India has put in place a US$5.4 billion policy to provide free medicine to its people, a decision that could change the lives of hundreds of millions, but a ban on branded drugs stands to cut big pharmaceuticals out of the windfall.
From city hospitals to tiny rural clinics, India’s public doctors will soon be able to prescribe free generic drugs to all comers, vastly expanding access to medicine in a country where public spending on health was just US$4.50 per person last year.
The plan was quietly adopted last year, but not publicized. Initial funding has been allocated in recent weeks, officials said.
Under the plan, doctors will be limited to a generics-only drug list and face punishment for prescribing branded medicines, a major disadvantage for pharmaceutical giants in one of the world’s fastest-growing drug markets.
“Without a doubt, it is a considerable blow to an already beleaguered industry, recently the subject of several disadvantageous decisions in India,” said KPMG partner Chris Stirling, who is European head of chemicals and pharmaceuticals.
“Pharmaceutical firms will likely rethink their emerging markets strategies carefully to take account of this development, and any similar copycat moves across other geographies,” he added.
However, the initiative would overhaul a system where healthcare is often a luxury and private clinics account for four times as much spending as state hospitals, despite 40 percent of the people living below the poverty line, or US$1.25 a day or less.
Within five years, up to half of India’s 1.2 billion people are likely to take advantage of the scheme, the government says. Others are likely to continue visiting private hospitals and clinics, where the scheme will not operate.
“The policy of the government is to promote greater and rational use of generic medicines that are of standard quality,” said L.C. Goyal, additional secretary at India’s Ministry of Health and Family Welfare and a key proponent of the policy. “They are much, much cheaper than the branded ones.”
Global drugmakers like Pfizer, GlaxoSmithKline and Merck will be hit. They spend billions of dollars a year researching new treatments and target huge growth for branded medicine in emerging economies such as India, where generics account for around 90 percent of drug sales by value, far more than in developed countries.
US-based Abbott Laboratories, which bought an Indian generics maker in 2010, is the biggest seller of drugs, both branded and generic, in India, followed by GlaxoSmithKline.
The Organisation of Pharmaceutical Producers of India (OPPI), a lobby group for multinational drugmakers in the country, argues that the price of drugs is just one factor in access to healthcare and that the scheme need not be detrimental to manufacturers of branded drugs.
“I think this will hasten overall growth of the pharmaceutical industry, as poor patients who could not afford will now have access to essential medicines,” OPPI director-general Tapan Ray said.
About 600 billion rupees (US$11 billion) in drugs are sold each year in India, or 482 billion at wholesale. Drugs covered under the new policy account for about 60 percent of existing sales, or 290 billion rupees at wholesale cost.
The government’s annual cost is likely to be lower due to bulk purchasing and because patients at private clinics would still pay for their own drugs. States will pay for 25 percent of the free drugs and New Dehli will cover the rest.
Under various existing programs, around 250 million people, or less than a quarter of India’s population, now receive free medicines, according to the health ministry.
India’s new policy, to be implemented by the end of this year and rolled out nationwide within two years, is expected to provide 52 percent of the population with free drugs by April 2017, at a cumulative cost of 300 billion rupees.
That requires a major funding ramp-up from a deficit-strapped government. The scheme has been granted just 1 billion rupees thus far from central government coffers.
Public doctors will be able to spend 5 percent of the budget, equivalent to around US$50 million a year, on drugs outside of the government’s list, on branded drugs or on medicines that are not on the list. Beyond that, they can be punished, Goyal said.
“If doctors are found to be prescribing medicines which are not on the list, or which are branded, then disciplinary action will be initiated,” he said.
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