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File photo
illustration of pills of all kinds, shapes and colours,
March 2003. (Credit:
Reuters/Jacky Naegelen/Files)
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(Reuters) -
India has put in place a $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 Pharma 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 $4.50 per person last
year.
The plan
was quietly adopted last year but not publicised. 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.
But 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 $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 the 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 (PFE.N), GlaxoSmithKline (GSK.L) and Merck (MRK.N) 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.
U.S.-based
Abbott Laboratories (ABT.N), which bought an Indian generics maker in 2010, is
the biggest seller of drugs, both branded and generic, in India, followed by
GlaxoSmithKline.
GRAPHIC:
Generics in India: link.reuters.com/sug29s
BIG PHARMA
BLUES
In March,
India granted its first ever compulsory license, allowing a domestic drugmaker
to manufacture a copy-cat version of Nexavar, a cancer drug developed by
Germany's Bayer (BAYGn.DE), unnerving foreign drugmakers that fear a lack of
intellectual property protection in emerging markets.
That
enabled India's Natco Pharma (NATP.NS) to sell its generic version of Nexavar
at 8,800 rupees per monthly dose, a fraction of the 280,000 rupees Bayer's
version cost.
In another
blow to Big Pharma's emerging market ambitions, China recently overhauled
regulations to grant authorities the power to allow domestic drugmakers to
produce cheap copies of medicines protected by patents.
Emerging
markets are on track to make up 28 percent of global pharmaceuticals sales by
2015, up from 12 percent in 2005, according to IMS Health, a healthcare
information and services company.
Most sales
in emerging markets come from branded generics, which are off-patent drugs
priced at a premium to those made by local manufacturers.
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," said Tapan Ray, director general of OPPI.
About 600
billion rupees 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 the central government will cover
the rest.
Under
various existing programmes, 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 2012 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.
STRICT
INSTRUCTIONS
Public
doctors will be able to spend 5 percent of the budget, equivalent to around $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, said
Goyal, the health ministry official.
"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.
Free
medicine is just one solution to better healthcare in India, where just getting
to a state clinic can require a long journey.
Swapnil
Yadav, who runs a clinic in Ambegaon, a village 170 km (105 miles) southeast of
Mumbai, said India should set up free drug retailers instead of government
clinics.
"Patients
can approach a private clinic and then get free medicines from government-run
medicine shops," he said.
The free
generics scheme, which mirrors policies in the states of Tamil Nadu and
Rajasthan, is expected to be fully operational by the time voters go to the
polls for the 2014 general election, when the populist Congress party will seek
a third straight victory.
Indian
makers of generics such as Dr Reddy's (REDY.NS) and Cipla (CIPL.NS) are best
placed to benefit.
"The
move will please the generics manufacturers who stand to gain substantially in
competing for contracts," said KPMG's Stirling.
(Additional
reporting by Kaustubh Kulkarni in MUMBAI and Ben Hirschler in LONDON; Editing
by Tony Munroe and Raju Gopalakrishnan)
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