India’s Poor Forced To Swallow The Bitter Pill As Medical Inflation Nibbles At Their Life Savings 

Uttar Pradesh-based Robin Singh has been travelling to All India Institute of Medical Sciences in Delhi every day for the last one month to get his mother’s kidney disease treated. The treatment, he says, has cost him a fortune after spending on medicines and tests at different private hospitals so far without a breakthrough.

“We had already spent a lot. We do not have any more money to spend on treating her at private facilities. Everything has become so expensive,” Singh rues.

The predicament is not unique to Singh. India’s poor and middle-class have been feeling the pinch of soaring inflation, with everything—petrol, food platter and other subsequent products—becoming heavy on the pocket. Against that backdrop, if someone in the family falls ill, people are now having to dig into their life savings. 

Along with inflation in other spaces, India is also facing the burgeoning pressure of rising medical inflation. In 2021, the country registered the highest medical inflation rate among the Asian countries at 14 per cent followed by China (12 per cent), Indonesia (10 per cent), Vietnam (10 per cent), and the Philippines (9 per cent), according to the Indian Health Insurance report released by by Motilal Oswal Financial Services Limited (MOFSL) in May this year.

The cost of medical treatment in India went up by 7.21 per cent in April this year, according to data from ministry of statistics and programme implementation. From medical procedures to medicines, everything has been attracting a higher price tag.

Swallowing The Bitter Pill 

The Centre tries to control prices of essential medicines by keeping a long list of essential drugs, prices for which are linked to Wholesale price index. 

The list of drugs under price control has steadily expanded from 74 in 1995 to nearly 860 by 2019. But the ongoing bout of inflation has allowed an increase in the prices of essential drugs under the pricing formula. 

With effect from April 7 this year, the National Pharmaceutical Pricing Authority of India increased the prices of 800 essential drugs under the National List of Essential Medicines by 10.7 per cent. Essential drugs are those that are therapeutic and are used to treat common medical ailments and are available to treat patients with immediate effect. 

“Based on the Wholesale Price Index data provided by the Office of the Economic Advisor, Department for Promotion of Industry and Internal Trade, Ministry of Commerce and Industry, the annual change in the WPI works out as 10.76607 per cent during the calendar year 2021 over the corresponding period of 2020,” the body said in its memorandum. 

With that, prices of medicines like azithromycin, ciprofloxacin hydrochloride, metronidazole, paracetamol, phenobarbitone, and phenytoin sodium, used for infections, fever, skin diseases, heart diseases, anaemia and high blood pressure, have seen an upward revision. 

Bihar resident Naresh Yadav feels the pain of these revisions. Yadav, who has been grappling with the rising costs of medicines for the treatment of a family member, says that the prices of regular medicines have increased multifold. “The medicines that used to cost Rs 5 each until a few days back, now cost Rs 15. A medicine for gas is costing Rs 400 now. I am now having to pay Rs 1,500 for an ultrasound which used to cost about Rs 700 earlier,” says an agitated Yadav. 

Medical inflation is mostly due to domestic factors and started during Covid-19, says Devendra Pant, chief economist at India Ratings and Research. “After that, charges of tests, doctor consultancy fee and almost everything has gone up. Since April, prices of basic medicines have gone up. Since inflation has remained elevated for over a year, it is not cyclical in nature. Medical prices are still showing increasing trends which are unlikely to ease before a year. Inflation has become structural in nature,” says Pant. 

The MOFSL report also highlighted how medical inflation has also driven insurance companies to raise prices of both their retail and group health plans. “While new customers have been impacted by higher prices, existing customers have seen a double whammy of age-related increases as well as price hikes,” said the report. According to media reports, health insurers have upped premiums on products by 10-15 per cent. 

Like Yadav, many citizens are now having to deal with not just rising inflation but also a spike in medicinal drugs, procedures along with rising health insurance costs. 

The Marginalised Majority 

Expensive Medicines In Pharmacy Of The World 

India is the world's third- largest manufacturer of medicines by volume. Going by industry claims, the country has one of the lowest manufacturing costs globally.  With a strong network of 3,000 drug companies and about 10,500 manufacturing units, every third pill consumed in the US is manufactured in India. 

Despite all this, Indians find it difficult to afford healthcare in India. A study titled Components of Out-of-Pocket Expenditure and Their Relative Contribution to Economic Burden of Diseases in India found that around 63 percent of the total healthcare spending in India is out-of-pocket expenditure by individuals.  

This means that whether an individual has private health insurance or visits a government healthcare facility for treatment, they will have to spend a significant amount from their pocket on getting treated in the country. It’s believed that a middle class Indian is just one medical emergency away from becoming poor, as very few people in the country can afford to get treated for serious ailments without dipping into their life-long savings. 

The China Conundrum 

For a while now, India has been heavily dependent on China for the supply of raw materials, other components and ingredients, and active pharmaceutical ingredients (APIs)—chemicals responsible for the therapeutic impact of the drugs—that are required to manufacture pharmaceutical drugs.  According to a Trade Promotion Council of India report, India imported 85 per cent of its APIs from China in 2019. 

However, the rocky India-China relationship over the past two years and the subsequent ban on certain Chinese products have put the brakes on the easy availability of raw materials and APIs from China. On 26 April last year, China’s state-run  Sichuan Airlines had suspended all cargo flights carrying medical supplies to India for 15 days. According to media reports, this resulted in hoarding of important pharmaceutical raw materials. 

Delhi-based pharmacist Sanjiv Jain blames the rising price of medicines on the China import issue, apart from the increase in petrol and diesel prices that have impacted the pharmacies. Giving the example of paracetamol, Jain explains, “A few months back, there was a shortage of paracetamol tablets. The raw material, which was previously costing Rs 120 per kg, was costing Rs 1,200-1,400 per kg.” 

“Before Covid-19, companies used to import raw materials and other ingredients for the manufacturing of medicines from China at a cheaper price. Now, owing to certain government policies and a ban on Chinese products, companies are importing raw materials from countries like Sweden and Hong Kong at a higher cost. That is why the prices of medicines have also increased,” he elaborates. 

Dilip Papade, another pharmacist from Madhya Pradesh, concurs. “Since the exports from China have reduced, the prices of medicinal drugs have shot up by 20 to 25 per cent,” he says. 

During the second wave last year, prices of crucial bulk drugs used to make medicines to treat Covid-19 saw price rise in the range of 25-180 per cent, according to Indian Pharmaceutical Alliance.  

“This was especially evident during the Covid-19 pandemic. The prices of some drugs have been increased by 20 to 25 per cent. Especially the cost of essential medicines increased by 10 to 15 per cent,” Papade added. 

Another reason that adds to the cost of medical inflation in India is the choice of medicines prescribed by the doctors. “The doctors have a symbiotic relationship with the pharmaceutical brands. That’s why some doctors prescribe only branded medicines which usually have a higher price compared to the generic drug,” Jain added. 

The Medical Council of India in 2017 had mandated doctors to prescribe only generic drugs to patients, but the guideline hardly gets followed in the country. In these times of high inflation and dwindling income, one can only hope that their loved ones don’t fall ill. For the unfortunates like Singh and Yadav, one can only hope their kins get well soon.