India’s Drug Problem: Pedaling Toward Insolvency

Every election we hear about how the new government needs to double triple or quadruple public healthcare spending. Every public health report yells the injustice of out of pocket healthcare expenditure and catastrophic healthcare spending across India.

What if I told you there was a way to reduce household out of pocket expenditure by about 70% and catastrophic expenditure by 60-70% through merely an improvement in operational efficiency?

Snapshot of Health Expenditure in India

India has made tremendous strides in life expectancy, maternal and infant mortality rates and HIV prevalence. However, we are now battling with both infectious diseases and non-communicable pandemics, meaning the old way of doing things may not work as efficiently. The 170% increase in healthcare costs, the low public health expenditure and the lack of insurance coverage have led to a rise in catastrophic health spending. 70-80% of the population are not covered by health insurance (either private or public) and 3.5% of the population (50 million Indians) go below the poverty line each year. As per estimates can be reduced to 0.5% if outpatient costs are covered. Outpatient costs include travel, consultation, diagnostics and drug-related; the last currently account for 49% of healthcare costs in India.

The Government steps in

Free and subsidised drugs have been the topic of multiple schemes announced by the States and the Centre and across political parties in the last couple of years. The recently announced Ayushman Bharat scheme is no different in its pharmaceutical focus. Drugs are to be provided free at the 1,50,000 Health & Wellness Centres as per AYB. Several programmes have said they would do it but why hasn’t it been done? Indian pharma is a $33B industry of which approximately $17B are exports; We provide 80% of generic drugs globally! Such are the volumes of pharmaceuticals manufactured in the country, that we rank 3rd in the world in that regard! With the plethora of manufacturers too, cost isn’t an issue either. At the consumer end, every public health centre, regardless of size and location, has pharmacy facilities. Why then can a patient not get his or her prescription fulfilled at a public health centre the year round is baffling!

Illogical logic

If you have a keen sense of observation, you would have noticed a large number of private pharmacies outside all public hospitals. These are not only significantly more expensive but always brimming with customers!

The problem is access. At the risk of turning this into a healthcare version of the movie ‘Inception’, the true issue is access to the access of accessible medicines. In simple terms, if the drugs aren’t in the public pharmacies, how will they be dispensed regardless of whether they’re offered free or not?

The Access-Infrastructure Conundrum

Maintaining access to affordable, high-quality pharmaceuticals is challenging for various reasons. For pharmaceutical companies, the complex and fragmented supply chain, the convoluted tender processes and delayed payments. For public pharmacies, the lack of a structured inventory systems and erratic stocking practices. For Health Departments, lack of access to funds or the inability to absorb and utilise the funds in a timely fashion make the general population pay the price. Consumers end up having turn to private pharmacies which sell whichever brand offers them the best margin thus raising costs and, downstream, reducing compliance with therapy. These are crucial obstacles to be addressed across the value chain.

Plugging the gaps

There are solutions which are low investment, high impact. Pre-work would involve epidemiological surveys, prescription analysis and supply chain analysis to define process gaps, disease and prescribing trends at the district level. Public-Private Partnerships with pharma companies, cold-chain transport providers and distributors can streamline the supply chain into a relatively more efficient process. Value-based evaluation of drugs based on not merely cost but also quality and health economics research through health technology assessments can improve quality and health outcomes. At public pharmacies, a centralised inventory management system connected with the supply chain will help manage stocks effectively. Multiple players in this space offer these IT solutions. For consumers, an Aadhar linked adherence tracking component can help in estimating demand and improve health outcomes, dealing with issues like antimicrobial resistance and Multidrug resistant Tuberculosis.


Success metrics include supply chain metrics (delays at any level), access metrics (drug unavailability, % of prescriptions honoured), health outcomes (drug adherence data, epidemiological trends) and health costs (spending at individual/family, district and state levels). Implementation would require a significant Investment in both time and cost (approximately 4 to 5 years and 500 cr. per state) and coordination to put this entire process together across demand and supply analysis, planning, implementation and integration.

The more important question is will we do it and not can we do it!

A possible cure, or another bitter pill?

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s