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India’s Drug Problem And The Rising Health Care Cost

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, which means that 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 is 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, it can be reduced to 0.5% if the outpatient costs are covered. Outpatient costs include travel, consultation, diagnostics and drug-related;  drug-related expenditure currently accounts for 49% of the total healthcare costs in India.

The Government Steps In

Free and subsidised drugs have been the topic of multiple schemes announced by the States, the Centre and across the political spectrum 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 of cost at the 1,50,000 Health & Wellness Centres as per AYB. Several programmes have said that they would do it, but what has been done so far? India provides 80% of the generic drugs globally, and the cost certainly isn’t an issue; every public health centre, regardless of size and location, has pharmacy facilities. The question is, why does the shortage of drugs continue to persist?

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 jam-packed.

The real problem is the access to medicines; at the risk of turning this into a healthcare version of the movie ‘Inception’-the issue is access to the access of medicines. In simple terms, if the drugs aren’t in the pharmacy, how will they be dispensed?

The Access Infrastructure Conundrum

Maintaining access to affordable, high-quality pharmaceuticals is challenging for various reasons. For pharmaceutical companies, the issue lies in the complex and fragmented supply chain, the convoluted tender processes and delayed payments. Whereas, for public pharmacies, the problem lies in the lack of a structured inventory system and erratic stocking practices are the. Consumers turn to expensive private pharmacies raising health costs and reducing compliance with therapy. These are crucial obstacles to be addressed across the value chain.

Plugging The Gaps

There are solutions which require low investment and have a high impact. There are certain pre-requisites though, that 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 an efficient process. Value-based evaluation of drugs based on cost, quality and health economics research can also improve quality. 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, while also dealing with issues like antimicrobial resistance.

Measuring Success

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 duration and cost (approximately 4 to 5 years and 500 cr. per state). It also requires putting this entire process together across demand and supply analysis, planning, implementation and integration.

This process could reduce supply deficiencies by at least 30% and health costs by 50%.

Food for thought, or another bitter pill?

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