite consistent with large scale surveys in poor communities of India, by OECD.

Health care business for up market is booming:

Growing inequitable distribution of healthcare products and services is now wide open and blatant, more than ever before. There is no signal yet that the Government would soon consider health care sector as its one of the key focus areas, along with education, just as infrastructure, such as, building roads, highways, e-highways, flyovers, bridges and smart cities.

For up-market patients, the private sector is creating world class facilities in India. We can see today a good number of ‘five-star’ hospitals, with more number of newer ones coming up offering jaw-dropping facilities, quite akin to, may be even surpassing what are being offered for patients’ luxurious comfort in the developed world. Although these facilities cost a fortune, one would usually need to be in a queue to get admitted there for any medical or surgical treatment.

Most of these hospitals are now in high demand for ‘medical tourism’. According to available reports India currently caters to health care needs of over 200,000 foreign patients. ‘Medical tourism’ business reportedly fetched around US$ 2 billion to India in 2012.

On the flip side of it, as we all read in the recent media reports, some of these hospitals in Delhi refused admission even to seriously ill dengue patients, as they can’t afford such facilities. A few of these patients ultimately succumbed to the disease and the parents of one such poor child, who died without any hospital treatment in that process, committed suicide unable to withstand the irreparable and tragic loss.

Giving ‘Infrastructure Status’ to health care sector:

When creating basic infrastructure is the priority area of the present Government for financial resource allocation, why not give ‘infrastructure status’ to the health care sector now? This is not just for the heck of it, but purely based on merit and earlier detail evaluation by a Government Committee of experts.

To address the critical health care needs for the vast Indian population with appropriate infrastructure, quality products, services and manpower, providing ‘infrastructure status’ to the health care sector could facilitate the whole process. Additionally, it can transform the Indian healthcare sector as one of the biggest job-generating industry too.

This has been a key demand of the industry until recently, though not so much being talked about it today. A few years back, the previous Government was reportedly mulling to assign full fledged infrastructure status to the healthcare sector, as it merits inclusion in the category of ‘infrastructure’, satisfying all the nine criteria set by the erstwhile Rangarajan Committee.

I find in my archive, the Confederation of Indian Industry (CII) also demanded ‘infrastructure status’ for the health care sector in its pre-union budget memorandum for 2010-11. In that proposal CII had estimated that health care industry in India requires an investment of around US$80 billion, whereas in the current fiscal year the public expenditure on health still languishes at U$4.81 billion.

This specific issue seems to have taken a back seat today, for reasons not known to me. However, it is interesting to note that not just the Government apathy, no such demand is being made today by the large multi-industry trade associations of India, as vociferously as we witness, for example, in the case of ‘The Goods and Service Tax (GST) Bill’.

Health care debate is not to the fore today:

Critical health care issues of the country don’t seem to be in the fore front today for comprehensive debates even for the Indian main stream media, to influence the government.

We have been experiencing for quite while that Indian media, including social media, in general, usually goes ballistic 24×7 mostly with selective sensational topics. These may include, among others…glitzy events on Government’s high profile advocacy initiatives to attract more Foreign Direct Investment (FDI) from large overseas companies…Or back home some unfortunate and tragic Dengue fever related deaths due to negligence just in Delhi, though the same and equally grave incidences taking place in the other states of India, are hardly getting any coverage…Or on some high profile alleged murder pot-boilers announcing media verdict conclusively, even before completion of police investigation and charge-sheet being filed in a court of law.

These are probably neither bad, nor unimportant, nor avoidable, nor can come within the ambit of any media criticism. I am also not trying to do that, either.

As the saying goes, variety is the spice of life. We, therefore, generally want to get a feel of it everyday early in the morning, mostly glancing through the newspaper headlines, or in the late evening watching impatient anchor with strong personal opinion trying hard to dominate over all other participants in high-decibel ‘TV debates’, as these are called by the respective channels.

In an era of sensationalized and eye-ball grabbing ‘Breaking News’ of all kinds, flashing everywhere almost every now and then, critical health care issues seem to have become a mundane subject to the newsmakers for any meaningful debate to influence the Government. Serious debates on critical health care issues presumably would not generate all important Television Rating Points (TRPs) to the TV channel owners. Though I have no idea, the TRP of such debates  probably has been estimated to be even lesser as compared to the cacophony aired by the TV channels on the cost to exchequer for the MPs subsidized meals in the Indian Parliament…with intermittent high pitch ‘war cry’ of the dominating anchor… ‘the nation wants to know this’.

Conclusion:

Be that as it may, health care environment impacts all of us, quite appreciably. There is not even an iota of doubt on it. However, we can feel it mostly when the reality hits us or our families hard…very hard, as serious and cruel ailments strike suddenly, or as we face avoidable disease related deaths of our near and dear ones, or when illness makes a loving one virtually incapacitated, even after facing financial bankruptcy.

Health care is a serious matter for all of us, just as it is a serious and critical business for every nation and every Government. This criticality factor is independent of whatever level of economic development the country is aspiring for. Thus, the indifference of the Indian Government, if I may say so, despite promising so much on health care earlier this year, is intriguing, and more so, when just 16 percent of the total population has access to free or partially-free health care in our India of the 21st century.

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.

India’s ‘National Health Policy 2015′ Needs Wings To Fly

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Ensuring ‘access to healthcare for all’ has remained a key well-articulated good intent of all the successive Governments in India, cutting across the political regimes, since 1983.

The Union Ministry of Health & Family Welfare published the first “National Health Policy (NHP)”, in 1983, which was endorsed by the Indian Parliament in the same year. The policy categorically enunciated the following:

“India is committed to attaining the goal of ‘Health for All by the Year 2000 A.D.’ through the universal provision of comprehensive primary healthcare services”.

For the first time after independence, this document captured the key directions and dimension of the national health policy such as, the creation of infrastructure for primary healthcare; close co-ordination with health-related services and activities (like nutrition, drinking water supply and sanitation); active involvement and participation of voluntary organizations; provision of essential drugs and vaccines; qualitative improvement in health and family planning services; provision of adequate training; and medical research aimed at the common health problems of the people. However, it did not elaborate much about the Universal Health Care (UHC).

Abysmal public expenditure to meet the key goal of NHP 1983:

The NHP 1983, which was revised in 2002, recommended an increase in public health expenditure to 2.0 percent of GDP in 2010.

The 12th Fiver Year Plan of the Government of India again acknowledged that the health sector expenditure by the central and state governments, both plan and non-plan will have to be substantially increased during the plan period. It also stated that the health expenditure was increased from 0.94 per cent of GDP in the 10th Plan to 1.04 per cent in 11th Plan and it should be increased to 2.5 per cent of GDP by the end of 12th Five Year Plan period.

That said, the bottom-line is, the current public spending on health is stagnating around 0.9 percent of the GDP. Leave aside implementation of the 1983 NHP goal of providing “Health for all by the year 2000 A.D”, even in 2015, India continues to grapple with the challenges for ensuring availability, accessibility, affordability and quality of comprehensive healthcare to all, though various governments have come and gone during this period. India’s rank in the Human Development Index (HDI) also remains at pitiful 136 out of 187 countries and despite improvements, India is likely to miss some key MDG targets in 2015.

Pockets of improvements – mostly grossly inadequate:

In the midst of gloom and doom in the health space of India, the 57 page draft NHP 2015 captures some of commendable improvements, as well, and very rightly so, which I am not going to repeat in this article.

A June 2013 report of IMS Institute also acknowledges that the extent of change and improvement in India’s healthcare system over the past decade is remarkable. The Government of India’s initiatives, as well as private sector actions and public-private-partnership programs, have contributed to this progress. Yet a lot more remains to be done.

The report highlights the following areas, which are worth taking note of:

  • The physical accessibility of public or private healthcare facilities is a challenge in rural areas. By contrast, in urban areas, accessibility is less of a challenge due to more facilities being available.
  • An increasing proportion of the population is using private healthcare 
facilities for both in-patient and out-patient treatments. Long waiting times and absence of diagnostic facilities are among the main reasons private healthcare facilities are chosen over public centers for in-patient treatment. For out-patient treatment, the availability or doctors and quality of care are cited as reasons for selecting a private healthcare facility. However, patients would readily switch to public healthcare centers if these issues were addressed, the research report states.
  • The cost of treatment at a public healthcare facility is much more affordable than at a private center. However, due to lack of physical reach, availability of quality treatment and other practices, patients are forced to use more expensive private facilities, thus exacerbating affordability challenges. The majority of Out of Pocket (OoP) expenses are due to medicines.
  • Overall, while there are pockets of improvements, significant healthcare access challenges continue to exist for the Indian population, especially in rural areas.

OoP expenses on health is one of the highest in India:

Out of Pocket (OoP) expenditure on health is one of the highest in India at 61.7 percent, as acknowledges by the draft NHP 2015, as well. This is against 35.3 of China, 30.6 of Brazil, 44.6 of Sri Lanka, 61.3 of Bangladesh, 14 of Thailand, 8.9 of United Kingdom and 11.8 of the United States. The reason being, due to lack of access to cheaper and quality public health facilities, a vast majority of the Indian population is forced to turn to expensive private healthcare providers, as confirmed by the IMS Institute in its above report..

Suggested framework for a comprehensive view of healthcare access:

The same June 2013 report of IMS Institute states that healthcare access has varying meaning in different countries, especially across developing and developed economies. In the developed economies, it is often equated to the access status of healthcare insurance, whereas in the developing economies, it is viewed primarily across two dimensions: the physical reach of a healthcare facility, and affordability to the patient.

Thus, it is important to build a framework that would provide a comprehensive view to healthcare access. The framework should be able to define healthcare access in the Indian context, aided by other parameters that are key in ensuring quality treatment to a patient.

The framework also allows understanding of each component of healthcare access separately, including inter-dependencies.

According to IMS Institute, healthcare access has 4 key dimensions as follows:

Physical Reach:

This component defines physical accessibility of a requisite healthcare facility, i.e. availability of a healthcare facility having an out-patient department (OPD) for common ailments, and an in-patient department (IPD) for hospitalization. These facilities may either be public or private in nature. Physical reach is defined as the ability to enter a healthcare facility within 5 kilometers (5km) from the place of residence or work.

Availability/Capacity:

This component defines availability of the requisite healthcare resources to provide patient treatment, i.e. doctors, nurses, in-patient beds, diagnostics, consumables, etc. The availability is governed by minimum specifications defined by the Government of India for public healthcare facilities, and international organizations such as W.H.O.

Quality/Functionality:

This component defines the quality of the healthcare resources available at the point of patient treatment.

Affordability:

This component defines the ability of a patient to afford complete treatment for the illness or disease.

Draft NHP 2015 – ‘Health is a fundamental right’:

Though the above parameters were not quite considered, as such, to define access to healthcare, the new government has done a good job with the draft NHP 2015, while updating NHP 2002. The new draft has evoked good interest among the stakeholders as healthcare has become very costly in India and continues to go north, steadily, as mentioned above.

The draft has covered lots of ground related to health, spanning across the change in the nature of the nation’s disease burden from communicable to non-communicable diseases, shortage of human resources in health sector and right up to the use of information and communication technology. It’s a hard fact that low investment in public health has been placing India consistently at the lower rungs of the development indices.

Against the backdrop of paltry public expenditure on health, the Union Ministry of Health and Family Welfare through its draft National Health Policy, 2015 (NHP 2015) has proposed making health a fundamental right, similar to denial of health an offence.

The draft policy reiterates, “Many industrialized nations have laws that do so. Many of the developing nations that have made significant progress towards universal health coverage, such as Brazil and Thailand, have done so, and … such a law is a major contributory factor. A number of international covenants to which we [India] are joint signatories give us such a mandate – and this could be used to make a national law. Courts have also rulings that, in effect, see health care as a fundamental right — and a constitutional obligation flowing out of the right to life.”

The draft NHP 2015 even states, “The Centre shall enact, after due discussion and on the request of three or more states a National Health Rights Act, which will ensure health as a fundamental right, whose denial will be justiciable.”

The new draft policy acknowledges that primary healthcare of date covers not more than 20 per cent of the health needs and that a very high OoP health expenditure (over 61 percent on medicines) is pushing nearly 63 million people into poverty every year.

One of the key features of the new draft policy is an universal medical insurance scheme that will be virtually free for the poor and affordable for the rest. The government expects the stakeholders to send their comments and suggestions on the draft policy by February 28, 2014.

However, the draft NHP 2015 does not deliberate on some other important areas, such as specific time-bound commitments on public investments, insurance cover on outpatient treatments & care and appropriate regulations for the private sector to contain healthcare costs.

Cut on current year health budget raises may eyebrows:

In the midst of the prevailing lackluster public healthcare scenario, just in the last month (December 2014), the government has reportedly ordered a US$ 948 million (20 percent) cut in its 2014-15 healthcare budget due to fiscal constraints.

It is worth mentioning that at 0.9 percent of GDP, India’s public health expenditure is already among the lowest in the world, as compared to compared to 2.7 percent in China, 4.2 percent in brazil, 1.4 percent in Bangladesh, 1.6 percent in Sri Lanka, 2.9 percent in Thailand and 8.5 percent in the United States.

In addition to the healthcare budget, the finance ministry has reportedly also ordered a spending cut this year for India’s HIV/AIDS program by about 30 percent to US$ 205.4 million.

A report from Reuters, quoting one of the health ministry officials, stated that this budget cut could crimp efforts to control the spread of diseases. More newborns die in India than in poorer neighbors such as Bangladesh, and preventable illnesses such as diarrhea kill more than a million children every year.

Needs wings to fly:

The draft NHP 2015 has come thirteen years after the previous NHP 2002 and following a 20 percent cut even on the paltry budgetary allocation on public health of this financial year. Thus, many skeptics ponder whether this well drafted NHP 2015, pregnant with many great promises, would ever see the light of the day.

The skepticism gets further reinforced, when the draft NHP 2015 says that to achieve its objectives the budgetary allocation on health would be increased to 2.5 percent of the GDP. The Government proposes to rely mostly on general taxation, besides creating a health cess similar to that of education cess, for effective implementation of this health policy. The draft indicates that 40 percent of this budget would come from central expenditure.

A quick reading of the following text from the Reuter’s report makes the scenario even more intriguing:

“The retrenchment (budget cut) could also derail an ambitious universal healthcare program that Modi wants to launch in April. The plan aims to provide all citizens with free drugs and diagnostic treatments, as well as insurance benefits.

The cost of that program over the next four years had been estimated at 1.6 trillion rupees (US$ 25 billion). The health ministry officials had been expecting a jump in their budget for the coming year, in part to pay for this extra cost.

‘Even next year we don’t think we’ll get a huge amount of money,’ said one official, adding that it was now unclear how the new program would be funded.”

Thus, the key point to ponder now: Would the NHP 2015 have wings to fly?

Is India just producing various documents on health without action?

Not too long ago, in October 2010, the Government of India constituted a ‘High Level Expert Group (HLEG)’ on Universal Health Coverage (UHC) under the chairmanship of the well-known international medical expert Prof. K. Srinath Reddy. The HLEG was mandated to develop a framework for providing easily accessible and affordable health care to all Indians.

The HLEG Report defined UHC as follows:

“Ensuring equitable access for all Indian citizens, resident in any part of the country, regardless of income level, social status, gender, caste or religion, to affordable, accountable, appropriate health services of assured quality (promotive, preventive, curative and rehabilitative) as well as public health services addressing the wider determinants of health delivered to individuals and populations, with the government being the guarantor and enabler, although not necessarily the only provider, of health and related services”.

I discussed this subject in my blog post of December 12, 2011, titled “Health being a basic human right, the proposal for Universal Health Coverage augurs well for India”

Most probably, this excellent HLEG report on UHC has already become an archival material for the posterity to refer, if and when required.

Interestingly, despite governments of different political dispensation ruling the country since 1983, the key goal of the NHP 1983 to ‘provide healthcare to all by the year 2000’ continues to haunt us over the last three decades.

Public healthcare infrastructure, especially in rural India, still remains grossly inadequate.

In most of the villages in India, primary health facilities, if available, (except in some progressive states), continue to be shoddy, fragile and is gasping for breath, as it were. Recent examples of Bilaspur (Chhattisgarh) sterilization tragedy in November 2014, when 15 women died or the incident of last week in Chatra district of Jharkhand, where about 40 women allegedly underwent sterilization under torchlight, would vindicate this point.

Much hyped program of “free essential drugs for all, from the government hospitals” has not been universally implemented, just yet…again due to financial resource constraints and paucity of other wherewithal.

Conclusion:

Currently, none of the newer constitutional rights, such as right to food, education and employment, enacted by the lawmakers for the well being of the concerned people of the country, is functioning as desired for various financial and administrative reasons. Even making adequate budgetary provisions for all these projects continue to pose a great challenge, both for the central and the state Governments.

Overall, NHP 2015 is a well-drafted and comprehensive policy document. It analyses the successes and failures of the past quite well, with a proposal of making health as a fundamental right. However, the status and experience with the other fundamental right-based legislations in India, do not fuel much optimism in this critical area, at least, as of now.

Consequently, the draft NHP 2015 does not appear to be more than a lucid narration of good intents, just what the NHP 1983 and 2002 did. Next month’s Union budget allocation for the financial year 2015-16 for health, calculated as a percentage of India’s GDP, would hopefully bring more clarity in this area.

Additionally, other important areas such as, specific time-bound commitments on public investments for health; extensions of medical insurance cover to even outpatient treatments & care and appropriate regulations for the private sector to contain healthcare expenditure, are worth considering in the NHP 2015.

Shorn of all these, would the National Health Policy 2015 have its wings to fly?

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.

 

Alarming Incidence of Cancer: Fragile Infrastructure: Escalating Drug Prices

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According to the ‘Fact-Sheet 2014′ of the World Health Organization (WHO), cancer cases would rise from 14 million in 2012 to 22 million within the next two decades. It is, therefore, no wonder that cancers figured among the leading causes of over 8.2 million deaths in 2012, worldwide.

A reflection of this scary scenario can also be visualized while analyzing the growth trend of various therapy segments of the global pharmaceutical market.

A recent report of ‘Evaluate Pharma (EP)’ has estimated that the worldwide sales of prescription drugs would reach US$ 1,017 bn by 2020 with a Compounded Annual Growth Rate (CAGR) of 5.1 percent between 2013 and 2020. Interestingly, oncology is set to record the highest sales growth among the major therapy categories with a CAGR of 11.2 percent during this period, accounting for US$ 153.4 bn of the global pharmaceutical sales.

The key growth driver is expected to be an exciting new class of cancer products targeting the programmed death-1 (PD-1) pathway with a collective value of US$ 14 bn in 2020, says the report.

Another recent report from the IMS Institute for Healthcare Informatics also highlights that global oncology spending touched US$ 91 billion in 2013 growing at 5 percent annually.

Consequently, Oncology would emerge as the biggest therapeutic class, more than twice of the anti-diabetic category, which features next to it.

Key global players:

Roche would continue to remain by far the largest player in the oncology market in 2020 with a 5 percent year-on-year growth between 2013 and 2020 with estimated total sales of over US$ 34bn in 2020 against US$ 25bn in 2013.

In 2020, besides Roche, other key players in the oncology segment would, in all probability, be Bristol-Myers Squibb, Celgene, Novartis, Pfizer, Johnson & Johnson, Astellas Pharma, AstraZeneca, Eli Lilly and Merck & Co, the EP report says.

Escalating costs of cancer drugs:

As IMS Health indicates, the overall cost for cancer treatments per month in the United States has now reached to US$10,000 from US$ 5,000 just a year ago. Thus, cancer drugs are fast becoming too expensive even in the developed markets, leave aside India.

The following table would help fathom how exorbitant are the costs per therapy of the common cancer drugs, though these are from the United States:

Generic                               Diagnosis

 Cost/ Dose (US$)

Cost of     Therapy/    28 days  (US$)

Cost per  Therapy      (US$)
brentuximab Hodgkins lymphoma

14,000

18,667

224,000
Pertuzumab Breast cancer

4,000

5,333

68,000
pegylated interferon Hepatitis C

700

2,800

36,400
Carfilzomib Multiple myeloma

1,658

9,948

129,324
ziv-aflibercept CRC

2,300

4,600

59,800
Omacetaxine CML

560

3,920

50,960
Regorafenib CRC

450

9,446

122,800
Bosutinib CML

278

7,814

101,580
Vemurafenib Melanoma

172

4,840

62,915
Abiraterone Prostate

192

5,391

70,080
Crizotinib NSCLC

498

27,951

363,367
Enzalutamide Prostate

248

6,972

90,637
ado-trastuzumab emtansine Breast – metastatic

8,500

8,115

105,500
Ponatinib Leukemia

319

8,941

116,233
Pomalidomide Multiple myeloma

500

10,500

135,500

(Source: ION Solutions)

Even US researchers concerned about high cancer drugs cost:

It is interesting to note, that in a review article published recently in ‘The Lancet Oncology’, the US researchers Prof. Thomas Smith and Dr. Ronan Kelly identified drug pricing as one area of high costs of cancer care. They are confident that this high cost can be reduced, just as it is possible for end-of-life care and medical imaging – the other two areas of high costs in cancer treatment.

Besides many other areas, the authors suggested that reducing the prices of new cancer drugs would immensely help containing cancer costs. Prof. Smith reportedly said, “There are drugs that cost tens of thousands of dollars with an unbalanced relationship between cost and benefit. We need to determine appropriate prices for drugs and inform patients about their costs of care.”

Cancer drug price becoming a key issue all over:

As the targeted therapies have significantly increased their share of global oncology sales, from 11 percent a decade ago to 46 percent last year, increasingly, both the Governments and the payers, almost all over the world, have started feeling quite uncomfortable with the rapidly ascending drug price trend.

In the top cancer markets of the world, such as, the United States and Europe, both the respective governments and also the private insurers have now started playing hardball with the cancer drugs manufacturers.

There are several instances in the developed markets, including the United States, where the stakeholders, such as, National Institute for Health and Care Excellence (NICE) of the United Kingdom and American Society of Clinical Oncology (ASCO) are expressing their concerns about manufacturers’ charging astronomical prices, even for small improvements in the survival time.

Following examples would give an idea of global sensitivity in this area:

  • After rejecting Roche’s breast cancer drug Kadcyla as too expensive, NICE reportedly articulated in its statement, “A breast cancer treatment that can cost more than US$151,000 per patient is not effective enough to justify the price the NHS is being asked to pay.”
  • In October 2012, three doctors at Memorial Sloan-Kettering Cancer Center announced in the New York Times that their hospital wouldn’t be using Zaltrap. These oncologists did not consider the drug worth its price. They questioned, why prescribe the far more expensive Zaltrap? Almost immediately thereafter, coming under intense stakeholder pressure, , Sanofi reportedly announced 50 percent off on Zaltrap price.
  • Similarly, ASCO in the United States has reportedly launched an initiative to rate cancer drugs not just on their efficacy and side effects, but prices as well.

India:

  • India has already demonstrated its initial concern on this critical issue by granting Compulsory License (CL) to the local player Natco to formulate the generic version of Bayer’s kidney cancer drug Nexavar and make it available to the patients at a fraction of the originator’s price. As rumors are doing the rounds, probably some more patented cancer drugs would come under Government scrutiny to achieve the same end goal.
  • I indicated in my earlier blog post that the National Pharmaceutical Pricing Authority (NPPA) of India by its notification dated July 10, 2014 has decided to bring, among others, some anticancer drugs too, not featuring in the National List of Essential Medicines 2011 (NLEM 2011), under price control.
  • Not too long ago, the Indian government reportedly contemplated to allow production of cheaper generic versions of breast cancer drug Herceptin in India. Roche – the originator of the drug ultimately surrendered its patent rights in 2013, apprehending that it would lose a legal contest in Indian courts, according to media reports. Biocon and Mylan thereafter came out with biosimilar version of Herceptin in the country with around 40 percent lesser price.

Hence, responsible pricing of cancer drugs would continue to remain a key pressure-point  in the days ahead.

Increasing R&D investments coming in oncology:

Considering lucrative business growth opportunities and financial returns from this segment, investments of global pharma players remain relatively high in oncology, accounting for more than 30 percent of all preclinical and phase I clinical product developments, with 21 New Molecular Entities (NMEs) being launched and reaching patients in the past two years alone, according to IMS Health.

However, it is also worth noting that newly launched treatments typically increase the overall incremental survival rate between two and six months.

Opportunities for anti-cancer biosimilars:

With gradual easing out of the regulatory pathways for biosimilar drugs in the developed markets, especially in the US, a new competitive dynamic is evolving in the high priced, over US$ 40 billion, biologics market related to cancer drugs. According to IMS Health, on a global basis, biosimilars are expected to generate US$ 6 to12 billion in oncology sales by 2020, increasing the level of competition but accounting for less than 5 percent of the total biologics market even at that time.

Alarming situation of cancer in India:

A major report, published in ‘The Lancet Oncology’ states that In India, around 1 million new cancer cases are diagnosed each year, which is estimated to reach 1.7 million in 2035.

The report also highlights, though deaths from cancer are currently 600,000 -700,000 annually, it is expected to increase to around 1.2 million during this period.

Such high incidence of cancer in India is attributed to both internal factors such as, poor immune conditions, genetic pre-disposition or hormonal and also external factors such as, industrialization, over growth of population, lifestyle and food habits.

The Lancet Oncology study showed that while incidence of cancer in the Indian population is only about a quarter of that in the United States or Europe, mortality rates among those diagnosed with the disease are much higher.

Experts do indicate that one of the main barriers of cancer care is its high treatment cost, that is out of reach for millions of Indians. They also believe that cancer treatment could be effective and cheaper, if detected early. Conversely, the treatment would be more expensive, often leading to bankruptcy, if detected late and would, at the same time, significantly reduce the chances of survival too.

The fact that cancer is being spotted too late in India and most patients lack access to treatment, would be quite evident from the data that less than even 30 percent of patients suffering from cancer survive for more than five years after diagnosis, while over two-thirds of cancer related deaths occur among people aged 30 to 69.

Unfortunately, according to the data of the Union Ministry of Health, 40 percent of over 300 cancer centers in India do not have adequate facilities for advanced cancer care. It is estimated that the country would need at least 600 additional cancer care centers by 2020 to meet this crying need.

Breast cancer is the most common type of cancer, accounting for over 1 in 5 of all deaths from cancer in women, while 40 percent of cancer cases in the country are attributable to tobacco.

Indian Market and key local players:

Cancer drug market in India was reported to be around Rs 2,000 Crore (US$ 335 million) in 2013 and according to a recent Frost & Sullivan report, is estimated to grow to Rs 3,881 Crore (US$ 650 million) by 2017 with a CAGR of 15.46 percent, throwing immense business growth opportunities to pharma players.

Dr.Reddy’s Laboratories (DRL) is one of the leading Indian players in oncology. DRL has already developed biosimilar version of Rituxan (Rituximab) of Roche, Filgastrim of Amgen and has also launched the first generic Darbepoetin Alfa and Peg-grafeel.

Other major Indian players in this field are Cipla, Lupin, Glenmark, Emcure, Biocon, Ipca, Natco, Intas, Reliance Life Science, Zydus Cadila and some more. These home grown companies are expected to take a leading role in the fast growing oncology segments of India, together with the major MNC players, as named above.

Analysis of detailed opportunities that would be available to these companies and consequent financial impacts could be a subject of separate discussion.

Conclusion:

Unlike many other developed and developing countries of the world, there is no system yet in place in India to negotiate prices of innovative patented drugs with the respective manufacturers, including those used for cancer. However, NPPA is now moving fast on reducing prices of cancer drugs. It has reportedly pulled up six pharma for not providing pricing data of cancer drugs sold by them.

Further, CL for all patented anti-cancer drugs may not be a sustainable measure for all time to come, either. One robust alternative, therefore, is the intense price negotiation for patented drugs in general, including anti-cancer drugs, as provided in the National Pharmaceutical Pricing Policy 2012 (NPPP 2012).

This important issue has been under consideration of the Department of Pharmaceuticals (DoP) since 2007. The report produced by the committee formed for this specific purpose, after dilly-dallying for over five years, now hardly has any takers and gathering dusts.

I reckon, much discussed administrative inertia, insensitivity and abject lack of sense of urgency of the previous regime, have desisted the DoP from progressing much on this important subject, beyond of course customary lip services, as on date. Intense lobbying by vested interests from across the world, seems to have further helped pushing this envelope deep inside an inactive terrain.

The new Government would hopefully make the DoP break its deep slumber now to resolve this critical issue decisively, in a time bound manner, assigning clear accountability, without any further delay.

At the same time, shouldn’t both the Honorable Ministers of Health and Chemicals & Fertilizers, taking the State Governments on board, put their collective resources together to create the following, expeditiously:

- A robust national health infrastructure for cancer care

- A transparent mechanism to prevent escalating cancer drug prices and other treatment costs

Hope, the good days would come to the cancer patients of India, at least, sooner than never.

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. 

For Affordable Healthcare: Synergize Resources Through PPP Models

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According to a 2012 study of IMS Consulting, the key factor of significantly high ‘Out of Pocket (OOP)’ expenditure on healthcare in India is that people are pushed into seeking costlier private care services due to imbalanced infrastructure of healthcare workers, medicines and facilities.

Currently, 74 percent of patients in ‘Out-Patient (OP)’ care and 65 percent in ‘in-Patient (IP)’ care seek healthcare in the private channels. In private inpatient care, the average cost of treatment exceeds the average monthly household income at 121 percent for the affording population and 217 percent for the poor population, forcing many families to borrow money or sell assets.

Thus, the affordability challenges for healthcare of the country, as manifested by high OOP spend, is mostly a consequence of a large patient population using the private healthcare channel due to still inadequate availability of public healthcare services.

The situation is looking up:

According to IMS study 2012, currently, on an average about 54 percent of the patients are receiving free medicines from the Government hospitals. In progressive states like, Tamil Nadu, Andhra Pradesh, Maharashtra and Karnataka this number goes up to 85 percent. At the same time, in rural India, which constitutes around 70 percent of the total 1.2 billion populations of India, usage of Government facilities for OP care has increased from 22 percent in 2004 to 29 percent in 2012, mainly due to the impact of National Rural Health Mission (NRHM).

Consequently, this increase will also have significant impact in reducing OOP healthcare expenses of the rural poor.

Medicines constitute highest component of OOP:

Medicines still constitute the highest component of OOP expenses in OP care, though its percentage share has decreased from 71 percent in 2004 to 63 percent in 2012.  Similarly for IP care, the share of medicines in total OOP has also decreased from 46 percent in 2004 to 43 percent in 2012.

However, still 46 percent of the patients seeking healthcare in public channels had to purchase medicines from private channels. Recently announced drug procurement system through Central Medical Services Society (CMSS) after hard price negotiation and distribution of those drugs free of cost from Government hospitals and health centers, could address this issue effectively.

Further scope to reduce OOP:

The study highlights that OOP spend could be lowered by 22 percent with:

  • Improved availability of healthcare facilities at public hospitals and health centers, which can be achieved through effective implementation of “National Health Mission” with higher budgetary allocation.
  • Improved availability of medicine at the public channels, which is feasible through effective implementation of already announced “Free Medicine” scheme of the Government across the country.

A total reduction of ~40% in overall OOP spend appears to be possible, the study reiterates, when more people would get confidence that public healthcare can meet all their needs.

The roadmap to achieve the goal:

Fundamentally there are five ways to deal with the affordability issue:

1. Reduction in demand: Creating a better health environment,

2. Reduction in costs: Through price control, increased competition, group purchasing power

3. Increase in financial support from government

4. Increased penetration of health insurance programs

5. Increase per-capita income of households

All these five areas, I reckon, would not be difficult to address through well-structured and strategic Public Private Partnership (PPP) initiatives.

It is increasingly recognized that there are many other healthcare challenges, which do not fall exclusively under either the public or the private sectors. These challenges need to be addressed with combined efforts… with well structured Public Private Partnership (PPP) models.

Private sector should play its role:

The private sector is already a major provider of health services in India. Hence, it has the wherewithal to support implementation of Government’s flagship healthcare programs, especially in the area of service delivery, to enhance their overall effectiveness.

As the Universal Health Care (UHC) proposal made by the High Level Experts Group (HLEG) to the Planning Commission of India highlighted, the government would provide the budget, while the private sector would take the responsibility for delivery of healthcare services.

Accountability for PPP should not fall through the systemic cracks:

The above study indicates, the private parties could include individual physicians, commercial contractors, large private and corporate super-specialty hospitals, not-for-profit agencies (NGOs), pharmaceuticals and device manufacturers. Expertise of all these stakeholders should be appropriately leveraged.

It is absolutely essential to make sure that the accountability of the PPP initiatives does not fall through the cracks now existing in the system.

To control costs and ensure required standards are met, all contractual agreements for PPPs, as recommended, must have adequate built-in monitoring and supervision mechanisms of the highest order, assigning clear roles and responsibilities for each party.

Similarly, NGOs need to be given a larger role of monitoring the activities or services rendered at such facilities to make sure the designated institutions are fulfilling their obligations to the public.

Conclusion:

To make healthcare affordable in India, well-strategized PPP initiatives would have critical roles to play.

Thus, instead of resorting to blame games with Government accusing the private sector to be exploitative and the private sector continuously moaning for ‘unfriendly’ business policies of the government, there is a fundamental need for both the constituents working closely together.

As a result, patients will have greater access to quality healthcare at an affordable price, the industry will grow faster in a sustainable way and the government will have its public healthcare obligations fulfilled to a reasonable extent.

Some of the major sectors in India where PPP has been quite successful are infrastructure, telecom, irrigation, power and airports. So, why should it not work for the healthcare sector of the country, as well?

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.

R&D: Is Indian Pharma Moving Up the Value Chain?

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It almost went unnoticed by many, when in the post product patent regime, Ranbaxy launched its first homegrown ‘New Drug’ of India, Synriam, on April 25, 2012, coinciding with the ‘World Malaria Day’. The drug is used in the treatment of plasmodium falciparum malaria affecting adult patients.  However, the company has also announced its plans to extend the benefits of Synriam to children in the malaria endemic zones of Asia and Africa.

The new drug is highly efficacious with a cure rate of over 95 percent offering advantages of “compliance and convenience” too. The full course of treatment is one tablet a day for three days costing less than US$ 2.0 to a patient.

Synriam was developed by Ranbaxy in collaboration with the Department of Science  and Technology of the Government of India. The project received support from the Indian Council of Medical Research (ICMR) and conforms to the recommendations of the World Health Organization (WHO). The R&D cost for this drug was reported to be around US$ 30 million. After its regulatory approval in India, Synriam is now being registered in many other countries of the world.

Close on the heels of the above launch, in June 2013 another pharmaceutical major of India, Zydus Cadilla announced that the company is ready for launch in India its first New Chemical Entity (NCE) for the treatment of diabetic dyslipidemia. The NCE called Lipaglyn has been discovered and developed in India and is getting ready for launch in the global markets too.

The key highlights of Lipaglyn are reportedly as follows:

  • The first Glitazar to be approved in the world.
  • The Drug Controller General of India (DCGI) has already approved the drug for launch in India.
  • Over 80% of all diabetic patients are estimated to be suffering from diabetic dyslipidemia. There are more than 350 million diabetics globally – so the people suffering from diabetic dyslipidemia could be around 300 million.

With 20 discovery research programs under various stages of clinical development, Zydus Cadilla reportedly invests over 7 percent of its turnover in R&D.  At the company’s state-of-the-art research facility, the Zydus Research Centre, over 400 research scientists are currently engaged in NCE research alone.

Prior to this in May 14, 2013, the Government of India’s Department of Biotechnology (DBT) and Indian vaccine company Bharat Biotech jointly announced positive results, having excellent safety and efficacy profile in Phase III clinical trials, of an indigenously developed rotavirus vaccine.

The vaccine name Rotavac is considered to be an important scientific breakthrough against rotavirus infections, the most severe and lethal cause of childhood diarrhea, responsible for approximately 100,000 deaths of small children in India each year.

Bharat Biotech has announced a price of US$ 1.00/dose for Rotavac. When approved by the Drug Controller General of India, Rotavac will be a more affordable alternative to the rotavirus vaccines currently available in the Indian market. 

It is indeed interesting to note, a number of local Indian companies have started investing in pharmaceutical R&D to move up the industry value chain and are making rapid strides in this direction.

Indian Pharma poised to move-up the value-chain:

Over the past decade or so, India has acquired capabilities and honed skills in several important areas of pharma R&D, like for example:

  • Cost effective process development
  • Custom synthesis
  • Physical and chemical characterization of molecules
  • Genomics
  • Bio-pharmaceutics
  • Toxicology studies
  • Execution of phase 2 and phase 3 studies

According to a paper titled, “The R&D Scenario in Indian Pharmaceutical Industry” published by Research and Information System for Developing Countries, over 50 NCEs/NMEs of the Indian Companies are currently at different stages of development, as follows:

Company Compounds Therapy Areas Status
Biocon 7 Oncology, Inflammation, Diabetes Pre-clinical, phase II, III
Wockhardt 2 Anti-infective Phase I, II
Piramal Healthcare 21 Oncology, Inflammation, Diabetes Lead selection, Pre-clinical, Phase I, II
Lupin 6 Migraine, TB, Psoriasis, Diabetes, Rheumatoid Arthritis Pre-clinical, Phase I, II, III
Torrent 1 Diabetic heart failure Phase I
Dr. Reddy’s Lab 6 Metabolic/Cardiovascular disorders, Psoriasis, migraine On going, Phase I, II
Glenmark 8 Metabolic/Cardiovascular /Respiratory/Inflammatory /Skin disorders, Anti-platelet, Adjunct to PCI/Acute Coronary Syndrome, Anti-diarrheal, Neuropathic Pain, Skin Disorders, Multiple Sclerosis, Ongoing, Pre-clinical, Phase I, II, III

R&D collaboration and partnership:

Some of these domestic companies are also entering into licensing agreements with the global players in the R&D space. Some examples are reportedly as follows:

  • Glenmark has inked licensing deals with Sanofi of France and Forest Laboratories of the United States to develop three of its own patented molecules.
  • Domestic drug major Biocon has signed an agreement with Bristol Myers Squibb (BMS) for new drug candidates.
  • Piramal Life Sciences too entered into two risk-reward sharing deals in 2007 with Merck and Eli Lilly, to enrich its research pipeline of drugs.
  • Jubilant Group partnered with Janssen Pharma of Belgium and AstraZeneca of the United Kingdom for pharma R&D in India, last year.

All these are just indicative collaborative R&D initiatives in the Indian pharmaceutical industry towards harnessing immense growth potential of this area for a win-win business outcome.

The critical mass:

An international study estimated that out of 10,000 molecules synthesized, only 20 reach the preclinical stage, 10 the clinical trials stage and ultimately only one gets regulatory approval for marketing. If one takes this estimate into consideration, the research pipeline of the Indian companies would require to have at least 20 molecules at the pre-clinical stage to be able to launch one innovative product in the market.

Though pharmaceutical R&D investments in India are increasing, still these are not good enough. The Annual Report for 2011-12 of the Department of Pharmaceuticals indicates that investments made by the domestic pharmaceutical companies in R&D registered an increase from 1.34 per cent of sales in 1995 to 4.5 percent in 2010. Similarly, the R&D expenditure for the MNCs in India has increased from 0.77 percent of their net sales in 1995 to 4.01 percent in 2010.

Thus, it is quite clear, both the domestic companies and the MNCs are not spending enough on R&D in India. As a result, at the individual company level, India is yet to garner the critical mass in this important area.

No major R&D investments in India by large MNCs:

According to a report, major foreign players with noteworthy commercial operations in India have spent either nothing or very small amount towards pharmaceutical R&D in the country. The report also mentions that Swiss multinational Novartis, which spent $ 9 billion on R&D in 2012 globally, does not do any R&D in India.

Analogue R&D strategy could throw greater challenges:

For adopting the analogue research strategy, by and large, the Indian pharma players appear to run the additional challenge of proving enhanced clinical efficacy over the known substance to pass the acid test of the Section 3(d) of the Patents Act of India.

Public sector R&D:

In addition to the private sector, research laboratories in the public sector under the Council for Scientific and Industrial Research (CSIR) like, Central Drug Research Institute (CDRI), Indian Institute of Chemical Technology (IICT) and National Chemical Laboratory (NCL) have also started contributing to the growth of the Indian pharmaceutical industry.

As McKinsey & company estimated, given adequate thrust, the R&D costs in India could be much lower, only 40 to 60 per cent of the costs incurred in the US. However, in reality R&D investments of the largest global pharma R&D spenders in India are still insignificant, although they have been expressing keenness for Foreign Direct Investments (FDI) mostly in the brownfield pharma sector.

Cost-arbitrage:

Based on available information, global pharma R&D spending is estimated to be over US$ 60 billion. Taking the cost arbitrage of India into account, the global R&D spend at Indian prices comes to around US$ 24 billion. To achieve even 5 percent of this total expenditure, India should have invested by now around US$ 1.2 billion on the pharmaceutical R&D alone. Unfortunately that has not been achieved just yet, as discussed above.

Areas of cost-arbitrage:

A survey done by the Boston Consulting Group (BCG) in 2011 with the senior executives from the American and European pharmaceutical companies, highlights the following areas of perceived R&D cost arbitrage in India:

Areas % Respondents
Low overall cost 73
Access to patient pool 70
Data management/Informatics 55
Infrastructure set up 52
Talent 48
Capabilities in new TA 15

That said, India should realize that the current cost arbitrage of the country is not sustainable on a longer-term basis. Thus, to ‘make hay while the sun shines’ and harness its competitive edge in this part of the world, the country should take proactive steps to attract both domestic as well as Foreign Direct Investments (FDI) in R&D with appropriate policy measures and fiscal incentives.

Simultaneously, aggressive capacity building initiatives in the R&D space, regulatory reforms based on the longer term need of the country and intensive scientific education and training would play critical role to establish India as an attractive global hub in this part of the world to discover and develop newer medicines for all.

Funding:

Accessing the world markets is the greatest opportunity in the entire process of globalization and the funds available abroad could play an important role to boost R&D in India. Inadequacy of funds in the Indian pharmaceutical R&D space is now one of the greatest concerns for the country.

The various ways of funding R&D could be considered as follows:

  • Self-financing Research: This is based on:
  1. “CSIR Model”: Recover research costs through commercialization/ collaboration with industries to fund research projects.
  2. “Dr Reddy’s Lab / Glenmark Model”: Recover research costs by selling lead compounds without taking through to development.
  • Overseas Funding:  By way of joint R&D ventures with overseas collaborators, seeking grants from overseas health foundations, earnings from contract research as also from clinical development and transfer of aborted leads and collaborative projects on ‘Orphan Drugs’.
  • Venture Capital & Equity Market:  This could be both via ‘Private Venture Capital Funds’ and ‘Special Government Institutions’.  If regulations permit, foreign venture funds may also wish to participate in such initiatives. Venture Capital and Equity Financing could emerge as important sources of finance once track record is demonstrated and ‘early wins’ are recorded.
  • Fiscal & Non-Fiscal Support: Should also be valuable in early stages of R&D, for which a variety of schemes are possible as follows:
  1. Customs Duty Concessions: For Imports of specialized equipment, e.g. high throughput screening equipment, equipment for combinatorial chemistry, special analytical tools, specialized pilot plants, etc.
  2. Income tax concessions (weighted tax deductibility): For both in-house and sponsored research programs.
  3. Soft loans: For financing approved R&D projects from the Government financial institutions / banks.
  4. Tax holidays: Deferrals, loans on earnings from R&D.
  5. Government funding: Government grants though available, tend to be small and typically targeted to government institutions or research bodies. There is very little government support for private sector R&D as on date.

All these schemes need to be simple and hassle free and the eligibility criteria must be stringent to prevent any possible misuse.

Patent infrastructure:

Overall Indian patent infrastructure needs to be strengthened, among others, in the following areas:

  • Enhancement of patent literacy both in legal and scientific communities, who must be taught how to read, write and file a probe.
  • Making available appropriate ‘Search Engines’ to Indian scientists to facilitate worldwide patent searches.
  • Creating world class Indian Patent Offices (IPOs) where the examination skills and resources will need considerable enhancement.
  • ‘Advisory Services’ on patents to Indian scientists to help filing patents in other countries could play an important role.

Creating R&D ecosystem:

  • Knowledge and learning need to be upgraded through the universities and specialist centers of learning within India.
  • Science and Technological achievements should be recognized and rewarded through financial grants and future funding should be linked to scientific achievements.
  • Indian scientists working abroad are now inclined to return to India or network with laboratories in India. This trend should be effectively leveraged.

Universities to play a critical role:

Most of Indian raw scientific talents go abroad to pursue higher studies.  International Schools of Science like Stanford or Rutgers should be encouraged to set up schools in India, just like Kellogg’s and Wharton who have set up Business Schools. It has, however, been reported that the Government of India is actively looking into this matter.

‘Open Innovation’ Model:

As the name suggest, ‘Open Innovation’ or the ‘Open Source Drug Discovery (OSDD)’ is an open source code model of discovering a New Chemical Entity (NCE) or a New Molecular Entity (NME). In this model all data generated related to the discovery research will be available in the open for collaborative inputs. In ‘Open Innovation’, the key component is the supportive pathway of its information network, which is driven by three key parameters of open development, open access and open source.

Council of Scientific and Industrial Research (CSIR) of India has adopted OSDD to discover more effective anti-tubercular medicines.

Insignificant R&D investment in Asia-Pacific Region:

Available data indicate that 85 percent of the medicines produced by the global pharmaceutical industry originate from North America, Europe, Japan and some from Latin America and the developed nations hold 97 percent of the total pharmaceutical patents worldwide.

MedTRACK reveals that just 15 percent of all new drug development is taking place in Asia-Pacific region, including China, despite the largest global growth potential of the region.

This situation is not expected to change significantly in the near future for obvious reasons. The head start that the western world and Japan enjoy in this space of the global pharmaceutical industry would continue to benefit those countries for some more time.

Some points to ponder:

  • It is essential to have balanced laws and policies, offering equitable advantage for innovation to all stakeholders, including patients.
  • Trade policy is another important ingredient, any imbalance of which can either reinforce or retard R&D efforts.
  • Empirical evidence across the globe has demonstrated that a well-balanced patent regime would encourage the inflow of technology, stimulate R&D, benefit both the national and the global pharmaceutical sectors and most importantly improve the healthcare system, in the long run.
  • The Government, academia, scientific fraternity and the pharmaceutical Industry need to get engaged in various relevant Public Private Partnership (PPP) arrangements for R&D to ensure wider access to newer and better medicines in the country, providing much needed stimulus to the public health interest of the nation.

Conclusion:

R&D initiatives, though very important for most of the industries, are the lifeblood for the pharmaceutical sector, across the globe, to meet the unmet needs of the patients. Thus, quite rightly, the pharmaceutical Industry is considered to be the ‘lifeline’ for any nation in the battle against diseases of all types.

While the common man expects newer and better medicines at affordable prices, the pharmaceutical industry has to battle with burgeoning R&D costs, high risks and increasingly long period of time to take a drug from the ‘mind to market’, mainly due to stringent regulatory requirements. There is an urgent need to strike a right balance between the two.

In this context, it is indeed a proud moment for India, when with the launch of its home grown new products, Synriam of Ranbaxy and Lipaglyn of Zydus Cadilla or Rotavac Vaccine of Bharat Biotech translate a common man’s dream of affordable new medicines into reality and set examples for others to emulate.

Thus, just within seven years from the beginning of the new product patent regime in India, stories like Synriam, Lipaglyn, Rotavac or the R&D pipeline of over 50 NCEs/NMEs prompt resurfacing the key unavoidable query yet again:

Has Indian pharma started catching-up with the process of new drug discovery, after decades of hibernation, to move up the industry ‘Value Chain’?

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.

Government Ups the Ante for More Compulsory Licenses in India

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On January 12, 2013, one of the leading dailies of India first reported that in a move that is intended to benefit thousands of cancer patients, Indian Government has started the process of issuing Compulsory Licenses (CL) for three commonly used anti-cancer drugs:

-       Trastuzumab (or Herceptin, used for breast cancer),

-       Ixabepilone (used for chemotherapy)

-       Dasatinib (used to treat leukemia).

For a month’s treatment drugs like, Trastuzumab, Ixabepilone and Dasatinib reportedly cost on an average of US$ 3,000 – 4,500 or Rs 1.64 – 2.45 lakh for each patient in India.

CL through a different route:

This time the government can reportedly notify its intent to grant  CL under Section 92 of the Indian Patents Act 2005, only if any of the following three conditions are met:

- National emergency

- Cases of extreme urgency

- Public non-commercial use

After such Government notification in the gazette, any company interested in manufacturing any or all of these three products can directly apply for a CL to the Indian Patent Office (IPO).

This route is also expected to save usual litigation costs for the interested pharmaceutical players.

In such case, this will be the first time in India, when instead of pharmaceutical players applying for CL the Government on its own will trigger the CL process.

A situation like this will undoubtedly signal immense unpredictability in the IPR environment of the country.

Incongruent with the New Drug Policy 2012:

Interestingly, section 4(xv) of the National Pharmaceutical Pricing Policy 2012 (NPPP 2012) under ‘Patented Drugs’ states as follows:

“There is a separate Committee constituted by the Government order dated 1st February, 2007 for finalizing the pricing of Patented Drugs, and decisions on pricing of patented drugs would be taken based on the recommendations of the Committee.”

A media report also highlighted that an inter-ministerial group constituted for regulating prices of patented medicines in India has recommended using a per capita income-linked reference pricing mechanism for such products.

Thus, it is rather intriguing for many to fathom, why is the Government contemplating to grant CL on the above three anti-cancer drugs in January 2013, despite the decision of the Union Cabinet on the same in the new Drug Policy as recent as December, 2012.

Medicines come at the third stage of a medical treatment process:

For all patients, including the cancer victims, medicines will come at the earliest in the third stage of any treatment process, the first two or in some cases first three stages being:

  • A doctor’s intervention
  • Correct diagnosis through diagnostic processes
  • Surgical interventions (in some cases)

In India, there is no regulation to address the ‘cost issues’ of the first two or three stages of treatment, though there is a dire need to facilitate the entire process and not just one. Coming straight to cancer medicines considering these as the only ‘magic wands’ to improve access to treatment, may well be considered as ‘jumping the gun’ by the Government, if not an imprudent decision.

Skewed healthcare distribution in India:

Healthcare distribution in India is rather skewed and cancer treatment is no exception mainly because of the following reasons:

  • Medical personnel are concentrated in urban areas.
  • 74 percent of doctors work in urban settlements, which is just around 1/4th of the population.
  • 61 percent of the medical colleges are in the 6 states of Maharashtra, Karnataka, Kerala, Tamil Nadu, Andhra Pradesh and Pudicherry.
  • Whereas, just 11 percent of these are located in Bihar, Jharkhand, Orissa, West Bengal and the north-eastern states
  • 369,351 government beds are in urban areas and a mere 143,069 beds in the rural areas.
  • Rural “doctors to population” ratio is lower by 6 times as compared to urban areas.

(Source: KPMG Report 2011)

Huge healthcare Infrastructural Deficiencies:

In India, not just compared to the developed nations, even as compared BRIC countries, there is a huge infrastructural deficiencies as follows:

Indicators

Year

India

US

UK

Brazil

China
Hospital Bed Density(Per 10000 population)

2011

12

31

39

24

30
Doctor Density(Per 10000 population)

2011

6

27

21

17

14

(Source: WHO, World Health Statistics 2012)

  • 0.6 doctors per 1000 population as against the global average of 1.23 suggests an evident manpower gap in the very first stage of a treatment process.
  • Number of beds available per 1000 people in India is only 1.2, which is less than half of the global average of 2.6.

Coming to Medical Colleges, the scenario is equally dismal, as follows:

Year

Number of Medical Colleges

Total Admissions

2011-2012

314

29,263

No of dental Colleges

Total Admissions

2011-2012

289

2783

(Source: Medical Council of India & Dental Council of India)

Thus, India needs to open around 600 medical colleges (100 seats per college) and 1500 nursing colleges (60 seats per college) in order to meet the global average of doctors and nurses.

(Source: KPMG Report 2011) 

Shortages in other healthcare professionals:

It has been reported that a deficit of 64 lakh (6.4 million) allied healthcare professionals India with highest gaps in Maharashtra, Uttar Pradesh, West Bengal, Bihar and Andhra Pradesh, is a stumbling block in providing basic and quality healthcare to Indian population, as follows:

Healthcare Professionals

Shortage
Anesthetists and technicians              850,000
Dental staff              2.04 Million
Ophthalmologists and optometrists              127, 000
Rehabilitation specialists              1.8 Million
Medical laboratory technicians              61,000
Radiographers              19,000
Audiology and speech language specialists                7,500
Medical staff              230,000

(Source: Times Of India, December 20, 2012)

Is the Government ‘missing the woods for the trees’?

In a scenario like this, it is rather impractical to envisage that routine grant of compulsory licenses by the Indian Patent Office will be able to resolve the critical issue of improving access to patented medicines on a long term basis.

Not many CL granted between 1995-2012:

Despite having the provisions of CL in the Patents Act of many countries, not many CLs have been granted across the world from 1995 to date for the obvious reasons.

The details are as follows:

Country Medicine CL granted in:
Israel Hepatitis B Vaccine October 1995
Italy Imipenem (antibiotic) June 2005
Italy Sumatriptan Succinate (migraine) February 2006
Canada Oseltamivir (influenza) July 2006
Brazil Efavirenz (HIV/AIDS) May 2007
Thailand Erlotinib, Docetaxel (cancer) January 2008
India Sorafenib Tosylate (cancer) March 2012

Source: DNA, March 9, 2012

An interesting paper:

However, I hasten to add that despite all these, the provision of CL in the Indian Patents Act 2005 has immense relevance, if invoked in the right kind of circumstances.

In the paper titled ‘TRIPS, Pharmaceutical Patents and Access to Essential Medicines: Seattle, Doha and Beyond’, published in ‘Chicago Journal for International Law, Vol. 3(1), Spring 2002’, the author argues, though the reasons for the lack of access to essential medicines are manifold, there are many instances where high prices of drugs deny access to needed treatments for many patients. Prohibitive drug prices, in those cases, were the outcome of monopoly due to strong intellectual property protection.

The author adds, “The attempts of Governments in developing countries to bring down the prices of patented medicines have come under heavy pressure from industrialized countries and the multinational pharmaceutical industry”.

Right pricing of patented drugs is critical: 

While there is no single or only right way to arrive at the price of an IPR protected medicine, how much the pharmaceutical manufacturers will charge for such drugs still remains an important, yet complex and difficult issue to resolve, both locally and globally. Even in the developed nations, where an appropriate healthcare infrastructure is already in place, this issue comes up too often mainly during price negotiation for reimbursed drugs.

A paper titled, “Pharmaceutical Price Controls in OECD Countries”, published by the US Department of Commerce after examining the drug price regulatory systems of 11 OECD countries concluded that all of them enforce some form of price controls to limit spending on pharmaceuticals. The report also indicated that the reimbursement prices in these countries are often treated as de facto market price.

In India, the Government is already mulling to put in place a similar mechanism for patented medicines, as captured in the NPPP 2012.

Further, some OECD governments regularly cut prices of even those drugs, which are already in the market. The values of health outcomes and pharmacoeconomics analysis are gaining increasing importance for drug price negotiations/control by the healthcare regulators even in various developed markets of the world to ensure responsible pricing of IPR protected medicines.

An evolving global trend:

To address such pricing issues, global pharmaceutical majors, like GSK and Merck (MSD) have already started following the differential pricing model, based primarily on the size of GDP and income status of the people of the respective countries. This strategy includes India, as well.

Reference pricing model is yet another such example, where the pricing framework of a pharmaceutical product will be established against the price of a reference drug in reference countries.

An innovative approach to address patented products’ pricing:

To effectively address the challenge of pricing of patented medicines in India, Swiss drug major Roche, has reportedly entered into a ‘never-before’ technology transfer and manufacturing contract for biologics with a local Indian company – Emcure Pharma, for its two widely acclaimed Monoclonal Antibodies’ anti-cancer drugs – Herceptin and MabThera.

The report says that in the past, Emcure had signed licensing deals with US-based bio-pharmaceutical drug maker Gilead Life Sciences for Tenafovir and with Johnson and Johnson for Darunavir. Both are anti-HIV drugs.

In this regard, media reports further indicated that Roche would offer to Indian patients significantly cheaper, local branded versions of these two anti-cancer drugs by early this year. The same news item also quoted the Roche spokesperson from Basel, Switzerland commenting as follows:

“The scope is to enable access for a large majority of patients who currently pay out of pocket as well as to partner with the government to enable increased access to our products for people in need”.

Such ‘out of box’ strategies and initiatives by the global innovator companies could help keeping prices of patented products affordable to the Indian patients, improving their access significantly and making the likes of the current Government initiative on CL irrelevant. 

Conclusion:

It is generally accepted that the provisions for CL in the Indian Patents Act 2005 has utmost relevance in terms of public health interest for all concerned.

However, keeping in view of recent policy announcement in the NPPP 2012, as approved by the Union Cabinet, on price negotiation for patented products, the reported Government move of invoking these provisions for three anti-cancer drugs is rather intriguing.

Moreover, even for the cancer patients, there seems to be a greater urgency to attend to basic healthcare infrastructural and delivery issues, besides providing Universal Health Coverage  (UHC) as recommended by the High Level Experts Group (HLEG) constituted for this purpose by the Government.

Far encompassing critical decisions like grant of CL, I reckon, should be taken only after exhausting all other access improvement measures.

Thus, recent news reports on the possibility of further grant of three more CLs could make the pharmaceutical business environment for the innovator companies in India more uncertain.

Demonstrable predictability for an innovation friendly environment is critical for the economic growth of India, which the Government should not lose sight of. Just upping the ante for more CL of anti-cancer drugs will not necessarily help improving access to cancer treatments in 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. 

Chasing the “Holy Grail”: Reasonably affordable healthcare for all

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The Healthcare industry of the world as a whole with a size of several trillion US$ is growing at a fast pace in many countries for various reasons. The industry can be broadly divided into six categories as follows:

  1. Managed Health Care, like the US and many other OECD countries providing ‘Universal Health Coverage’
  2. Medical Equipment and Devices
  3. Pharmaceuticals
  4. Bio-pharmaceuticals
  5. Health Insurance
  6. Health Support Services

Though BRIC countries and other emerging markets are showing promising growth potential, United States of America (USA) still remains the largest entity within the global healthcare industry, followed by European Union (EU) and Japan.

Success requirements:

The most important success requirements for the Global healthcare industry may be listed as follows:

  1. Proficiency in early capturing of the key market trends
  2. Leveraging technology in all areas of business
  3. Continuous product and service innovation
  4. Meeting customer needs even before they feel for the same
  5. Cutting-edge, well-differentiated and well-executed market and marketing strategies
  6. Always in touch with customers with win-win business objectives
  7. Outpacing competition with continuous proactive moves

India:

The success factors for excellence in the healthcare sector of India are no different from other emerging markets. However, some key components of this sectoral space, like optimal infrastructure and efficient delivery mechanisms, especially in the hinterland and rural areas of the country, are still in ‘Work In Progress (WIP)’ stages of development.

Healthcare growth drivers in India:

According to the Investment Commission of India, the healthcare sector of the country has registered a robust CAGR of over 12 percent during the last four years and the trend is expected to be ascending further.

Quite in tandem, other important areas of the healthcare sector have also recorded impressive performance as follows:

Areas Growth %
Hospitals/Nursing Homes 20
Medical Equipment 15
Clinical Lab Diagnostics 30
Imaging Diagnostics 30
Other Services (includes Training & Education; Aesthetics & Weight loss; Retail Pharmacy, etc.) 40

In addition, from the allocation made for health (2.5 percent of the GDP) in the 12th Five Year Plan Document of India, it appears that the country will clock a mid to high-teen growth in its healthcare spending during this period, mainly due to the following reasons:

  1. Economy to turn stronger
  2. Massive public healthcare expansion through projects like Universal Health Coverage (UHC), expanded National Rural Health Mission (NRHM), new National Urban Health Mission (NUHM)
  3. Expanded Rashtriya Swasthya Bima Yojojana (RSBY) for Below Poverty Line (BPL) population
  4. Growing middle income households both in the urban and rural areas
  5. Increasing life-style related health issues
  6. Improving penetration of Health Insurance

Key Challenges:

The path ahead will not really be strewn with the beds of roses. The rural healthcare infrastructure will continue to pose a key challenge, at least in the near term, some of the facts being as follows:

A. Status of Rural Healthcare Infrastructure in India:

Infrastructure and Services Villages [%]
Connected with Roads 73.9
Having any Health Provider 95.3
Having trained birth attendant 37.5
Having ‘Anganwadi’ Worker (Child Care Center in rural areas) 74.5
Having a doctor 43.5

(Source: Ministry of Health and Family Welfare)

B. Hospital Beds per 1000 of population:

Country Hospital Beds Per 1000 Population
India > 0.7 [Urban: 2.2 and      Rural 0.1]
Russia 9.7
Brazil 2.6
China 2.2
World Average 3.96

(Source: Kshema)

Needs more innovative business models:

Being supported by the monetary and other fiscal incentives of the Government, Tier II and III cities of India will continue to attract more investors for their future growth potential. At the same time, anticipated lower profit margins from these areas, predominantly due to relatively lower affordability threshold of the local population and inadequate health insurance penetration in these areas, is expected to make these healthcare providers to plan for no-frill innovative business models, like much talked about ‘the hub-and-spoke model’, as practiced in many other industries.

Some of the key players of the healthcare industry of India like, Apollo and Fortis have already started expanding into tier-II and tier-III cities of the country, prompted by increasing demand for high-quality specialty healthcare services at reasonably affordable prices in the smaller towns of the country.

Meanwhile, Frontier Lifeline Hospital is reportedly in the process of setting up India’s first Special Economic Zone (SEZ) for healthcare, ‘Frontier Mediville’ at Elavoor, near Chennai.

Areas of caution:

While looking at the big picture, the following factors should also be taken note of:

  • At least in the short to medium term, it will be unrealistic to expect that India will be a high margin / high volume market for the healthcare sector in general.
  • The market will continue to remain within the modest-margin range with marketing excellence driven volume turnover.
  • The government focus on reasonably affordable drug prices may get extended to medical devices / equipment and other related areas, as well.

India is taking strides:

I.   According to the Rural Health Survey Report 2009 of the Ministry of Health and Family

Welfare, in rural India during the last five years:

  • The number of primary health centers has increased by 84 per cent to 20,107.
  • Around 15,000 health sub-centers and 28,000 nurses and midwives have been added.

II   According to RNCOS December, 2010 report:

  • Indian health insurance market is currently not only the fastest growing, but also second largest non-life insurance segment in the country.
  • The health insurance premium in India is expected to grow at a CAGR of over 25 per cent from 2009-10 to 2013-14.
  • By end 2013 India is expected to curve out a share over 3 per cent in the global medical tourism industry with a CAGR in the number of medical tourists to over 19 per cent, during 2011-2013 period.

III.    According to PwC, the medical technology industry of India is expected to grow from US$

2.7 billion in 2008 to US$ 14 billion by 2020.

IV.    Leveraging cutting edge technology, digital bio-surveillance projects are being initiated to

generate data on the prevalence of various diseases and to create actionable databases on healthcare needs in rural India by several private players like, Narayana Hrudayalaya and the Mazumdar Shaw Cancer Centre.

V.     Major healthcare players of India like, Manipal Group, Max Healthcare and Apollo are now

reportedly venturing into new segments such as primary care and medical diagnostics.

Job creation 
in healthcare sector:

The trend of new job creation in the healthcare sector of India is also quite encouraging, as supported by the following details:

  • The Healthcare sectors in India recorded a maximum post recession recruitment to a total employee base of 33,66,000 with a new job creation of 2,95,000, according to ‘Ma Foi Employment Trends Survey 2010’.
  • Despite slowdown in other industries, in the healthcare sector the new job creation continues at a faster pace.
  • With many new hospital beds added and increasing access to primary, secondary and tertiary / specialty healthcare, among others, the ascending trend in job creation is expected to continue in the healthcare sector of India in the years ahead.

Pharmaceutical Industry:

McKinsey & Company in its report titled, “India Pharma 2020: Propelling access and acceptance realizing true potential” estimated that the Indian Pharmaceutical Market (IPM) will grow to US$ 55 billion by 2020 and the market has the potential to record a turnover of US$ 70 billion with a CAGR of 17 per cent.

Currently India:

  • Ranks 4th in the world in terms of pharmaceutical sales volume.
  • Caters to around a quarter of the global requirements for generic drugs.
  • Meets around 70 per cent of the domestic demand for Active Pharmaceutical Ingredients (API).
  • Has the largest number of US FDA approved plant outside USA
  • Files highest number of ANDAs and DMFs
  • One of most preferred global destinations for contract research and manufacturing services (CRAMS)

Conclusion:

Despite all these, the healthcare Industry of India is still confronted with many challenges while striking a right balance between public health interest and expectations for a high margin ‘free market’ business policies by a large section of players in the healthcare sector of India, across its sub-sectors, both global and local, quite unlike many other emerging sectors, like telecom and IT.

Moreover, pharmaceuticals come under the ‘Essential Commodities Act’ of the country, where government administered pricing is common.

That said, without further delay, all stakeholders, along with the Government, should now join hands, to collectively resolve the critical issues of the healthcare sector of the nation, like:

  • Creation and modernization of healthcare infrastructure leveraging IT
  • Universal Health Coverage
  • Win-win regulatory policies
  • Creation of employable skilled manpower
  • Innovation friendly ecosystem
  • Reasonably affordable healthcare services and medicines for the common man through a robust government procurement and delivery system
  • Right attitude of all stakeholders to find a win-win solution for all issues, instead of adhering to the age-old blame game in perpetuity, as it were, without conceding each other’s ground even by an inch.

Now is the high time for India, I reckon, to reap a rich harvest from the emerging lucrative opportunities, coming both from India and across the world in its healthcare space. This, in turn, will help the country to effectively align itself with the key global healthcare need of providing reasonably affordable healthcare to all.

In pursuit of this ‘Holy Grail’, the nation has all the success ingredients in its armory, as mentioned above, to play a key role in the global healthcare space, not just as a facilitator to help achieving reasonable corporate business objectives of the healthcare players, but more importantly to alleviate sufferings of a vast majority of the ailing population, living even beyond the shores 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.

‘India Taskforce’ takes the first step in an arduous task to bridge the trust deficit.

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To prepare a comprehensive long term strategy to unleash the growth potential of the Pharmaceutical Industry of India considering all its current issues, the Ministry of Health and Family Welfare announced constitution of a taskforce on March 15, 2011 involving all the stakeholders, as mentioned below. As per reports, the first meeting of the committee was held on June 6, 2011 to deliberate on the mandated goals.

Within 3 months the taskforce, under the chairmanship of V.M. Katoch, Secretary, Department of Health Research and Director-General, Indian Council of Medical Research (ICMR), is expected to work out and submit a short, medium and long term strategic path and goals to the Government, highlighting the key and specific policy measures required to achieve these objectives.

The taskforce will have members drawn from:

  1. National Pharmaceutical Pricing Authority,
  2. Department of Industry Policy and Promotion,
  3. Indian Drug Manufacturers Association, Mumbai,
  4. Indian Pharmaceutical Alliance, Mumbai,
  5. Organization of Pharmaceutical Producers of India, Mumbai,
  6. Federation of Pharmaceutical Entrepreneurs, Gurgaon,
  7. Confederation of Indian Pharmaceutical Industry,
  8. Bulk Drug Manufacturers’ Association, Hyderabad,
  9. SME Pharma Industry Confederation, New Delhi
  10. Drug Controller General of India as the Member Secretary.

The focus areas:

The report has been mandated to cover the following critical areas:

  1. Evolving a short, medium and long-term policy and strategy to make India a hub for drug discovery, research and development.
  2. Evolving strategies to further the interests of Indian pharma industry in the light of issues related to intellectual property rights and recommend strategies to capitalize the opportunity of $60 to $80 billion drugs going off-patent over the next five years.
  3. Evolve policy measures to assure national drugs security by promoting indigenous production of bulk drugs, preventing takeover of Indian pharma industry by multi-national corporations, drug pricing, promotion of generic drugs
  4. Recommend measures to assure adequate availability of quality generic drugs at affordable prices.
  5. Recommend measures to tackle the problem of spurious drugs and use of anti-counterfeit technologies.

Estimates and Perspectives:

  • The pharma industry is growing at around 1.5-1.6 times the Gross Domestic Product growth of India
  • Currently, India ranks third in the world of volume of manufacturing pharmaceutical products
  • The Indian pharmaceutical industry is expected to grow at a rate of around 15 % till 2015
  • The retail pharmaceutical market in India is expected to cross US$ 20 billion by 2015
  • According to a study by FICCI-Ernst & Young India will open a probable US$ 8 billion market for MNCs selling patented drugs in India by 2015
  • The number of pharmaceutical retailers is estimated to grow from 5,50,000,  to 7,50,000 by 2015
  • At least 2,00,000 more pharma graduates would be required by the Indian pharmaceutical industry by 2015
  • The Indian drug and pharmaceuticals sector attracted Foreign Direct Investments to the tune of US$ 1.43 billion from April 2000 to December 2008 (Ministry of Commerce and Industry), which is expected to increase significantly along with the policy reform measures and increased Government investment (3%-4%) as a percentage of GDP towards healthcare, by 2015
  • The Minister of Commerce estimates that US$ 6.31 billion will be invested in the domestic pharmaceutical sector
  • Due to low cost of R&D, the Indian pharmaceutical off-shoring industry is expected to be a US$ 2.5 billion opportunity by 2012

Key growth drivers: Local and Global:

Local: • Rapidly growing middle class population of the country with increasing disposable income. • High quality and cost effective domestic generic drug manufacturers are achieving increasing penetration in local, developed and emerging markets. • Rising per capita income of the population and inefficiency of the public healthcare system will encourage private healthcare systems of various types and scales to flourish. • High probability of emergence of a robust healthcare financing/insurance model for all strata of society. • Fast growing Medical Tourism. • Evolving combo-business model of global pharmaceutical companies with both patented and generic drugs is boosting local outsourcing and collaboration opportunities. Global: Global pharmaceutical industry is going through a rapid process of transformation. The moot question to answer now is how the drug discovery process can meet the unmet needs of the patients and yet remain cost effective.

Cost containment pressure due to various factors is further accelerating this process. CRAMS business, an important outcome of this transformation process, will be the key growth driver for many Indian domestic pharmaceutical players in times to come. Bridging the ‘Trust Deficit’ is one of the key Challenges:

Like all other industries, Pharmaceutical Industry in India has its own sets of challenges and opportunities under which it operates. Some of the challenges the industry faces are:

  • Unfortunate “Trust Deficit” between the Government and the Industry to improve access to affordable modern medicines.
  • Regulatory red tape and lack of initiative towards international harmonization.
  • Inadequate infrastructure and abysmal public delivery system.
  • Lack of adequate number of qualified healthcare professionals.
  • Inadequate innovation friendly ecosystem to encourage R&D and other non-product related innovation in the pharmaceutical value chain.
  • Myopic Drug Policies have failed to deliver.
  • Addressing needs of over 350 million BPL families who cannot afford to buy any healthcare products and services.
  • ‘80% out of pocket expenditure’ of the common man towards healthcare.
  • Inadequate Public Private Partnership (PPP) initiatives in most of the critical areas of healthcare.

Urgent need to bridge the ‘Trust Deficit’ and improve public perception of the Industry:

Like many other countries of the world, in India too there is a negative public perception about the pharmaceutical industry. Recent reports on ‘clinical trials related patient’s compensation’ or the government intervention on allegedly gross ‘unethical’ marketing practices by the pharmaceutical companies, further strengthen such belief.  Unfortunately, despite meteoric success of the generic pharmaceutical industry of India in the global arena, public perception of the industry still remains as one, which is being driven by profiteering motive at the cost of the precious lives of ailing common population of the country. This is indeed acting as a strong retarding force. As a result the regulators are also compelled to introduce more of growth stifling measures at a fairly regular pace.

A new ‘Harris Poll’ conducted in the US between November 8 and 15, 2010 reports as follows:

Top industries that largest numbers of people believe should be more regulated

Industry % of respondents
Oil

47
Pharmaceuticals

46
Health Insurance

42
Tobacco

38
Banks

34
Managed Care

34

That an overwhelming 46% respondent in the US feels that the Pharmaceutical Industry should be regulated, only reflects a poor public perception of the industry in the USA.

Industries trusted by the fewest people

Industry % of respondents
Tobacco

2
Oil

4
Telecommunication

7
Managed Care

7
Life Insurance Companies

10
Pharmaceuticals

11

(Source: Harris Poll 2010) 

It is indeed an irony that a miniscule 11% respondents trust pharmaceutical industry in the USA.

Thus in the prevailing scenario globally, the Indian Pharmaceutical Industry should take more demonstrable self-regulatory measures to improve its public perception and make its growth more inclusive, in the best possible way that it can. Without active support of the government, media and other stakeholders, through conscious efforts to improve its image, all the efforts of the taskforce may ultimately get converted into a zero sum game.

Job Creation by the industry is of critical importance: Pharmaceutical sector in India has created employment for approximately 3 million people from 23,000 plus units. Accelerated growth in job creation, will not only open up more opportunities to pharmaceutical professionals, but will also fuel growth opportunities in allied business segments like Laboratory, Scientific instruments, Medical Devices and Pharma machinery manufacturing sectors.

Despite all these, it is worth noting that a major challenge still remains in getting employable workforce with the required skill sets. This issue will grow by manifold, as we move on, if adequate vocational training institutes are not put in place on time to generate employable workforce for the industry.

Government Initiatives, thus far, are still less than adequate: The government of India has started working out some policy and fiscal initiatives, though grossly inadequate, for the growth of the pharmaceutical business in India. Some of the measures adopted by the Government are follows:

  • Pharmaceutical units are eligible for weighted tax reduction at 175% for the research and development expenditure obtained.
  • Two new schemes namely, New Millennium Indian Technology Leadership Initiative and the Drugs and Pharmaceuticals Research Program have been launched by the Government.
  • The Government is contemplating the creation of SRV or special purpose vehicles with an insurance cover to be used for funding new drug research
  • The Department of Pharmaceuticals is mulling the creation of drug research facilities which can be used by private companies for research work on rent

Pharmaceutical Export going North: In recent years, despite economic slowdown in the global economy, pharmaceutical exports in India have registered a commendable growth. Export has emerged as an important growth driver for the domestic pharmaceutical industry with over 50 % of their total revenue coming from the overseas markets. For the financial year 2008-09 the export of drugs is estimated to be around US $8.25 billion as per the Pharmaceutical Export Council of India (Pharmexil). A survey undertaken by FICCI reported 16% growth in India’s pharmaceutical export during 2009-2010.

This trend needs to be encouraged and be given further boost.

Conclusion:

The newly formed taskforce will hopefully be able to address all these issues in an integrated way to guide this life-line industry to a much higher growth trajectory  to compete effectively not only in the global generic space, but also with the global innovator companies, sooner than later.

So the ball game for the taskforce is to recommend strategy and policy measures to improve access to modern medicines by reducing ‘out of pocket’ expenses significantly through public/private health insurance initiatives, protect public health interest and foster a climate for innovation, simultaneously, and certainly not one at the cost of the other.

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.