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“Indian Drug Regulator Accords Primacy to Pharma Industry Instead of Safegurding Public Health and Safety” – Parliamentary Committee

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The Department Related Parliamentary Committee on Health and Family Welfare presented its 59th Report of 118 pages in total on the functioning of the Indian Drug Regulator – the Central Drug Standards Control Organization (CDSCO) in both the houses of the Parliament on May 08, 2012.

Regulations and the Regulator for the Pharmaceutical Industry of India – A snapshot:

The pharmaceutical industry in India is regulated, broadly, in the following ways:

  • Drugs and Cosmetics Act of India 1940 together with Drugs and Cosmetics Rules regulate the Pharmaceutical Industry across the country for all types of drugs, irrespective of the fact whether these are locally produced or imported from other countries of the world.
  • The office of the Drug Controller General of India (DCGI) is primarily responsible for effective enforcement of most of these laws and rules across the country.
  • All issues related to clinical trials, product approval and standards, import licenses and introduction of new drugs are the direct responsibilities of the DCGI’s office.
  • Health being a state subject in India, on the ground, Foods and Drugs Administrations (FDA) of the State Governments enforce laws related to approvals for setting up pharmaceutical production facilities and obtaining licenses to stock and sell drugs in their respective states.
  • A valid license from the Drug Regulator is necessary for location-wise manufacturing of each type of drugs in the country with a mandatory requirement of periodic renewal of such licenses, as specified therein.

A key point to ponder from the Report:

The report begins with the following observations:

Medicines apart from their critical role in alleviating human suffering and saving lives have very sensitive and typical dimensions for a variety of reasons. They are the only commodity for which the consumers have neither a role to play nor are they able to make any informed choices except to buy and consume whatever is prescribed or dispensed to them because of the following reasons:

  • Drug regulators decide which medicines can be marketed
  • Pharmaceutical companies either produce or import drugs that they can profitably sell
  • Doctors decide which drugs and brands to prescribe
  • Consumers are totally dependent on and at the mercy of external entities to protect their interests.

In this prevailing condition, the committee felt that effective and transparent drug regulation, free from all commercial influences, is absolutely essential to ensure safety, efficacy and quality of drugs keeping just one objective in mind, i.e., welfare of patients.

Quite in congruence with this critical requirement the Committee examined in detail the functioning of CDSCO, which includes the office of the DCGI, as well, to ascertain whether applicable rules and laws are being implemented efficiently and honestly for the best interest of patients by the Drug Regulator of India.

Why is the ‘Mission Statement’ of CDSCO industry oriented and not patient focused?

Very interestingly, the report highlights with the following examples, how out of line the ‘Mission Statement’ of CDSCO is as compared to the same of other countries by being blatantly industry oriented instead of safeguarding Public Health and safety:

Drug Regulator

The ‘Mission Statement’
1

CDSCO, India

 Meeting the aspirations…. demands and requirements of the pharmaceutical industry.
2.

USFDA, USA

 Protecting the public health by assuring the safety, efficacy, and security of human and veterinary drugs.
3.

MHRA, UK

 To enhance and safeguard the health of the public by ensuring that medicines and medical devices work, and are acceptably safe.
4.

TGA, Australia

 Safeguarding public health & safety in Australia by regulatingMedicines…

Consequently, the Committee took a very strong exception for such utter disregard and continued neglect of patients’ interest by the Drug Regulator of India and recommended immediate amendment of the ‘Mission Statement’ of CDSCO incorporating in very clear terms that the existence of the organization is solely for the purpose of protecting the best interest of patients and their safety. It is needless to say that thereafter, it will require stringent conformance with the same with high precision.

Some very critical findings:

The committee in its report made the following critical findings, besides others:

  • “A total of 31 new drugs were approved in the period January 2008 to October 2010 without conducting clinical trials on Indian patients.
  • Thirteen drugs scrutinized by the panel are not allowed to be sold in the United States, Canada, Britain, European Union and Australia.
  • Sufficient evidence is available on record to conclude that there is collusive nexus between drug manufacturers, some functionaries of CDSCO and some medical experts.
  • When it comes to approving new drugs, too much is left to the absolute discretion of the CDSCO officials.
  • The Central Government can either issue directions under Section 33P to states to withdraw the licenses of FDCs granted without prior DCGI approval or the Central Government can itself ban such FDCs under Section 26A.
  • Though the Ministry is forming Drug Approval Committees, which are given very important powers, there is no transparent procedure for the selection of experts of such Committees.
  • Accurate information on drugs for patients is absolutely essential to prevent inappropriate use more particularly in children, elderly, during pregnancy and lactation.
  • Due to the sensitive nature of clinical trials in which foreign companies are involved in a big way and a wide spectrum of ethical issues and legal angles, different aspects of Clinical trials need a thorough and in-depth review.”

The Report named some pharmaceutical companies:

While arriving at these points, the report indicted some pharmaceutical companies, both national and international as follows (in alphabetical order):

Company Company Company
1. Bayer 8. Lundbeck 15. Ranbaxy
2. Cipla 9. Macleods 16. Sanofi
3. Centaur 10. Mars 17. Sun Pharmaceuticals
4. Emcure 11. Merck 18. Themis
5. Eli Lilly 12. Novartis 19. Theon
6. GlaxoSmithKline 13. Pharmacia (acquired by Pfizer) 20. UCB
7. Hetero 14. Phamasset Inc. (a subsidiary of Gilead) 21. Venus

A scathing remark against CDSCO:

The report made the following scathing remarks on CDSCO in its point 2.2:

“The Committee is of the firm opinion that most of the ills besetting the system of drugs regulation in India are mainly due to the skewed priorities and perceptions of CDSCO. For decades together it has been according primacy to the propagation and facilitation of the drugs industry, due to which, unfortunately, the interest of the biggest stakeholder i.e. the consumer has never been ensured.”

Allegation of possible collusion needs to be thoroughly probed:

The report also deliberates not only on the utter systemic failure of CDSCO along with the DCGI’s office to enforce law effectively, but also towards a possible collusion between CDSCO and the pharmaceutical industry to implement a self-serving agenda by hoodwinking the system. This is a very serious allegation, which needs to be thoroughly probed and the findings of which should be made public for everybody’s satisfaction.

Parliamentary Committee Report is a ‘considered advice and of persuasive value’:

Though any report of such Parliamentary Committee has been stated to have a persuasive value and be treated as considered advice given by the Committee, which in this case is to CDSCO, DCGI, Ministry of Health and also the industry.

Some probes already initiated:

Reuters in its publication of May 9, 2012 indicated that this Parliamentary Committee Report has prompted greater scrutiny even from the US regulators, which are reportedly investigating a number of drug companies under the Foreign Corrupt Practices Act (FCPA).

Initial reports also indicate that both the Indian Government and some large international pharmaceutical companies have announced detail probe based on this report at their respective ends.

Some remedial measures - Mashelkar Committee Recommendations:

Considering all these, besides taking appropriate remedial measures related to Clinical Trials of drugs in India, it is about time to reconsider the recommendations of Dr. R. A. Mashelkar Committee on the subject and make amendments in the Act accordingly to facilitate creation of a ‘Central Drugs Authority (CDA)’ introducing, along with other measures, a centralized licensing system for the manufacture, sale, export and distribution of drugs.

Why does India need CDA?

I firmly believe that the formation of the ‘Central Drugs Authority (CDA)’ will provide the following significant benefits to the Industry and also to the Government for the best interest of public health and safety:

  1. Achieving uniform interpretation of the provisions of the Drugs & Cosmetics Act & Rules
  2. Standardizing procedures and systems for drug control across the country
  3. Enabling coordinated nationwide action against spurious and substandard drugs
  4. Upholding uniform quality standards with respect to exports to foreign countries from anywhere in India
  5. Implementing uniform enforcement action in case of banned and irrational drugs
  6. Creating a pan-Indian approach to drug control and administration
  7. Evolving a single-window system for pharmaceutical manufacturing and research undertaken anywhere in the country.

Conclusion:

As a consequence of the above report of the Parliamentary Committee identifying gross irregularities in the functioning of the CDSCO, the Minister of Health and Family Welfare (MoHFW) of India Mr. Ghulam Nabi Azad has already announced constitution of a three-member committee to probe into the matter in depth.

Following well-known experts have been named as members of this high powered committee, which will submit its report and recommendations in two months’ time:

  • Dr. V.M. Katoch: Director General, Indian Council of Medical Research (ICMR),
  • Dr. P.N. Tandon: President, National Brain Research Centre
  • Dr. S.S. Aggarwal: Former Director, Sanjay Gandhi Postgraduate Institute of Medical Sciences, Lucknow

The committee has been mandated to:

  • Examine the validity of the scientific and statutory basis adopted for approval of new drugs without clinical trials
  • Outline appropriate measures to bring about systemic improvements in the processing and grant of statutory approvals
  • Suggest steps to institutionalize improvements in other procedural aspects of functioning of the CDSCO

The outcome of the report of this high powered committee, internal probes voluntarily initiated by some pharmaceutical companies and possible implementation of the ‘Mashelkar Committee’ recommendations on the formation of CDA in the country will hopefully bring in some systemic changes in the drug regulatory system of India, for patients’ sake.

By: Tapan Ray

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

The New Drug Policy of India enters into the final lap of a Marathon Run

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Final working out and thereafter announcement of much awaited and long overdue the new ‘Drug Policy’ of India has now entered into a very interesting stage. This is mainly because of the unique combination of the following three key reasons:

1. 2002 Drug Policy was challenged in the Karnataka High Court, which by its order dated November 12, 2002 issued stay on the implementation of the Policy. This order was challenged by the Government in the Supreme Court, which vacated the stay vide its order dated March 10, 2003 but ordered as follows: “We suspend the operation of the order to the extent it directs that the Policy dated 15.2.2002 shall not be implemented. However we direct that the petitioner shall consider and formulate appropriate criteria for ensuring essential and lifesaving drugs not to fall out of the price control and further directed to review drugs, which are essential and lifesaving in nature till 2nd May, 2003”.

2. A live court case on the new draft ‘Drug Policy’ with the ‘essentiality criteria’ for price control is pending before the Supreme Court of India with its next hearing scheduled in the last week of July 2012. In this court case an independent network of several ‘Non-Government Organizations (NGOs)’ known as ‘All India Drug Action Network (AIDAN)’ is arguing against the ‘flawed’ draft ‘National Pharmaceutical Pricing Policy 2011 (NPPP 2011)’, mainly on the following grounds:

  • ‘Market Based Pricing (MBP)’ methodology calculated on the ‘Weighted Average Price (WAP)’ of top three brands, as specified in the ‘Draft NPPP 2011’ would not only lead to increase in the prices of medicines, but also legitimize higher drug prices.
  • To keep the drug prices under check effectively, the ‘Ceiling Prices (CP)’ of Medicines should be based on ‘Cost based Pricing (CBP)’ model rather than MBP.
  • Adequate control mechanism is lacking in the NPPP 2011 to prevent the manufacturer from avoiding price control by tweaking with the formulations featuring in the National list of Essential Medicine 2011 (NLEM 2011).

3. In this scenario, a Group of Ministers (GoM) of the Union Cabinet has started deliberating on this issue since April 25, 2012 taking all key stakeholders on board to give its recommendations to the Union Cabinet on the scope, form, structure and the basic content of the new Drug Policy.

The bone of contentions:

The methodology and the span of price control of the draft NPPP 2011 have still remained the key bone of contentions for the new ‘Drug Policy’ of India. Suggested three key methodologies: From the responses received on the draft NPPP 2011, it appears that following three are the  suggested key methodologies to arrive at the CP of price controlled NLEM 2011 formulations:

  • Cost Based Pricing
  • Market based pricing

-  WAP of top 3 brands             -  WAP of bottom 3 brands

  • The formula suggested by the Economic Advisory Council of the Prime Minister of lesser of (i) the price paid by the median consumer + 25% and (ii) price paid by the 80th percentile consumer.

ARGUMENTS IN FAVOR AND AGAINST OF EACH: A. Cost based Pricing: Besides AIDAN, other reported key supporters of the CBP are the Ministry of Health and All India Chemists Associations. ARGUMENTS IN FAVOR: The current drug price control regime (DPCO 1995) is based on cost-plus pricing model, where Maximum Retail Prices (MRPs) of price controlled formulations are worked out as per the formula given in ‘para 7’ of DPCO, 1995 as follows: R.P. = [M.C. +C.C. +P.M. +P.C.] x [1+MAPE/100] +E.D. Where,

  • R.P:  Retail price
  • M.C:  Material cost, including process loss
  • C. C.: Conversion cost
  • P.M: Packing material
  • P.C: Packing Charges
  • MAPE : Maximum Allowable Post manufacturing Expenses of 100 percent
  • E.D.: Excise duty

The proponents of CBP believe that it is:

  • Transparent
  • Most beneficial to the patients
  • Fair, with a decent profit margin allocation for the manufacturers

ARGUMENTS AGAINST: Many others do not believe in CBP. They argue that price-inflation of non-price controlled drugs is much less than the price-controlled ones, which clearly vindicates that market competition works better than price control of drugs and thus is more beneficial to the patients. The following table shows the trend of general inflation against the drug price inflation from 1992 to 2011 period, as follows:

Type of Inflation

Inflation (in Index)
1. General Inflation

403
2. Price-controlled molecules

151
3. Non Price-Controlled Molecules

112

(Source: IMS data, RBI CPI average yearly inflation) This school of thought quotes the example of discontinuation of manufacturing in India 29 out of 74 Active Pharmaceutical Ingredients (APIs) under DPCO 1995 due to financial non-viability on account of CBP. Moreover, CBP is considered by them as a process, which is:

  • Intrusive
  • Lacking in transparency
  • Discretionary
  • Discouraging for innovation, high quality & efficiency
  • Not followed by any major country in the world
  • Not supported by even WHO. It says other countries are moving away from Indian type of CBP

B. Market Based Pricing (MBP): MBP in general is considered by its proponents as a system which is:

  • Transparent
  • Non-Discretionary
  • Encourages growth & investment
  • Rewards innovation
  • Promotes efficiency

The two variants of MBP under discussion are:

- WAP of top 3 brands

- WAP of bottom 3 brands

ARGUMENTS IN FAVOR:

1. WAP of top 3 brands:

  • It is a transparent system and will reduce the prices of medicines
  • With adequate checks and balances in place the method will not lead to increase in prices because of the following reasons:

- All price increases are subject to WPI              – Market competition will not permit any price increases              – Companies in low-price segments will create pressure to reduce prices further

2. WAP of bottom 3 brands: This group argues that instead of WAP of top 3 brands, if the same for the bottom three brands is considered, ceiling prices will come down very significantly, benefiting patients much more than what WAP of top three brands will do.

ARGUMENTS AGAINST:

1. WAP of top three brands:

  • Would lead to overall increase in the prices of many medicines
  • Below ceiling price brands would raise their price upto the ceiling price level immediately
  • Would legitimize high drug prices

2. WAP of bottom 3 brands:

  • Not representative of the market, as only the brands with a low market presence will be considered for WAP calculations
  • The Bottom 3 priced brands factor in only ~17% of the market
  • Likely to have an adverse overall impact on patients as many small brands with lowest acceptable quality standards will be considered for WAP calculations, which may ultimately push high quality formulations out of the market.

C. Formula suggested by EAC of the Prime Minister: ARGUMENTS IN FAVOR:

Will ensures affordable drug prices for the patients by:

  • Encouraging and rewarding high market competition
  • Discouraging monopolistic or oligopolistic market situation

ARGUMENTS AGAINST:

  • EAC criteria for insufficient competition are based on the 1994 Policy
  • The situation is different today as the market has grown 9 times since then
  • The number of brands tends to be low in lower volume turnover molecule segments mainly due to low disease prevalence. Thus bringing these molecules under CBP will be irrational
  • Instead of implementing CBP where lesser number of brands exists in many generic segments, EAC formula should encourage competition even in these lower value turnover molecule segments to bring the prices further down

That said, ‘Drug Price’ has always remained one of the critical factors to ensure greater access to medicines, especially in the developing economies like India, where predominantly individuals are the payors. This point has also been widely accepted by the international community, except perhaps by the diehard ‘self-serving’ vested interests. Important Points to Ponder:

A. ‘Drug Price’ control alone can not improve access to medicines significantly:

To improve access to medicines, even the Governments in countries like Germany, Spain, UK, Korea and China have recently mulled strict price control measures in their respective countries. However, it is important to note and as we have seen above, though the drug prices are indeed one of the critical factors to improve access to modern medicines, there is a need to augment other healthcare access related initiatives in tandem for a holistic approach.

In India, we have witnessed through almost the past four decades that drug price control alone  could not improve access to modern medicines for the common man very significantly, especially in the current socioeconomic and healthcare environment of the country.

B. Taming drug price inflation only has not helped improving access to medicines:

It is quite clear from the following table that food prices impact health more than medicine costs :

Year

Pharma Price Increases

Food Inflation

2008

1.1%

5.6%

2009

1.3%

8.0%

2010

0.5%

14.4%

Source: CMIE Exploring a practical approach: Considering pros and cons of the key methodologies of price control of formulations featuring in NLEM 2011, as I had written in this blog in April 2, 2012, I would like to reemphasize that a middle path with a win-win strategy to resolve this deadlock effectively would be in the best interest of both patients and the industry alike, in the current situation. The middle path, I reckon, may be explored as follows:

  1. Calculate ‘Weighted Average Price’ for each formulation based on prices of all brands – high, medium and low, applying some realistic exclusion criteria.
  2. When inclusion criteria for price control in the draft NPPP 2011 is ‘essentiality’ of drugs, it sounds quite logical that price control should be restricted to NLEM 2011 only.
  3. Enough non-price control checks and balances to be put in place to ensure proper availability of NLEM 2011 drugs for the common man and avoidance of any possible situation of shortages for such drugs.

Conclusion:

Conforming to the directive of the honorable Supreme Court of India on price control of essential medicines in the country, the GoM should now help resolving the issue of putting in place a robust new National Pharmaceutical Pricing Policy, without further delay, taking the key stakeholders on board.

In any case, it has to be a win-win solution both for the patients and the industry alike, paving the way for improving access to modern medicines for the entire population of India, together with other strategic initiatives in this direction. This is absolutely essential, especially when medicines contribute around 72 percent of the total ‘Out of Pocket Expenses’ of the common man of the country.

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.

Increasing Healthcare Consumption in India with equity

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Along with the economic progress of India, healthcare consumption of the population of the country is also increasing at a reasonably faster pace. According to McKinsey India Report, 2007, the share of average household healthcare consumption has increased from 4 per cent in 1995 to 7 per cent in 2005 and is expected to increase to 13 per cent in 2025 with a CAGR of 9 per cent, as follows:

Share of Average Household Consumption (AHC) (%)

Household Consumption 1995 2005 E 2015 F 2025 F CAGR %
1. Healthcare

4

7

9

13

9
2. Education & Recreation

3

5

6

9

9
3. Communication

1

2

3

6

 12
4. Transportation

11

17

19

20

7
5. Personal Products and Services

4

8

9

11

8
6. Household Products

2

3

3

3

 5
7. Housing & Utilities

14

12

12

10

 5
8. Apparel

5

6

5

5

 5
9. Food, Beverages & Tobacco

56

42

34

25

3

(Source; McKinsey India Report 2007)

From this study, it appears that among all common household consumption, the CAGR of ‘healthcare’ at 9 percent will be the second highest along with ‘education’ and ‘communication’ topping the growth chart at 12 percent.

As per this McKinsey study, in 2025, in terms of AHC for ‘healthcare’ (13 percent) is expected to rank third after ‘Food & Beverages’ (25 percent) and ‘transportation’ (20 percent).

Thus, over a period of time AHC for ‘healthcare’ shows a very significant growth potential in India. Hence, this important area needs much greater attention of the policymakers to help translate the potential into actual performance with requisite policy and fiscal support/incentives.

Sectoral break-up of the Healthcare Industry:

According to IDFC Securities 2010, the sectoral break-up of the US$ 40 billion healthcare industry is as follows:

Industry

%
Hospitals

50
Pharma

25
Diagnostics

10
Insurance & Medical Equipment

15

(Source: IDFC Securities Hospital Sector, November 2010)

Therefore, as per this above report, the top two sectors of the healthcare industry are hospitals with 50 percent share and pharmaceuticals at 25 percent.

Public sector drives the healthcare expenditure in the developed countries:

Almost all OECD countries now provide universal or near-universal health coverage for a core set of health services, which are primarily funded by the public sector.

The report titled, ‘Health at a Glance 2011’ indicates that adjusted for purchasing power parity United States of America (USA) at US$ 7290 per capita expenditure on health in 2007, which is almost two and a half times more than the OECD average of US$ 2984, towers above other OECD countries. However, the same for Turkey and Mexico was less than one-third of the OECD average.

India and South East Asia are different:

Unlike OECD countries, according to the World Health Organization (WHO), in South East Asia, except Thailand and Indonesia, healthcare is primarily driven by private expenditure, as seen in the following table:

Public and Private Expenditure on Health as % of Total

Country

Public %

Private %
Laos

17.60

82.40
Cambodia

23.80

76.20
India

32.40

67.60
Philippines

34.70

65.30
Vietnam

38.50

61.50
Malaysia

44.10

55.90
Indonesia

54.40

45.60
Thailand

74.30

25.70

Source: World Health Statistics 2011, World Health Organization (WHO)

In India, the critical healthcare industry is heavily dependent on private sector investments, where the total public expenditure on health is just around one third of the country’s total expenditure for the same, though in the 12th Five Year Plan period the the government is likely to increase its health expenditure as a percentage to GDP to 2.5 percent.

Healthcare – a more sensitive sector in India:

According to an article titled, ‘Financing health care for all: challenges and opportunities’, published in ‘The Lancet’ dated February 19, 2011 ‘Out of Pocket’ expenditure on health in India (78 per cent) is one of the highest as compared to its neighboring, except Pakistan (82.5 percent). The details are as follows:

Country ‘Out of Pocket’ expenses (%)
1. Pakistan

82.5
2. India

78
3. China

61
4. Sri Lanka

53
5. Thailand

31
6. Bhutan

29
7. Maldives

14

Such a high out of pocket expenditure for health in India, makes ‘affordability’ of healthcare products and services so sensitive to all concerned.

Just Hospital oriented health insurance plans are not adequate enough:

The above article from ‘The Lancet ‘also indicates that 74 per cent of the total healthcare expenditure goes for only outpatient or in-clinic treatment of the patients. Only 26 per cent of healthcare expenditure goes for inpatient treatment in the hospitals.

Thus coverage of only expenditure towards hospitalization by the health insurance companies will not be able to provide significant benefits to most of the citizens of India.

Further, the article says that from 1986 to 2004, there has been three times increase in the average real expenditure per hospital admission, both in the government and private hospitals.

Threefold increase in the drug prices from 1993-94 to 2006-07 was mentioned as the key factor for cost escalation in the medical care in India.

Private healthcare sector needs more fiscal incentives and lesser cost of capital:

As indicated above, private healthcare players will increasingly play a very significant role to increase healthcare consumption with equitable span across the population of India. To encourage them to spread their wings in the semi-urban and rural areas of the country effectively, lucrative fiscal/ financial incentives along with the availability of low cost capital, are absolutely necessary.

It is worth mentioning that the growth of rural middle class population is now faster than ever before and much more than their urban counterpart.

Exploitation of the patients must stop:

Unfortunate and deplorable incidences of exploitation of patients, mainly by the private players, are critical impediments to foster growth in quality healthcare consumption within the country.

In this context, ‘The Lancet’, January 11, 2011 highlighted as follows:

“Reported problems (which patients face while getting treated at a private doctor’s clinic) include unnecessary tests and procedures, rewards for referrals, lack of quality standards and irrational use of injection and drugs. Since no national regulations exist for provider standards and treatment protocols for healthcare, over diagnosis, over treatment and maltreatment are common.” Prevailing situation like this calls for urgent national regulations for provider-standards and treatment-protocols, at least for the common diseases in India and more importantly their stricter implementation across the country.

UHC will significantly improve healthcare consumption:

In October 2010, the Planning Commission of India constituted a ‘High Level Expert Group (HLEG)’ on Universal Health Coverage (UHC) under the chairmanship of the well-known medical professional Prof. K. Srinath Reddy. The HLEG was mandated to develop a framework for providing easily accessible and affordable health care to all Indians.

UHC will guarantee access to essential free health services to all. However, because of the uniqueness of India, HLEG proposed a hybrid system that draws on the lessons learnt not only from within India, but also from other developed and developing countries of the world.

UHC is expected to ensure guaranteed access to essential health services to every Indian, including cashless in-patient and out-patient treatment for primary, secondary and tertiary care. All these services will be available to the patients absolutely free of any cost.

Under UHC all citizens of India will be free to choose between Public sector facilities and ‘contracted-in’ private providers for healthcare services.

It is envisaged that the people would be free to supplement the free of cost healthcare services offered under UHC by opting to pay ‘out of pocket’ or going for private health insurance schemes, as per their individual requirements.

Conclusion:

India has already been globally recognized as one of the fastest growing healthcare markets of the world. All components in the healthcare space of the country including hospital and allied services are registering sustainable decent growth, riding mainly on private investments and now fueled by various government projects, such as:

  1. National Rural Health Mission (NRHM)
  2. National Urban Health Mission
  3. Rashtriya Swasthya Bima Yojana (RSBY)
  4. Universal Health Coverage (UHC)
  5. Free Medicine from the Government hospitals
  6. Centralized procurement by both the Central and the State Governments

Supported by newer, both public and private initiatives, like:

  • Increase in public spending on healthcare from 1.0 per cent to 2.5 per cent of GDP in the 12th Five Year Plan period
  • Increasing participation of the private players in smaller towns and hinterland of the country
  • Wider coverage of health insurance
  • Micro-financing
  • Greater spread of telemedicine
  • More number of mobile diagnosis and surgical centers

All these interesting developments adequately fueled by rising income levels and improving access to healthcare though albeit slowly at present, equitable consumption of healthcare in India, I reckon, is expected to improve by manifold in the years ahead, despite shrill voices of  naysayers of vested interests, orchestrated many a times from 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 – Young Today, Old Tomorrow: Emerging Issues of Aging, Health and Socioeconomic Profile of the Country

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‘World Health Day’ is celebrated every year on April 7, the day ‘World Health Organization (WHO)’ was founded in 1948.

Each year, on this day, people from all walks of life across the globe are invited by WHO to focus on a particular emerging health challenge of global relevance, which becomes the theme of the ‘World Health Day’ for the year.

In 2012, the theme for this day was, “Aging and health: Good health adds life to years”. It focuses on how good health throughout the life span can help the senior citizens to lead a full and productive life and in turn makes them valuable and experienced resources not just to their respective families, but also to the societies and communities they belong to.

Aging affects all:

The process of aging, without any exception, affects the entire population, young or old, male or female, rich or poor, alike, across the world and is considered as one of the key factors of social transformations through the passage of time.

With the advancement in medical science coupled with increasing social awareness for living a healthy life, the average life expectancy of the population in the 20th century reportedly increased by around 30 years in the developed world and is expected to maintain similar growth trend in the 21st century, as well.

Now, with an increasing life expectancy even in the developing world, the issue is assuming greater magnitude and at a much faster pace.

In the language of Steve Jobs:

Steve Jobs, the global icon and the former CEO of Apple Inc., during his commencement speech to Stanford in 2005, very aptly articulated as follows:

“No one wants to die. Even people who want to go to heaven don’t want to die to get there. And yet death is the destination we all share. No one has ever escaped it. And that is, as it should be, because Death is very likely the single best invention of Life. It is Life’s change agent. It clears out the old to make way for the new. Right now the new is you, but someday not too long from now, you will gradually become the old and be cleared away. Sorry to be so dramatic, but it is quite true.”

In a normal situation old age precedes death and just like the inevitability of death, everybody, even a baby born today will need to embrace the old age before being cleared away by death. Thus, as the population will age as a natural process, there will be growing need to make even the old age more meaningful. Sounds like a tall call, but quite pertinent indeed.

Although, an average elderly person of today is much healthier than of the past generations, they will still need appropriate health management and social security plans, especially for an emerging economy, like India.

World population aging faster:

Population Division of the Department of Economic and Social Affairs of the United Nations in its publication titled, “World Population Aging:  1950-2050”, described the trend of ageing of the global population and highlighted the following:

  • Population aging is unprecedented : This is unparallel in human history and the current century will witness even more rapid aging than the previous one.
  • Population aging is pervasive:  It is affecting every man, woman and child across the world, though currently it is at different stages of progress in different countries.
  • Population aging is enduring:  The world will not return to the young populations of our ancestors.
  • Population aging has profound implications:  It affects many facets of lives of human beings.

Increasing burden of disease:

The burden of some serious age related diseases increases by manifold as the life progresses towards its ‘twilight zone’. Even now, the treatment costs and overall burden of age related diseases, both in the developed and the developing countries, are escalating in an alarming proportion.

Age related diseases:

According WHO, in the industrialized countries over 75 percent of deaths in people of over 65 years of age are due to cancer, cardiovascular and cerebrovascular diseases, in addition to disabilities like, loss of bone density leading to osteoporosis.

As per published reports, the incidence of age related Alzheimer’s disease, which is now incurable, will almost double every 20 years to reach around 66 million in 2030 and over 115 million in 2050.

Research for delaying the onset:

Reuters in an article titled, “Is aging a disease?” published in May 20, 2010 reported that many scientists from various parts of the world are now studying the genetic mechanisms of the old persons to help delay, if not overcome, the onset of diseases like Alzheimer’s, cancers, diabetes, cardiovascular ailments and many other age-related illnesses to help leading a better quality of life during old age of the human population.

Elderly population and the impact:

As per an estimate of the United Nations (UN), there will be around 1200 million people over 65 years of age by 2025. Currently, from across the world millions of aging people are denied of proper health care for various reasons. The situation in India is much worse.

It is envisaged by many that failure, either on the part of the Government or society at large, to address this critical issue today, could have a snowballing effect tomorrow.

In Japan, currently half of the national health budget is spent on the elderly individuals, which constitute around a whopping 23 percent of the country’s population. According to another estimate of the Japanese Government, by 2055 half of their total population will constitute of retired senior citizens.

India:

With over 65 percent of the population of India being now below 30 years of age, the country is  well poised to have one of the largest numbers of young and productive population in the world, though 7 percent of country’s 1.13 billion people are now over 60 years of age and the number is growing.

The Median Age of the population will keep on increasing over a period of time as follows:

Aging Profile: India and other countries

Year 2000 2015 2025 2030 2035 2040 2050
Median Age–India 23.4 27.2 30.3 31.4 33.5 35.0 37.9
Median Age–World 26.4 29.5 31.9 33.0 34.0 34.9 36.8
Median Age–More Developed Regions 37.3 41.2 43.3 44.2 45.0 45.4 45.2
Median Age–Less Developed Regions 24.1 27.5 30.0 31.2 32.4 33.5 35.7
Median Age–Least Developed Regions 18.1 19.6 21.2 22.2 23.3 24.5 27.1

(Source: Population Division, Department of Economic and Social Affairs, United

Nations Secretariat)

Growth of elderly population is much faster than the population:

As as per the paper titled, “Implications of an Aging Population in India: Challenges and Opportunities” presented at ‘The Living to 100 and Beyond Symposium’ of the Society of Actuaries in Orlando on January 12–14, 2005, the Indian population has approximately tripled during the last 50 years, but the number of elderly Indians has increased more than fourfold.

Assuming continuation of this trend, the United Nations have predicted that the Indian population will again grow by 50 percent in the next 50 years, with the elderly population recording another fourfold growth.

Changing demographic profile:

The situation in India, therefore, by no means is a trivial one and needs to be addressed with a right earnest and sooner, mainly because of the changes in the demographic profile of the country, as follows:

Projected Changes in Indian Demography (in Million)

Age Group

2000

2015

2025

2030

2035

2040

2050
0-14 Years

347

345

337

327

313

300

285
15-59 Years

593

782

865

895

919

937

938
>60 Years

77

119

167

195

223

248

308
Total

1,017

1,246

1,369

1,417

1,455

1,485

1,531

(Source: Population Division, Department of Economic and Social Affairs, United Nations Secretariat)

Thus, over a period of time in India, increasing number of less productive elderly people and the declining trend of the younger population, could adversely impact the overall socioeconomic profile and and the disease burden of the nation.

Conclusion:

In India, there has been hardly any support in terms of social security, especially for a vast majority of people, who are unable to work after becoming senior citizens of the country.

In a situation like this, the Government of India, civil society and the private sector enterprises of the country should work in tandem to give shape to appropriate policy measures to effectively address the issues of the increasing number aging population of the country, over a period of time.

This is necessary not just for the socioeconomic reasons, but also to arrest any significant increase in the overall disease burden of the nation with its possible adverse impact on the growing economy of the country.

Continuing lack of interest to work out a long term social and policy measures to address the important issues related to population aging in India, in a holistic way, could significantly impede the pace of economic growth of the country, celebration of the ‘World Health Day’ on April 7, 2012 notwithstanding.

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.

Balancing Strong IP Protection, Public Health Safeguards and Declining R&D Productivity – A Crafty Gutsy Ball Game

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Pharmaceutical innovation has always been considered the lifeblood for the pharmaceutical industry and very rightly so. However, many studies do point out that such innovation has benefited the developed world more than the developing world.

Product Price and Access:

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”.

While the Trade-Related Aspects of Intellectual Property Rights Agreement (TRIPS) of the World Trade Organization (WTO) sets out minimum standards for the patent protection for pharmaceuticals, it also offers adequate safeguards against negative impact of patent protection or its abuse in terms of extraordinary and unjustifiable drug pricing. The levels of these safeguards vary from country to country based on the socio-economic and political requirements.

The Doha Declaration:

Many independent experts in this field consider the Doha Declaration as an important landmark for recognizing the primacy to public health interest over private intellectual property and the rights of the members of WTO to use safeguards as enumerated in TRIPS, effectively.

To protect public health interest and extend access to innovative medicines to majority of their population whenever required, even many developed/OECD countries do not allow a total freehand for the patented products pricing in their respective countries.

Early signals of global empathy:

While expressing similar sentiment ‘The Guardian’ reported that Andrew Witty, the global CEO of GlaxoSmithKline, has decided to slash prices on all medicines in the poorest countries, give back profits to be spent on hospitals and clinics and more importantly share knowledge about potential drugs that are currently protected by patents.

Witty further commented that he believes, drug companies have an obligation to help the poor patients getting appropriate treatment and reportedly challenged other pharmaceutical giants to follow his lead.

An interesting study:

A study titled, ‘Pharmaceutical innovation and the burden of disease in developing and developed countries’ of Columbia University and National Bureau of Economic Research, to ascertain the relationship across diseases between pharmaceutical innovation and the burden of disease both in the developed and developing countries, reported that pharmaceutical innovation is positively related to the burden of disease in the developed countries but not so in the developing countries.

The most plausible explanation for the lack of a relationship between the burden of disease in the developing countries and pharmaceutical innovation, as pointed out by the study, is weak incentives for firms to develop medicines for the diseases of the poor.

Point – Counterpoint:

A contrarian view to this study argues that greater focus on the development of new drugs for the diseases of the poor should not be considered as the best way to address and eradicate such diseases in the developing countries. On the contrary, strengthening basic healthcare infrastructure along with education and the means of transportation from one place to the other could improve general health of the population of the developing world quite dramatically.

The counterpoint to the above argument articulates that health infrastructure projects are certainly very essential elements of achieving longer-term health objectives of these countries, but in the near term, millions of unnecessary deaths in the developing countries can be effectively prevented by offering more innovative drugs at affordable prices to this section of the society.

A solution emerging:

Responding to the need of encouraging pharmaceutical innovation without losing focus on public health interest, in 2006 the ‘World Health Organization (WHO)‘ created the ‘Inter-governmental Working Group on Public Health, Innovation and Intellectual Property (IGWG)‘. The primary focus of IGWG is on promoting sustainable, needs-driven pharmaceutical R&D for the diseases that disproportionately affect developing countries.

Declining R&D productivity:

Declining R&D productivity adds another dimension to this raging debate with a snowballing effect, as it were.

Over a period of decades, the business models for small-molecule based blockbuster drugs have successfully catapulted the global pharmaceutical business to a high-margin, dynamic and vibrant industry. However, a time has now come when the golden path from the ‘mind to market’ of the drug discovery process is becoming increasingly arduous and prohibitively expensive.

Deploying expensive resources to discover a New Chemical Entity (NCE) with gradually diminishing returns in the milieu of very many ‘me too’ types of new drugs, does no longer promise a strong commercial incentive.

The impact of the above scenario also gets reflected in the status of International patent filings under the Patent Cooperation Treaty (PCT) of the ‘World Intellectual Property Organization (WIPO)’ as follows:

A. Last five years, PCT filings:

The last five years’ PCT filing status does not seem to be encouraging either.

Year

PCT Filings

Change %

2007

159,926

2008

163,240

2.1

2009

154,406

(5.4)

2010

164,316

6.4

2011

181,900

10.7 *(E)

* Estimate

B. Country-wise PCT Filing in 2011:

While having a closer look at the data, it becomes quite evident that in terms of percentage increase in the PCT filings two Asian countries, China and Japan, have registered their overall dominance. However, in terms of absolute number USA still ranks first.

County

No. Of PCT Filings

% Increase

USA

48,596

8

China

16,401

33.4

Japan

38,888

21

Germany

18,568

5.7

South Korea

10,447

8

C. Technical-field-wise PCT Filing in 2011:

In terms of the technical fields, pharmaceuticals ranked fifth in 2011.

Rank

 Industry

No. Of PCT Filings

1.

 Electrical Machinery, Apparatus, Energy

11,296

2.

 Digital Communication

11,574

3.

 Medical technology

10,753

4.

 Computer technology

10,455

5.

 Pharmaceuticals

7,683

6.

 Organic fine chemistry

5,283

7.

 Biotechnology

5,232

D. Biotech/Pharma companies featuring in WIPO’s Top 100 filers list:

Very few biotech and pharmaceutical companies featured in the Top 100 PCT filers’ list of WIPO as follows:

Company
1. Procter & Gamble
2. Sumitomo Chemical
3. DuPont
4. Dow Global
5. Novartis AG
6. Roche
7. Merck GmbH
8. Sanofi-Aventis GmbH
9. Bayer CropScience AG

E. The top five university PCT filers in 2011:

Universities of the US dominated among the PCT filings by the Academic institutions as follows:

University

No. Of PCT Filings
University of California, US

277
Massachusetts Institute of Technology, US

179
University of Texas System, US

127
Johns Hopkins University, US

111
Korea Advanced Institute of Science and Technology, South Korea

103

Need to encourage pharmaceutical innovation:

Based on the WIPO data, as mentioned above, the current status of the global pharmaceutical innovation does not seem to be very encouraging.

That said, in the environment of declining R&D productivity of the global pharmaceutical industry, there is indeed a strong requirement to encourage pharmaceutical innovation across the globe, based on the socio-economic environment of each country, together with adequate safeguards in place to protect public health interest.

Why protect patent?

The pharmaceutical major Eli Lilly has very aptly epitomized the reason for patent protection in their website called ‘LillyPad’, as follows:

“Pharmaceutical companies continue to invest in innovation not only because it is good for business, but it is what patients expect. If we want to continue to have breakthrough products, we need patent protection and incentives to invest in intellectual property.  The equation is simple, patents lead to innovation – which help lead to treatments and cures”.

Conclusion:

Currently, various socio-economic expectations, demands and requirements, not just for the poor, but also of the powerful growing middle class intelligentsia are gradually getting unfolded on this subject from many parts of the globe. These collective demands cannot be either wished away or negotiated with a strong belief that the future should be a replication of the past.

There should be full respect, support and protection for innovation and the product patent system in the country. This is essential not only, for the progress of the pharmaceutical industry, but also to alleviate sufferings of the ailing population, effectively.

At the same time, available indicators point out that the civil society would continue to expect in return just, fair, responsible and reasonably affordable prices for the innovative medicines, based on the overall socio-economic status of the local population. Some experts have already opined that prices of life saving innovative drugs, unlike many other patented products, will no longer remain ‘unquestionable’ in increasing number of countries.

Thus, even at the time of declining pharmaceutical R&D productivity, striking a right balance  between a strong patent regime and safeguarding overall health interest of its population, particularly of those with a very high ‘out of pocket’ expenditure towards healthcare, will indeed be a crafty gutsy ball game for a country.

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.

Are Preventive Medicines always cost effective to be an area of focus in healthcare management?

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American Board of Preventive Medicine defines ‘Preventive Medicine’ as follows:

“Preventive Medicine is the specialty of medical practice that focuses on the health of individuals, communities, and defined populations. Its goal is to protect, promote, and maintain health and well-being and to prevent disease, disability and death.”

The most basic examples of preventive medicines are known to be hand washing, breast feeding and immunization.

Simple preventive measures, such as, increasing awareness against tobacco smoking, misuse of alcohol or unprotected sex, especially in an emerging economy like India, will go a long way to prevent and control such habit related diseases, help saving significant expenditure of the nation towards healthcare.

The purpose:

The primary purpose of preventive medicines could well have dual objectives as follows:

  • Disease prevention of a large section of the population
  • Reduce the healthcare expenses

Primary, secondary and tertiary prevention:

As stated above, primary disease prevention usually would include vaccination against specific disease types, whereas secondary and tertiary prevention are usually done through early detection process and screening of the target population.

Relevance to chronic diseases:

A World Health Organization (WHO) report, titled, “Preventing Chronic diseases – a vital investment” argues that globally of the 58 million deaths in 2005, approximately 35 million were due to chronic diseases, which were expected to increase by 17% in the next 10 years thereafter.

It points out that 80% of all premature heart disease, stroke and diabetes are preventable. This assumes greater significance as 80% deaths due to chronic disease occur in low and middle income nations where most of the world population lives, against only 20% of the same in the high income countries.

The report, therefore, articulates that it is absolutely necessary for the countries to review and implement a comprehensive and integrated preventive public health strategy.

Regular preventive measures:

Experts recommend following regular preventive measures, which are very relevant to India:

  • Counseling on hygienic life style
  • Routine primary vaccinations
  • Counseling on quitting smoking, alcohol misuse, protected sex, losing weight, eating healthy food, treating depression etc.
  • Regular general health check-up
  • Cancer screenings like mammograms and colonoscopies

Immense potential in India:

In a country like India, with high prevalence of many preventable diseases involving a large section of the nation’s population, preventive medicine promises immense potential to reduce the healthcare expenditure of the country significantly and at the same time would promise a much better quality of life to its population.

A counter point:

Another school of thought, primarily US based, advocates that preventive medicines, on the contrary, would raise the healthcare expenditure.

  • Preventive Medicine increases healthcare cost:

In support of this contrarian view, a paper published in ‘The New England Journal of Medicine (NEJM)’ on February 14, 2008 based on 599 studies between 2000 and 2005 infers that though disease prevention in some cases may reduce the cost of healthcare, more preventive medicines in many cases could, in fact, increase  the overall healthcare expenditure.

  • Screening cost is more than savings:

It says that screening cost of a disease for a large section of the population may far exceed the savings from treatment avoidance in those cases where only a small part of the population would have become ill in the absence of preventive measures.

  • Treatment with medicine offers greater value:

The article also points out that:

“The drugs used to treat high cholesterol yield much greater value for the money, if the targeted population is at high risk for coronary heart disease, and the efficiency of cancer screening can depend heavily on both the frequency of the screening and the level of cancer risk in the screened population.”

  • Preventive medicine more expensive:

The authors argue that preventive medicine will be more expensive where to make a small populations free from a particular disease, preventive measures are taken involving a large population, most of whom even otherwise would not have suffered from that illness.

Conclusion:

Coming back to the WHO report which categorically says, contrary to the belief of some section of the society, especially in the USA that measures for control and prevention of chronic diseases are really not too expensive for any nation, not even for the low and middle income countries.

In reality, even chronic diseases can be prevented and effectively controlled to reduce the disease burden of any country very significantly. The WHO article also says that expensive patented medicines are no longer required for prevention of, for example, even cardiac ailments. The cheaper generic drugs, if used along with counseling on life style changes, will be quite affordable to a vast majority of population even in the middle and low income countries.

Weighing all pros and cons, WHO aims to reduce the death rates from all chronic diseases by 2% per year through preventive medicines, which would mean prevention of 36 million deaths due to chronic disease by 2015, mostly in the low and middle income countries.

These statistics will more than vindicate the argument that preventive measures and medicines are cost effective, in the long run for any nation, particularly for a country like 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.

Healthcare Industry of India: Being catapulted from a labyrinth to an accelerated growth trajectory

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As reported by the ‘World Health Statistics 2011′, India spends around 4.2 percent of its Gross Domestic Product (GDP) on health, which is quite comparable with other BRIC countries like, China and Russia.This has been possible mainly due to increasing participation of the private players in the healthcare sector.

The following table will highlight this point:

Health Expenditure:

Type Brazil Russia India China
Exp. on Health (% of GDP)

8.4

4.8

4.2

4.3
Govt. Exp. on Health  (% of Total Exp. on Health)

44

64.3

32.4

47.3
Pvt. Exp. on Health      (% of Total Exp. on Health)

56

35.7

67.6

52.7
Govt. Exp. on Health    (% of Total Govt. Exp.)

6

9.2

4.4

10.3
Social Security Exp. on Health (% of General Govt. Exp. on Health)

-

38.7

17.2

66.3

However, the following healthcare indicators suggest quite clearly that the total expenditure on healthcare by a country is not always directly proportional to its health outcome. This holds good for many countries across the world, including the USA, as the overall healthcare system  and more importantly its cost effective delivery mechanism are the key determinants of success:

Health Indicators:

Type Brazil Russia India China
Life Expectancy at birth

73

68

65

74
Neonatal Mortality Rate  (Per 1000)

12

06

34

11
Infant  Mortality Rate MDG 4  (Per 1000)

17

11

50

17
Maternal   Mortality Rate MDG 5(Per 1000,000 birth)

58

39

230

38

Source: World Health Statistics 2011

Fueled by the increasing participation of private players, coupled with a hefty hike in public expenditure on health to 2.5 percent of GDP during the 12th Five Year Plan Period, the Indian healthcare sector, currently at US$ 65 billion, is expected to reach US$ 100 billion by 2015 (Source: Fitch), increasing the total spend of the country on health to around 6.8 percent of GDP during this period.

The expenditure towards healthcare infrastructure is expected to grow by 50 percent from its 2006 number to reach US$ 14.2 billion in 2013, as reported by KPMG.

Growth Drivers:

The key growth drivers are expected to be as follows:

  • A hefty hike in Government expenditure as a percentage to GDP for health
  • 1% of the growing population coming above the poverty line every year
  • Growing middle class population
  • Increasing incidence of non-infectious chronic illnesses and other life style diseases
  • Reasonable  treatment costs due to intense competition and government intervention on health related issues
  • Large public healthcare projects like, National Rural Health Mission (NRHM), National Urban Health Mission (NUHM), ‘Universal Health Coverage’, distribution of free medicines through Government hospitals
  • Expansion of Rashtriya Swasthya Bima Yojana (RSBY)
  • Increasing penetration of private health insurance
  • Increasing direct procurement of medicines both by the Central and also the State Governments
  • A boom in medical tourism

The basic Challenge:

Following areas will throw a tough challenge for a sustainable growth in healthcare:

  • To reach a doctor population ratio of 1 doctor and 2.3 nurses per 1000 population by 2025 from the current 0.06 doctors and 1.3 nurses.
  • To reach a ratio of 2 beds per 1000 population by 2025 from the current 1 bed, which means India would require creating additional 1.75 million beds by that time.
  • An investment of US$ 86 billion will be needed to achieve 1 doctor, 2 beds and 2.3 nurses per 1000 population by 2025
  • Although the health insurance had a penetration to a meager 2.3 percent of the population in 2007, the sector is expected to cover just around 20 percent of the population by 2015 (Source: ICRA).

Key Developments:

  • As per the Rural Health Survey Report 2009 of the Ministry of Health, the rural healthcare sector in the country is registering an appreciable growth with the addition of the following during the last five years:

-     15,000 health sub-centers

-     20, 107 primary health centers

-     28,000 nurses and midwives

  • According to a report by research firm RNCOS, the health insurance premium is expected to grow at a CAGR of over 25 per cent from 2009-10 to 2013-14.
  • India will curve out a share of 3 percent of the global medical tourism industry (Source:RNCOS)
  • Medical technology industry of India is expected to reach US$ 14 billion by 2020 from US$ 2.7 billion in 2008, according to a report by PwC.
  • E-healthcare in rural areas is gaining popularity with the involvement of both public and private players like, ISRO, Mazumdar Shaw Cancer Center and Narayana Hrudayalaya. Some telecom companies like, Nokia and BlackBerry are also contemplating to extend the use of mobile phones for remote disease monitoring as well as diagnostic and treatment support. Introduction of 3G and in the near future 4G telecom services will further enhance opportunities of e-healthcare through mobile phones.
  • Expansion of major healthcare players in tier-II and tier-III cities of India like, Apollo, Narayana Hrudayalaya, Max Hospitals, Aravind Eye Hospitals and Fortis will help improving access to affordable healthcare in the smaller places, significantly.

Examples of expansion in smaller places:

According E&Y report of November 2010, following key players are expanding their presence in tier II and tier III cities, besides metro and tier I cities:

Company No. Of beds

Presence
Apollo Hospitals Enterprise Ltd 8,500 Chennai, Madurai, Hyderabad, Karur, Karim Nagar, Mysore, Visakhapatnam, Bilaspur, Aragonda, Kakindada, Bengaluru, Delhi, Noida, Kolkata, Ahmedabad, (Mauritius), Pune, Raichur, Ranipet, Ranchi, Ludhiana, Indore, Bhubaneswar, (Dhaka, Bangladesh)
Aarvind Eye Hospitals 3,649 Theni, Tirunelveli, Coimbatore, Puducherry, Madurai, Amethi, Kolkata
CARE Hospitals 1,400 Hyderabad, Vijaywada, Nagpur, Raipur, Bhubaneshwar, Surat, Pune, Visakhapatnam
Fortis Healthcare Ltd 5,044 Mumbai, Bengaluru, Kolkata, Mohali, Noida, Delhi, Amristar, Raipur, Jaipur, Chennai, Kota
Max Hospitals 800 Delhi and NCR
Manipal Group of Hospitals +7,000 Udupi, Bengaluru, Manipal, Attavar, Mangalore, Goa, Tumkur, Vijaywada, Kasaragod, Visakhapatnam

Source: E&Y, November 2010

Healthcare sector is attracting FDI:According to the Department of Industrial Policy & Promotion (DIPP), the healthcare sector is undergoing significant transformation and attracting investments not only from within the country but also from overseas.The Cumulative FDI inflow in the healthcare sector from April 2000 to November 2011, as per DIPP publications, is as follows:

Sector FDI inflow (US$ million)
Hospital and diagnostic centers 1100
Medical and surgical appliances 472.6
Drugs and pharmaceuticals 5,033

(Source: Fact Sheet on FDI (April 2000 to November 2011), DIPP)

Government Policy:

Government has also started focusing on increasing investments towards creation of a sustainable medical infrastructure, especially in the rural areas. The following policy initiatives could help facilitating this process:

  • 100 per cent FDI for health and medical services.
  • Allocation of US$ 10.15 billion to the National Rural Health Mission (NHRM) for upgradation and capacity building of rural healthcare facilities.
  • Allocation of US$ 1.23 billion to create six AIIMS type medical institutes and upgradation of 13 existing Government Medical Colleges.

Overseas players started participating:

BCG Group will open shortly a multidisciplinary health mall that would provide a one-stop solution for all healthcare needs starting from doctors, hospitals, ayurvedic centers, pharmacies including insurance referral units at Palarivattom in Kochi, Kerala. BCG’s long-term plan, as reported in the media, is to set up a health village spanning across an area of a 750,000 sq. ft. with an estimated cost of US$ 88.91 million.

Along the same line, to set up more facilities for diagnostic services in India, GE Healthcare reportedly has planned to invest US$ 50 million for this purpose.

Examples of initiatives by State Governments:

In southern India, the Government of Andhra Pradesh has implemented a Health Management Project funded by the Department for International Development (DFID) of the UK costing US$ 59.68 million. It has been reported that many other State Governments of India are planning to go for similar Health Management models in their respective States.

Improving access to modern medicines in India:

Ten year CAGR in terms of volume of the domestic pharmaceutical industry has been around 15 percent, which clearly signals significant increase in the consumption of medicines, leading to their improving access to the general population of both rural and urban India.

Extension of focus of the Indian pharmaceutical Industry, in general, to the fast growing rural markets further vindicates this point.

The rate of increase in access to medicines may not be directly commensurate to the volume growth of the industry during this period, but a major part of the industry growth could certainly be attributed towards increasing access to medicines in India, which should cover over 60% of the population of the country, by now.

Unfortunately, even the Government of India does not seem to be aware of this gradually improving trend of access to medicines in the country. Official communications of the government still quote the outdated statistics of 1998 (published in 2004), which states that 65% of the population of India does not have ‘Access to Modern Medicines’ even today. No wonder, why many of us still prefer to live on to our past.

Conclusion:

Be that as it may, around 40% of the population still does not seem to have adequate ‘Access to Medicines’ in India. This issue though attracted attention of the policy makers, has still remained mostly unresolved and needs to be addressed following a holistic approach with the newer plans.

A robust model of healthcare financing for all socioeconomic strata of the society with plans  like, ‘Universal Health Coverage’ and continuous improvement of healthcare infrastructure and   delivery systems, as are now being planned by the astute brain trusts of India, are expected to bring significant reform in the healthcare space of India.

Let us also note at the same time that all these are happening, despite shrill voices of naysayer vested interests, continuously projecting to many of us a stagnant, dismal and never improving healthcare scenario of the country, more often than not.

Very fortunately, from an unenviable labyrinth, healthcare industry of India, at last, seems to be on the threshold of being catapulted to a higher growth trajectory riding on a decent number of both public and private initiatives, never than ever before.

Unless it is so, why will the healthcare players from across the world keep on increasing their operational focus, in every way, on India and China?

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.