Tag Archives: long

Pharma Sales Post Covid-19 Lockdown

Posted on by
Reply

Disruptions from Covid-19 pandemic have caused limited access to physicians for Pfizer’s marketing and sales teams have had. If ‘the novel Coronavirus pandemic hamstringing the company’s sales team,’ there could be a slowdown in new prescriptions and a sales hit in the second quarter, said the global CEO of Pfizer, on April 28, 2020. He further said, ‘new prescriptions for a range of its products will decline as patients continue avoiding in-office physician visits.’

Pfizer is not only the company facing such situation. In fact, the entire pharma industry is encountering a tough headwind for the same reason. However, being very specific on the quantum of sales hit – on the same day, ‘Merck, with a heavy presence in physician-administered drugs’, predicted an adverse impact of US$ 2.1Billion on sales, from COVID-19.

Physical absence of, virtually the entire pharma field force in the field for strict compliance of social distancing during the lockdown period, causing a crippling effect on the new prescription demand generation activity. This possibility was hardly imagined by anyone in the industry. Which is why, the current situation is too challenging for pharma sales and marketing leadership teams to respond, with a sustainable strategic approach. Moreover, most of them don’t yet seem to be accustomed with charting any pivotal demand generation activity, sans field force.

Further, the meaning of ‘Patient-Centricity’ in the post lockdown period – still maintaining ‘social distancing’ norms, is expected to undergo considerable changes. This may include development of newer health care practices for many customers, which they started practicing during the lockdown period. However, no one can exactly predict, as on date, whether such changes will continue for a long term, as we move on. In this article, I shall deliberate on a likely scenario in the pharma selling space post Covid-19 outbreak, based on research studies. This is primarily because Covid-19 could be with us for a long time.

Covid-19 could be with us for a long time:

As reported, on the day 35 into the world’s largest lockdown, India, reportedly, was failing to see an easing of new cases similar to what hot spots such as Spain and Italy have recently experienced with more intensive Covid-19 outbreaks. Even today, the scale and duration of the pandemic are very uncertain, so will be the necessity of maintaining social or physical distancing guidelines. This possibility gets vindicated by what the Director General of the World Organization said on April 22, 2020: ‘Make no mistake: we have a long way to go. This virus will be with us for a long time.’ Thus, shutdowns in different forms, is expected to continue for some time in India.

‘Covid-19 pandemic to last for minimum two years’ with its consequent fallout also on the pharma industry:I

Interestingly, ‘India began its containment measures on March 25, when its outbreak showed only 564 cases.’ As on May 03, 2020, the recorded Coronavirus cases in India have sharply climbed to 39,980 and 1,323 deaths. India is now expected to prepare exiting the 54-day lockdown in phases from May 17, 2020, with a few limited relaxations even before that date. However, as the BBC news of April 9, 2020 also points out, the country may not afford to lift the lockdown totally – everywhere, for everyone and for all the time, anytime soon, for obvious reasons.

The April 30, 2020 report from the Center for Infectious Disease Research and Policy at the University of Minnesota, confirms this situation. It says: ‘The Coronavirus pandemic is likely to last as long as two years and won’t be controlled until about two-thirds of the world’s population is immune.’ This is because of the ability to spread from asymptomatic people, which is harder to control than influenza, the cause of most pandemics in recent history. Thus, the Coronavirus pandemic is likely to continue in waves that could last beyond 2022, the authors said.

Many countries around the world are already facing similar issues for exiting Covid-19 lockdown. It has been observed that easing the lockdown is a tricky policy choice, as it triggers a fresh wave of infection, as recently happened in advanced countries, such as, Singapore and several other nations.

It is, therefore, clear now that shutdowns need to continue in different forms in India as different waves of Covid-19 infections strike, in tandem with scaling up of requisite testing and health infrastructure to manage those outbreaks, effectively.  Consequently, its impact on the pharma industry is likely to continue with its unforeseen fallout, prompting the same old question, yet again, why the oldest commercial model remains pivotal in the pharma industry.

The oldest commercial model remains pivotal in the pharma industry:

About a couple of years ago from now, an interesting article of IQVIA, titled, ‘Channel Preference Versus Promotional Reality,’ highlighted an important fact. It said, one of the oldest commercial models of using medical or sales representatives to generate product demand through personal communication with each doctor, and other key stakeholders, is still practiced in the pharma industry, both as a primary medium and also to communicate the message.

The same model continues in the pharma industry, regardless of several fundamental challenges in the business environment. Curiously, erosion of similar models in many other industries, such as financial and other services, in favor of various highly effective contemporary platforms, is clearly visible. Some of these fundamental challenges involve an increasing number of both, the healthcare professionals and also patients they treat, moving online.

This has been happening since some time – long before Covid-19 outbreak. Today, many patients want contemporary information on the disease-treatment process, available alternatives and the cost involved with each. These patients also want to communicate with their peers on the disease for the same reasons, before they take a final decision on what exactly they would like to follow. A similar trend is visible, at a much larger scale, with medical professionals, including top drug prescribers.

Healthcare customers’ increasing digital preference was captured well before the Covid-19 outbreak:

The rise of digital communication as a global phenomenon, was deliberated in the June 04, 2019 ‘Whitepaper’ of IQVIA, titled ‘The Power of Remote Personal Interactions.’ It captured an increasing digital preference of healthcare customers much before Covid-19 outbreak. For example, according to IQVIA Channel Dynamics data1, there was a 26 percent decline in total contact minutes for face-to-face detailing in Europe, since 2011.

Another 2018 IQVIA survey reported, 65 percent to 85 percent of representatives were saying that access to physicians is becoming harder. The paper also indicated that the rise of digital and multichannel communication with healthcare professionals has been far from uniform across countries, with Japan leading the world, followed by the United States.

India is an emerging power in the digital space, today. Thus, I reckon, it has immense opportunity to leverage digital platforms in healthcare, especially to effectively address the current void in the demand generation activity of drug companies. The key question that needs to be answered: Are pharma customers developing new habits during, at least, the 54-day national lockdown period?

‘It takes about 18 days to 254 days for people to form a new habit’:

According to a study, titled ‘How are habits formed: Modelling habit formation in the real world,’ published on July 16, 2009, in the European Journal of Social Psychology, it takes anywhere from 18 days to 254 days for people to form a new habit. Thus, changing preferences of many healthcare consumers, including doctors and patients, at least, in the 40-day period of national lockdown in India, may trigger a change in habits of many patients. This change may further evolve over a period a time.

Such changes would demand a new and comprehensive ‘Patient-Centric’ approach from pharma players, as well, having a clear insight on the dynamics of the changes. Gaining data-based insight on the same, pharma sales and marketing leadership would need to develop a grand strategy to deliver ‘patient-group’ specific desired outcomes. One of these approaches could be, triggering non-personal sales promotion on digital platforms.

Triggering non-personal sales promotion on digital platforms:

Dealing with future uncertainty calls for non-conventional and innovative strategies, such as, generating brand prescription effectively even without personal promotion. Thus, to tide over the current crisis, triggering non-personal sales promotion on digital platforms, appears to be the name of the game. In a 2018 IQVIA survey, looking at the multi-channel landscape in life sciences, 54 percent of the 250 respondents from pharma and biotech were found already using virtual interactions, such as e-Detailing, or were planning to assess the approach.

What is required now is to rejuvenate the initiative, with a sense of great urgency. Covid-19 pandemic has the possibility and potential to expedite a strong pull in this direction, responding to a new ‘customer-centric’ approach, as prompted by the evolving scenario, triggered during the 54-day long stringent lockdown period. This is especially considering the fact that it takes about 18 days to 254 days for people to form a new habit.

Further, as Bloomberg reported on May 02, 2020, “coming up with a vaccine to halt Covid-19, in a matter of months isn’t the only colossal challenge. The next big test: getting billions of doses to every corner of the world at a time when countries increasingly are putting their own interests first,” which may take quite time.

Conclusion:

One thing for sure, the sudden outbreak of Covid-19 pandemic has made all ongoing and robust strategic business plans somewhat topsy-turvy. Most pharma companies were compelled to floor the break-pedal of several business operations, including prescription demand generation activity of field sales forces, during the lockdown period.

At this time, many healthcare consumers, including patients, tried various remote access digital platforms to continue with their treatment or for a new treatment of common ailments, besides procurement of medicines. Two primary drivers, in combination with each other, prompted those individuals to try out the digital mode. One, of course, the stringent lockdown norms, and the other being the fear of contracting Covid-19 infection, if the prescribed personal distancing standards are breached – just in case.

This position may lead to two possibilities – one, involving the patients and the doctors and the other, involving field staff/doctors/hospitals/retailers, etc. During, at least, the 54-day long lockdown period, if not even beyond May 17, 2020 – those patients may develop a sense of convenience with the digital platforms. This may lead to a new habit forming, which has the potential to create a snowballing effect on others – through word-of-mouth communication. The process may signal a shift on what ‘Patient-Centricity’ currently means to the pharma players.

The other one, I reckon, involves with the continuation of strict social or physical distancing norms for an indefinite period. This could seriously limit field-staff movement and meeting with the doctors, hospitals/retailers, besides many others, and more importantly would lead to a significant escalation of cost per call. The question, therefore, is: Will pharma selling remain as before, post Covid-19 lockdown? Most probably not. If so, a new task is cut out, especially for the Indian pharma leadership team, to chart a new ‘Patient-Centric’ digital pathway, in pursuit of sustainable business excellence.

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.

Family owned pharma business: Separate ownership from management for long term organization interest

Posted on by
Reply

A study recently conducted by ‘ASK Investment Managers’ reported, “Family Owned Businesses (FOB)” account for 60% of market cap among the top 500 companies in India and comprise 17% of the IT Industry, 10% of refineries, 7% of automobiles and 6% of telecom, in the country. Within the domestic pharmaceutical sector similar percentage, I reckon, will be much higher.

July 31, 2011 edition of  ‘The Times of India’ published an article titled, “Keep dynasties out of India Inc.” The article described the dynastic management succession of India Inc. as:

“Family-run businesses in India have rudimentary succession plans. Most follow a set formula: the heir receives an MBA from a good American university, joins the family business in mid-management, rises rapidly up the ranks and eventually takes the top job”.

Many, however, believe that, especially, for medium to large Indian companies, the financial interest of the owners will be better served if they separate ownership from management, as we find even today that just below the founder Chairman, many big Indian corporations like, Reliance, Tata, Aditya Birla Group, Godrej and even Dabur, are run by strong team of professionals.  However, such a scenario has not emerged in the domestic pharmaceutical industry of India, not just yet.

In this context, it is worth mentioning that while interacting at a CII event in New Delhi on April 9, 2011, Mr. Adi Godrej, Chairman of Godrej Group said:

“I expect that my successor will be someone from the family. Though the heads of the Group Companies are all professionals… If a family member is to be chosen, external assessment is also very important.”

On a different note, Mr. Rahul Bajaj, Chairman of Bajaj Group had earlier announced that their businesses will continue to be managed by Bajaj family members.

This brings us to the moot question, ‘is there any institution more enduring or universal than a family business?’  Before the multinational corporations, there were FOBs. Before the Industrial Revolution, there were FOBs. Before the enlightenment of Greece and the empire of Rome, there were FOBs.

However, with today’s fast changing corporate business dynamics, the same question haunts again, ‘will the FOBs prevail in this new millennium, as well?
Families are the developmental foundation for new business and future prosperity:
In many of the most productive countries, like, the United States, Germany, Spain and China, to name just a few, families control up to 90 percent of the businesses and contribute more than 50 percent of the gross domestic product. In the emerging economies, families are the developmental foundation for new business and future prosperity. Until now, the focus on ensuring prosperity through family businesses was to help them preserve wealth and survive from one generation to the next. But with changing times, the families have come to understand the requirements for long-run growth and productivity that can generate prosperity for many generations to come. A critical facet of all thriving businesses and growing economies is no secret entrepreneurship.
Need to differentiate between a family and business interest: Even in India a large number of businesses are owned and managed by families, which though always may not be considered as a weakness, as long as the families are able to:
• Differentiate between a family and business interest • Bring in a strategic focus in business, instead of trying to do everything that appears lucrative • Strike a right balance between their short and long term strategic business goals with a sharp customer focus • Build a human capital for the organization and appoint the best professionally-fit person for the key positions • Decentralize the decision making process with both authority and accountability. (Unfortunately many Indian entrepreneurs still feel that an organization can be termed as a professional one just by hiring outside professionals and keeping all major decision making authority within the family and close friends) • Institute good corporate governance within the organization.

In India, almost all of the domestic Pharmaceutical companies are family run:
Almost hundred percent of the domestic Pharmaceutical companies in India are currently family run. As most of these companies started showing significant growth only after 1970, we usually see the first or second generation entrepreneurs in this family run businesses. In most of these companies, ownership is well defined and has been very clearly established. Unfortunately, in few others, internal squabbles within the family members, make the Board of Directors irrelevant and consequently seem to be on a disastrous tail spin.

The most successful Indian Pharmaceutical Company, so far, with global foot prints is Ranbaxy. Unfortunately, in the very early third generation of entrepreneurship, the business was sold off to Daichi-Sankyo, probably for some very valid business reasons.
Even in the second generation of entrepreneurship, we have witnessed some well known Pharmaceutical Companies, like Glenmark, Elders etc. getting split up between brothers. Perhaps in future we shall see more of such splits and consolidations.
What could possibly be the reason of such changes within the family managed Indian Pharmaceutical Business? Could it be due to an overlap between family and business interests? Could it be that a professional manager at the helm, devoid of the concerned business family interest and reporting to a professional board of directors could have managed the business better? Is it then an issue of business leadership? Most probably it is.
‘Family Councils’ or ‘Super Board’?
Many ‘family owned’ companies in India irrespective of the types of business, after the organization attains a critical mass, create an informal or even formal “Family council” consisting of the family members. The “Family Councils” act as a primary link between the business family and the Board. They also play a key role in the appointments of the Board Members, the CEO and his direct reports.
Some feel that these ‘Family Councils’ with the sweeping decision making authority at the highest level that they have vested on themselves, could at times tend to act as a ‘Super Board’. When it happens, it seriously impedes the independent functioning of the Board, which may in turn prove to be counter- productive to overall governance of the business.
The situation could get further complicated, if there is a discord within the members of these all-powerful “Family Councils.”
Should a family business be professionalized in true sense?
Let us now try to deliberate, if the family decides to hand over the reign of business to a professional CEO, reporting directly to a professional board of directors, while retaining majority of voting rights, how could the family address this situation?
It is reported that at the close of 2007, the Chairman of Eli Lilly & Co. said publicly what many industry observers have been saying privately for some time, “I think the industry is doomed if we don’t change”. The accompanying statistics painted a grim picture of the traditional big pharma business model going from blockbuster to bust. The old business model – sprawling organizations, enormous capital investments, and spiraling costs, underwritten by a steady stream of multibillion blockbuster products – is simply no longer feasible.
In search for a new and more viable business models, some boards of directors have been selecting CEOs of substantially different backgrounds to lead their companies through the current industry crisis.
It’s a bold new direction and being adopted by a number of leading companies. However, entails significant risk that boards should fully understand and take steps to mitigate.
The family run Pharmaceutical Companies in India should take a note of the changing dynamics of the professionally managed global pharmaceutical business while selecting the helmsman and may wish to get some message out of those newer trends, as and when they would decide to pass on the baton to a professional CEO reporting directly to a well competent professional board of directors.
Changing dynamics of the Big Pharma . . .
Although some global pharmaceutical companies are still following the traditional succession planning model, many leading pharmaceutical companies have started adopting different new models for succession planning. I have tried to classify those models into 4 categories, as follows:
GenNext Insiders: Preferring to seek leaders with pharma experience but with new perspectives, some boards have selected youthful industry insiders to take the reins:
• GlaxoSmithKline, Europe’s largest drug maker, has designated Andrew Witty to succeed Jean-Pierre Garnier as chief executive officer in May 2008. At 43, the new CEO, who has been with the company since 1985, will be its youngest-ever leader.
• One month before Witty took over at Glaxo, Severin Schwan, 40, became the youngest-ever CEO of Roche Holding AG, where he has spent his entire career.
Dare Devils: Other boards, also seeking the combination of pharmaceutical experience and new perspectives, have sought industry insiders from functions that don’t ordinarily lead to the top job:
• In 2006, Pfizer named Jeffrey Kindler, the company’s general counsel, to succeed Henry McKinnell. Kindler in his rather short tenure as the head honcho of the company, oversaw the company’s mega cquisition of Wyeth. However, in mid December,  2010 Jeffrey Kindler retired, rather all of a sudden, reportedly not being able to cope with the work pressure and Pfizer veteran Ian Read, Head of its Biopharmaceutical operations, immediately assumed the role of President, CEO and  director in the Board of the Company.

• James M. Cornelius, who was named CEO of Bristol-Myers Squibb in September 2006, spent 12 years as CFO of Eli Lilly.
Youthful Outsiders: Pursuing a leadership model that represents both the promise of youth and of outside perspectives, some companies have selected young leaders from other industries, initiating them into the pharma industry and then promoting them to CEO:
• In 2000, Thermo Electron (now Thermo Fisher Scientific) named as COO the then 41-year-old Marijn E. Dekkers, who had previously held several executive positions at Honeywell International, and who became CEO of Thermo in 2002.
• In 2007, Novartis brought 47-year-old Joseph Jimenez aboard to lead the Novartis Consumer Health Division and named him CEO of Novartis Pharmaceuticals shortly after. He brought with him extensive experience in consumer products at ConAgra, Clorox, and Heinz.
Seasoned Outsiders: Although a 50-something executive from outside the industry would offer an attractive combination of an established record of leadership and fresh perspectives, this model has rarely been tried. The scarcity of examples is surprising, given that such a strategy is less risky than bringing in youthful outsiders, and I expect to see this new model adopted in upcoming nominations.
Enabling it to work… One will observe that the risk in all of these new representations is high but doing nothing is inherently riskier. In the meantime, I would recommend that Indian Pharmaceutical Companies who may contemplate to examine one of these models should try to explore the following three steps to ensure long-term success:
1. Employ the most sophisticated assessment techniques available:
In all four versions, the most difficult challenge is evaluation of talent.
GenNext Insiders lack the extensive leadership background that might indicate how well they will perform over the long term.
Dare Devils are difficult to assess for competencies they’ve rarely been required to exhibit.
Youthful Outsiders not only lack extensive leadership backgrounds but also pose the question of how well their talents will apply to pharma.
Seasoned Outsiders pose the same challenge.
Arguably, these new leadership models have expanded the pool of potential CEO candidates, but they clearly require boards to exercise great diligence in assessment.
2. Continually plan for succession:
After installing a new CEO, the Indian entrepreneur along with its professional Board of Directors shouldn’t assume that the company is set for the next five to ten years. In the event that the new leader fails to produce over the first 24-36 months, the board should have a Plan B already in place, as the markets will not be as patient. Defining skill sets, aligning search committees, and recruiting a new leader takes time, and the average length of CEO tenure continues to shrink. Thus through ongoing succession planning, the board can be ready for any eventuality. It is wise to engage in constant succession planning at the top in any industry, but it’s essential in an industry searching for fundamental shifts in its business models, through new leadership.
3. Create a talent pool:
For an Indian Pharmaceutical Company, in a short span – the search for CEO talent will become even more challenging. The professional board of directors will understand this today and insist that their companies take action to create a talent bench now, by bringing in executives from other industries and providing them with development plans that can potentially lead to the top job. Stakeholders and markets are unlikely to wait patiently for success in this period of profound transformation in the industry. Whichever leadership models the boards will choose, they should take every precaution to get it right the first time.
Family-run Indian Pharmaceutical Businesses will now face even a more challenging future:
The glorious history of the family run Indian Pharmaceutical Business will now face even a more challenging future. The valor and resolve of these entrepreneurs would be tested by the product-patent regime, the ever evolving product portfolios, the environment of intense competition and consolidations.
Crossing the second generation of a ‘family-run’ business is critical:
In most of the family-run pharmaceutical businesses, successfully crossing the second generation of promoters appears to be critical for the ongoing success of the organizations. A large majority of family-run pharmaceutical businesses in India is still run by the first generation of promoters. Those companies, including very large ones like Ranbaxy or even the medium to smaller size promoter driven pharma businesses, who are or were with their second generation of promoters, had faced or could face their own problems in various areas including the ownership issues or in passing on the baton to a competent successor. In that process some of these very successful companies have even changed hands.
In addition, some other well-reputed promoter driven pharmaceutical businesses are ‘going south’ in their business performance, mostly because the second generation of promoters are not collectively pulling on to the same direction and in that process creating confusion within the management of the organization. Upcoming third generation, though not yet ready to run the businesses, tend to throw their weight in the critical decision making process, endangering very survival of the business. This could put the organization in a difficult to control deadly ‘tail-spin’, as it were.
Conclusion:
In a situation like this, with increasing global business opportunities, together with the new IPR regime, Indian Pharmaceutical entrepreneurs should separate the ‘business interest’ from the ‘family interest’, appoint a professional CEO, reporting directly to a competent and professional board of directors, to face squarely the “Challenge of Change” and be accountable to deliver the agreed deliverables to the stakeholders of the business.

A fair and transparent succession model is a crucial element of good corporate governance in the family run pharmaceutical businesses in India, just as any other industry sectors. Someone in this context said, “the market is a ruthless arbiter: it will reward companies that rise above family’.

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.

Path-breaking medicines are just not enough… a comprehensive healthcare reform in India is long overdue

Posted on by
Reply

The Prime Minister of India, Dr. Manmohan Singh reiterated the following in his speech at the 30th Convocation of PGIMER, Chandigarh on November 3, 2009:

”As in economics, so as in medicine too, it is easy to get lost in high level research and forget the ground realities. A common perception among the public is that institutions running with public money end up as ivory towers. It is widely felt that the poor and under-privileged sections of our population do not have adequate access to the health care system. The system needs structural reforms to improve the quality of delivery of services at the grass-root level. It has to be more sensitive to the needs of our women and children. We must also recognize that a hospital centered curative approach to health care has proved to be excessively costly even in the advanced rich developed countries. The debate on health sector reforms is going on in US is indicative of what I have mentioned just now. A more balanced approach would be to lay due emphasis on preventive health care”.

Some key research findings on ‘Public Health’:

Interesting research studies on public health highlight two very interesting points:

- Health of an individual is as much an integral function of the related socio-economic factors as it is

influenced by the person’s life style and genomic configurations.
- Socio-economic disparities including the educational status lead to huge disparity in the space of healthcare.

WHO ranking of the ‘World’s Health Systems’:

The WHO ranking of the ‘World’s health Systems’ was last produced in 2000. This report is no longer produced by the WHO due to huge complexity of the task.

In this interesting report, the number one pharmaceutical market of the world and the global pioneer in pharmaceutical R&D, the USA features in no. 37, Japan in no. 10, UK in no.18 and France tops the list with no.1 ranking. Among emerging BRIC countries, India stands at no. 112, Russia in no.130 and China in no. 144.

In a relative yardstick, although India scored over the remaining BRIC countries in year 2000, one should keep in mind that China has already undertaken a major healthcare reform in the last year. Early this year, we all have seen how President Obama introduced a new healthcare reform for the USA, despite all odds. India’s major reform in its healthcare space is, therefore, long overdue.

Details of WHO ‘World’s Health Systems’ ranking of the countries are available at the following link:

http://www.photius.com/rankings/healthranks.html

No need to reinvent the wheel:

When we look at the history of development of the developed countries of the world, we observe that all of them had invested and are continuously investing to improve the social framework of the country where education and health get the top priority. Continuous reform measures in these two key areas of any nation have proved to be the key drivers of economic growth. This is a work in continuous progress. Recent healthcare reforms both in China and the USA will vindicate this argument. In India we, therefore, do not require to reinvent the wheel, any more.

It has been observed that reduction of social inequalities ultimately helps to effectively resolve many important healthcare issues. Otherwise, the minority population with adequate access to knowledge, social and monetary power will always have necessary resources available to address their concern towards healthcare, appropriately.

Path breaking medicines are just not enough:

Regular flow of newer and path breaking medicines in India to cure and effectively treat many diseases, have not been able to eliminate either trivial or dreaded diseases, alike. Otherwise, despite having effective curative therapy for malaria, typhoid, cholera, diarrhea/dysentery and venereal diseases, why will people still suffer from such illnesses? Similarly, despite having adequate preventive therapy, like vaccines for diphtheria, tuberculosis, polio, hepatitis and measles, our children still suffer from such diseases.

Reducing socio-economic inequalities is equally important:

All these continue to happen in India, over so many decades, because of socio-economic considerations, as well. Thus, together with comprehensive healthcare reform measures, time bound simultaneous efforts to reduce the socio-economic inequalities will be essential to achieve desirable outcome for the progress of the nation.

Proper focus on education is critical for a desirable health outcome:

Education is of key importance to make any healthcare reform measure to work effectively. Very recently we have witnessed some major reform measures in the area of ‘primary education’ in India. The right to primary education has now been made a fundamental right of every citizen of the country, through a constitutional amendment.

As focus on education is very important to realize the economic potential of any nation, so is equally relevant in the healthcare space of the country. India will not be able to realize its dream to be one of the economic superpowers of the world without a sharp focus and significant resource allocation in these two critical areas – Health and Education, simultaneously.

Progress in the healthcare space of India:

It sounds quite unfair, when one comments that nothing has been achieved in the area of healthcare in India, as is usually done by vested interests with a condescending attitude in various guises. Since independence, India has made progress, may not be highly significant though, with various government sponsored and private healthcare related initiatives, as follows:

- Various key disease awareness/prevention programs across the country, for both communicable and non-communicable diseases.
- Eradication of smallpox
- Excellent progress in polio eradication program
- Country wide primary vaccination program
- Sharp decline in the incidence of tuberculosis
- Significant decrease in mortality rates, due to water-borne diseases.
- Good success to bring malaria under control.
- The mortality rate per thousand of population has come down from 27.4 to 14.8 percent.
- Life expectancy at birth has gone up to 63 years of age.
- Containment of HIV-AIDS
- India has been recognized as the largest producers and global suppliers of generic drugs of all categories and types.
- India has established itself as a global outsourcing hub for Contract Research and Contract Manufacturing Services (CRAMS).
- The country has now been globally recognized as one of the fastest growing emerging markets for the pharmaceuticals

New healthcare initiatives in India:

There are various hurdles though to address the healthcare issues of the country effectively, but these are not definitely insurmountable. National Rural health Mission is indeed an admirable scheme announced by the Government. Similar initiative to provide health insurance program for below the poverty line (BPL) population of the country, is also commendable. However, effectiveness of all such schemes will warrant effective leadership at all levels of their implementation.

Per capita public expenditure towards healthcare is inadequate:

Per capita public expenditure towards healthcare in India is much lower than China and well below other emerging countries like, Brazil, Russia, China, Korea, Turkey and Mexico.

Although spending on healthcare by the government gradually increased in the 80’s overall spending as a percentage of GDP has remained quite the same or marginally decreased over last several years. However, during this period private sector healthcare spend was about 1.5 times of that of the government.

It appears, the government of India is gradually changing its role from the ‘healthcare provider’ to the ‘healthcare enabler’.

High ‘out of pocket’ expenditure towards healthcare in India:

According to a study conducted by the World Bank, per capita healthcare spending in India is around Rs. 32,000 per year and as follows:

- 75 per cent by private household (out of pocket) expenditure
- 15.2 per cent by the state governments
- 5.2 per cent by the central government
- 3.3 percent medical insurance
- 1.3 percent local government and foreign donation

Out of this expenditure, besides small proportion of non-service costs, 58.7 percent is spent towards primary healthcare and 38.8% on secondary and tertiary inpatient care.

Role of the government:

In India the national health policy falls short of specific and well defined measures.

Health being a state subject in India, poor coordination between the center and the state governments and failure to align healthcare services with broader socio-economic developmental measures, throw a great challenge in bringing adequate reform measures in this critical area of the country.

Healthcare reform measures in India are governed by the five-year plans of the country. Although the National Health Policy, 1983 promised healthcare services to all by the year 2000, it fell far short of its promise.

Underutilization of funds:

It is indeed unfortunate that at the end of most of the financial years, almost as a routine, the government authorities surrender their unutilized or underutilized budgetary allocation towards healthcare. This stems mainly from inequitable budgetary allocation to the states and lack of good governance at the public sector healthcare delivery systems.

Encourage deep penetration of ‘Health Insurance’ in India:

As I indicated above, due to unusually high (75 per cent) ‘out of pocket expenses’ towards healthcare services in India, a large majority of its population do not have access to such quality, high cost private healthcare services, when public healthcare machineries fail to deliver.

In this situation an appropriate healthcare financing model, if carefully worked out under ‘public – private partnership initiatives’, is expected to address these pressing healthcare access and affordability issues effectively, especially when it comes to the private high cost and high quality healthcare providers.

Although the opportunity is very significant, due to absence of any robust model of health insurance, just above 3 percent of the Indian population is covered by the organized health insurance in India. Effective penetration of innovative health insurance scheme, looking at the needs of all strata of Indian society will be able to address the critical healthcare financing issue of the country. However, such schemes should be able to address domestic and hospitalization costs of ailments, broadly in line with the health insurance model working in the USA.

The Government of India at the same time will require bringing in some financial reform measures for the health insurance sector to enable the health insurance companies to increase penetration of affordable health insurance schemes across the length and the breadth of the country.

A recent report on healthcare in India:

A recent report published by McKinsey Quarterly, titled ‘A Healthier Future for India’, recommends, subsidizing health care and insurance for the country’s poor people would be necessary to improve the healthcare system. To make the healthcare system of India work satisfactorily, the report also recommends, public-private partnership for better insurance coverage, widespread health education and better disease prevention.

Conclusion:

In my view, the country should adopt a ten pronged approach towards a new healthcare reform process:

1. The government should assume the role of provider of preventive and primary healthcare across the nation to ensure access to healthcare to almost the entire population of the nation.

2. At the same time, the government should play the role of enabler to create public-private partnership (PPP) projects for secondary and tertiary healthcare services at the state and district levels.

3. The issue of affordability of medicine can best be addressed by putting in place a robust model of healthcare financing for all sections of the population of the country. Through PPP a strong and highly competitive health insurance infrastructure needs to be created through innovative fiscal incentives.

4. These insurance companies will be empowered to negotiate all fees payable by the patients for getting their ailments treated including doctors/hospital fees and the cost of medicines, with the concerned persons/companies, with a key objective to ensure access to affordable high quality healthcare to all.

5. Create an independent regulatory body for healthcare services to regulate and monitor the operations of both public and private healthcare providers/institutions, including the health insurance sector.

6. Levy a ‘healthcare cess’ to all, for effective implementation of this new healthcare reform process.

7. Effectively manage the corpus thus generated to achieve the healthcare objectives of the nation through the healthcare services regulatory authority.

8. Make this regulatory authority accountable for ensuring access to affordable high quality healthcare services to the entire population of the country.

9. Make operations of such public healthcare services transparent to the civil society and cost-neutral to the government, through innovative pricing model based on economic status of an individual.

10. Allow independent private healthcare providers to make reasonable profit out of the investments made by them

By Tapan Ray

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