Is India Shining?

Friday, May 18, 2007

All of us, who either work in pharma, follow it or read about it, know that the industry is going through a tough phase. This is not just restricted to the West but to India too. The West is more in the news because of the sheer size of the industry there. The crunch seems to have percolated down to ‘smaller’ countries like India. However, this may not be an industry-wide phenomenon as the Indian pharma retail industry seems to be growing strongly in the higher tens.

In a presentation to industry leaders last week, Shailesh Gadre, head honcho at IMS Health, a market research company that pharma marketers generally follow, referred to this as the highest growth performance recorded in the last decade. This, he also pointed out, was in line with the growth of other emerging markets such as Brazil, China, Mexico and Korea. Mr. Gadre attributes this growth to interalia the impact of the IPR transition and the dynamic disease pattern in India.

This brings me to my point! India has a population boom and try as we might, this is something that we will have to live with. While we have tried to showcase this as our advantage, by projecting this population as potential customers to herald the retail boom, the fact is that more than 70% of them can barely afford more than two square meals a day! With an estimated 1.5 billion by 2050 (somebody, somewhere expects family planning to finally take shape!) is the Indian population a boon or a bane? The ‘dynamic disease pattern’, as Mr. Gadre puts it, makes this country sound like one with the most unhealthy population in the world (China’s population is estimated to be lower than India’s by 2050). India will lead the world in terms of people afflicted with diabetes, cardiovascular disease, AIDS and cancer!

Is it all dull and grey? Thankfully, no! There is a retail boom in India with FDI/FII investment on the upward of $12 billion. India Inc.’s profitability is at an all-time high. 1 out of every 6 firms listed on the Sensex made more profits in H-1, 07 than in FY-06. This robust profitability and GDP growth is driven by the services sector comprising IT, ITeS, Healthcare, Tourism and others. Now if healthcare is expected to drive GDP growth, is it not ironical that we ignore the largest chunk of the population? 60% of hospitals are concentrated in urban areas. What about rural areas? The ~70% who are in the rural areas and who do not have access to medicines and healthcare? What are we doing about them?

I asked this question of V. Vaidyanathan, Executive Director – ICICI Bank, India’s second largest bank and the largest private one. He found the question quite pertinent and said that ICICI dealt with this problem by helping the poor create wealth to make them more self-reliant and this was by extending credit facility to them. Sustainable model? It sure worked in the case of Bangladesh’s Grameen Bank! Let’s hope it works here too!

Things surely don’t look very rosy for India, at least not in the health department! A population boom, most of them unhealthy and unable to afford basic medicine and healthcare. And to top it all distribution of medicines and delivery of healthcare is all set to get more expensive in a country where 95% of the people are expected to pay out-of-pocket!

What is the government thinking? Is there any work on to bring the common man under a social security scheme? What is the pharma industry doing to drive this? We hear that the pharma market is cluttered and fragmented and very competitive. Isn’t competition supposed to compel companies to deliver increasing value to customers? Aren’t companies supposed to get more innovative? Obviously the strategy is one of profit maximization! Nothing wrong! Companies exist to make profits. But, is it not important for a company to invest in making both physicians and patients better informed and therefore, compelling themselves to deliver better value? Will short term cost savings or myopic strategies such as profit maximization overwhelm companies desire to widen access to life-saving medicines address the health needs of a growing population? Can’t companies profit even by addressing these basic issues?

So far, there’s nothing out for the common man to see! India had 10 years to set its house in order before the WTO agreement came into force. Have those 10 years been wasted or have all the efforts that have gone in yet to bear fruit? Only time will tell if India is truly shining.

Posted by Salil Kallianpur at 5:34 PM

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