19 June 2017 Business Cover Story

Popping The Right Pill?

After controlling stent prices, the Modi government is preparing to take on expensive branded drugs with generic medicine stores across India
Popping The Right Pill?
Photograph by Tribhuvan Tiwari

India’s booming pharma sector is a global star. Its ability to produce cheap branded and unbranded generics, much of it exported, has earned India the tag of being the ‘world’s pharmacy’. For instance, 92 per cent of HIV/AIDS medicines supplied globally are made in India. A third of the generic medicines sold in the US are from Indian manufacturers. Homegrown pharma has also helped make healthcare affordable in some of the poorest nations, across communicable and non-­communicable diseases.

In sharp contrast to this success story, affordable healthcare is still beyond the reach of millions of Ind­ians. According to the 71st round of the National Sample Survey 2014, the latest round on healthcare for which data are available, nearly 57 per cent of rural Indians avoid seeking medical advice when needed because they can’t afford the costs. Among urban Indians, the figure is even higher: 67 per cent. The survey also revealed that in rural areas, spending on prescription medicines accounted for 72 per cent of a household’s healthcare costs, the highest among BRICS countries. Average out-of-pocket healthcare spending accounts for 69 per cent of the total health expenditure in India, which is higher than most of India’s neighbours, including Thailand (25%), China (44%) and Sri Lanka (55%).

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Into its third year in office, the Modi government has now turned its attention to healthcare with a slew of proposals to promote generic drugs across both the public and private healthcare-delivery platforms. Though questions have already been raised on the feasibility, the department of pharmaceuticals (under the ministry of chemicals and fertilisers) and the health ministry are making coordinated efforts to ensure that at least the public healthcare delivery system completely shifts to generics.

Generics are drugs whose patents have expired or lapsed and, therefore, they can be freely produced by any manufacturer. They could still be sold under a brand name, but since there are no active intellectual property rights owners, they are way chea­per. To keep the drugs cheap, Indian patent laws recognise patents for drug-­making processes rather than the end products. Since the 1970s, ­this has enabled ­pharma companies to engage in ­“reverse engineering” of paten­ted drugs and produce them through slightly different processes.

Under the WTO TRIPS (Trade-­Related Aspects of Intellectual Property Rights) agreement, India has also negotiated a ‘compulsory licence’ facility, which permits local companies to produce generic copies of foreign drugs for domestic use and also export. The Modi government now wants pharma manufacturers that have benefited from these traditional policy frameworks to augment the supply of cheap drugs domestically for the poor.

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On paper, the plan to push generics looks ambitious. According to a calculation by the pharma department, out-of-pocket healthcare expenses on medicines could come down by as much as half if generics get prescribed in 23 therapeutic areas. This could be big savings for nearly 600 million health-insecure Indians. “If a middle-class family spends Rs 3,000 on a month’s supply of medicines for chronic problems, we want to bring that down to Rs 1,500,” says chemicals and fertilisers minister Ananth Kumar.

At 10 per cent, the prevalence of substandard drugs was higher in government ­hospitals and health ­department stores than in private pharmacies (3%).

The changes being planned span both the health ministry and the pharma department; while the health ministry regulates drugs, the pharma ministry oversees drug pricing. To push generic drugs down the supply chain, the government is looking at a countrywide network of drug stores called Jan Aushadhi Kendras, under a ­revamped scheme called Pradhan Mantri Bharatiya Jan Aushadi Pariyojana. The first of these stores had been launched in 2008 by the then UPA government, but failed to achieve much success.

Kumar gives an illustration of the cost advantage. A blister pack of 10 tablets of glimepiride 2 mg, a diabetes drug, costs up to Rs 50 or more. At these generic drug stores, the minister says, it would be available for Rs 5. The Modi government wants to launch 3,000 stores by end of 2017, setting a turnover target of Rs 60 crore. The idea is to have a drug distribution network across the country for good quality and cheap medicines—something similar to the public distribution network for subsidised ration. “This is the Modi government’s biggest scheme in healthcare,” the minister says.

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The health ministry has also been asked to push a key amendment to Drug and Cosmetics Act in the next Parliament session. As the law ­currently stands, a pharmacist is bound to provide exactly the same branded or unbranded drug that is written on a prescription. The amendment being pushed will allow pharmacists to ­suggest cheaper alternatives, such as a generic, an official said on the ­condition of anonymity.

The other key change is that central government doctors must only write generics, while private doctors will have to mention the generic version alongside the brand. The Modi govern­ment has already gone into a social ­media overdrive to publicise the gene­ric scheme. Kumar says Modi wants the scheme to become a mass movement.

To open a store, NGOs or self-help groups as well as pharmacy graduates will have to sign up with the Bureau of Pharma PSUs of India, which functions under the pharma department and will offer discounts and incentives under a business model. For example, a franchise agent will be paid an upfront margin of five per cent, excluding taxes on invoice, and an incentive of 1.5 per cent on total monthly sales beyond Rs 7.5 lakh for supplying to a minimum of 10 stores. This will be in addition to a one-time grant of Rs 2.5 lakh to anybody who opens a store. MoUs have already been signed with 18 states to set up such stores. The idea is to eventually have a Jan Aushadhi store in every village block. Currently, 30,000 applications are being processed.

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Modi’s popular appeal may well spur a rush to open these stores. They could result in social benefits of lower medicine costs, but experts say it will be no panacea to the problems of poor healthcare delivery in India. By concentrating on bringing down medicine costs through generics, say critics, the government is overlooking the main problem: low public health expenditure. India spends a paltry 1.3 per cent of its GDP on healthcare, one of the lowest in the world.

“It does make a lot of economic sense when you consider there will be a positive policy bias for the local generic industry vis-à-vis branded manufacturers. What befuddles me is that the generic industry can hardly support the kind of demand,” says Ruis Sanjuan of the Goa-based Alliance for Health Action. Agrees S. Srinivasan of the Baroda-based LOCOST (Low Cost Standard Therapeutics), a group that promotes generics. “It seems like a hare-brained idea considering that 90 per cent of the pharma market is branded,” he says. “How can 10 per cent generics do the job for you?”

Srinivasan, who also leads the All India Drug Action Network, an advocacy for rational drug use, believes the government ignored key issues such as fixed dose combinations, which will be difficult to prescribe with generics. “India’s current drug price control policy covers only about 12 per cent of the drug market—the main reason why medicines are unaffordable and would continue to be unaffordable. India is the diabetes capital of the world and most anti-diabetics are outside price control. Imagine!” says Srinivasan. “The other big worry is quality.” Several Indian generic manufacturers and exporters have received a spate of regulatory red flags from agencies such as the US Food and Drug Administration (FDA). In January 2014, the FDA suspended imports from all Indian plants of Ranbaxy Laboratories Ltd. Sun Pharmaceutical Industries Ltd, Wockhardt Ltd and Dr Reddy’s Laboratories have also faced product recalls at various points of times.

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According to the National Drug Survey 2016, the latest available, about three per cent of drug samples collec­ted from private retail pharmacies were found deficient in quality. At 10 per cent, the prevalence of substandard drugs was alarmingly higher in government hospitals and health dep­artment stores. Studies have shown that a substandard drug may not cure diseases and even result in drug resistance.

So, while a switch to generics may offer substantial social benefits, here’s the catch. Of the 10,000 Indian generic manufacturers, only 400 currently conform to WHO-GMP (WHO Good Manufacturing Practices). There’s a minefield out there to watch out for.

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