India’s Health Conundrum: Price Control, Generics and Patents

Earlier this year (2012), the Indian patent office coerced Bayer AG to give the licence for its kidney and liver cancer medicine – Nexavar – to Cipla. It was a very disturbing judicial precedent for the future of entry of the pharmaceuticals in India.

Cipla has recently cut the price of its generics – including the one for Nexavar – by 75%.

It is great for the poor and middle class who cannot afford the drug for cancer treatment – not just in India but many countries of Asia and Africa, which is Cipla’s market. But it is a danger sign for many world class pharma companies.

India could be a $17.5 bn market for pharmaceuticals. But would it? There are many ifs.

In the continuation of the market reforms, price controls for the drugs were relaxed such that only 20% of all drugs are under the Government price control regime.

As per one proposal this year by the Government, the number of drugs under price control could be as high as over 65% (2/3rds)!

A sign that India may be going back to old control regime? And the accompanying corruption!

The Indian Pharmaceutical companies are opportunistic – while they argue tooth and nail about circumventing the international patent laws to get more international drugs to give up their licenses to them for generic drug manufacture; they also argue from the other side of the mouth for lifting of the price controls! So, they want to steal and make money with that loot!

The former – giving up of licenses by international pharma companies – can help the poor, but latter – companies pricing the generics as per their own criteria may not. A Harvard public School study confirms this:

A study by Harvard School of Public Health in 2007 found that a government decision in the mid-1990s to scale back the number of drugs under price controls had led to “exceedingly high” jumps in the costs of some medicines, including those for cardiac disorders.

India’s health sector is in a turmoil right now. Government hospitals are under-equipped and under-staffed, while the private hospitals are exceedingly expensive.

2/3rd of India’s population is not covered by health insurance (only 15% in China). So, most of the medical expenses are out of pocket for the larger populace.

About 70% of health-care spending in India comes from individuals’ own resources, and more than half of that is spent on buying medicine, according to industry estimates.

That could be a good thing or a bad thing – because even in the United States, one can see that Medical Insurers are nothing more than highway robbers.

For a country like India – social medical system is critical. We cannot have private health system to take over. But the Government is so corrupt and nepotism oriented that such social sector Health system ends up being a curse than a benefit. If someone even gets treatment, it is not because of professional work of a doctor or health professionals, but because their altruism!

We strongly think that social health sector cannot be compromised in India. Private health care will not work for larger population. On the other hand, private participation is also extremely important.

Focus on generics is good, and if the competition in the pharma market remains the way it is, then prices for the drugs may also remain low.

Mr. Piramal, the drug-company chairman, said no drug producer in India had more than a 7% market share by sales.

Keeping these companies on their toes is probably the best way to ensure the low prices for drugs in India. Now, if only we could find a way to keep the Bayers of the world interested in the Indian market despite the generics “threat”.