India’s Health Policy: Flip Flops or Opaque Policy Shifts?

The directive from the Drug Controller General of India’s (DCGI) office to all State Drug Controllers to issue trademarks for generic names instead of brands – even if it was just to resolve trademark issues – is yet another display of confounding decision making by the Union Government that has been plaguing the country in general and the health care sector in particular.

Over the years despite knowing of its multiplier effect on GDP, India never attached great importance to the improved health of its population. Policy lapses witnessed the private sector stepping in to address a fast rising demand for health care creating one of the most privatized medical systems in the world. As a consequence, India is confronted with the problem of meeting growing expenditure on health care which is heavily skewed towards out-of-pocket expenses for its citizens, driving large sections into poverty.

India’s future lies in its demographic dividend – the advantage of having a young, healthy and productive work force. And to reap the benefits of this work force we have to achieve decent health and education outcomes for the majority. India averaged 8% p.a. GDP growth rates over the 11th Plan period. And yet, its public spending on health has hovered around an abysmal 1-1.2% of GDP, one of the lowest in the world. The Approach Paper to the 12th Plan declared an increase to only 1.58% by 2017. And how is this possible, given the government’s recently vocalized desire to move towards universal health care (UHC) for not just its citizens but its residents that include millions of illegal immigrants as well?

India chose to begin its journey towards UHC with one step – to provide free medicines through its public health system. The Centre released approximately Rs. 30,000 crores to the States to fund the procurement of medicines, over the next 5 years (2012-17) under the ongoing NRHM. After the Supreme Court’s intervention and with the five public-sector pharmaceutical companies lying in shambles, the government quickly approved the new drug pricing policy that led to the inclusion of 348 medicines (approximately 30% of medicines and 60% of the market) into the National List of Essential Medicines (NLEM) and effectively under a price controlled not by the market, customers and competition but by the government.

Simultaneously, in an ostensible effort to make medicines affordable to its residents (not citizens), the government did two other things: 1) allow foreign direct investment into brown field projects in the sector with caveats such that foreign companies who invest in India will produce stipulated quantities of essential medicines and invest in local manufacturing and R&D 2) demonstrate that it will use compulsory licensing more as a weapon of choice than as one of need.

Both these steps make sense in the short term thus providing political capital to the government for the upcoming general elections in 2014, but harm the future of India as a preferred destination in the long term, thus depriving the opportunity to create economic capital. What vindicates this point is that to this date, there has been no effort from the government to invest in creating the infrastructure required to deliver superior health outcomes to the population despite it being the root cause for the inflow into the private sector despite all its societal evils.

However, all this pales in comparison to the DCGI directive to state drug controllers to not issue marketing licenses for trademarks or branded drugs but in their generic names alone. While the technicality of this decision alone warrants a separate column, it suffices to say that this makes no sense whatsoever. Authorities are expected to regulate or legislate to help either the industry, traders or end consumers. This decision helps none of these groups or anyone else. All it does is commoditize the industry thus threatening to wipe out small and medium players who lack the financial strength to compete with MNCs who despite severe pressure on profit margins will survive. The consumer has little or no knowledge of the brands of medicines and therefore is unlikely to benefit from the decision. The only group that will benefit are the middlemen – the traders – who will control the supply of medicines and make unholy profits in the bargain. Under harsh criticism, the DCGI recently clarified informally that this directive was more to resolve trademark issues. Apparently, too many similar sounding trademarks confuse doctors and retailers. If it really is the reason, the decision is laughable. Isn’t it easier for similar sounding trademarks to be denied by the regulators, thus pushing the onus back on the industry to decide on clearly differentiated trademarks?

On one hand, India signals that it will welcome much needed FDI into the sector. But on the other it threatens to disregard product patents, invoke compulsory licensing, discontinue issuance of marketing licenses to trademarks while controlling prices on essential drugs and also considers controlling prices for patent-protected innovative drugs as well. Such indecisiveness about policy bodes ill for a country that faces the daunting challenge of enrolling, financing and providing acceptable health outcomes for 1.2 billion citizens and millions of other residents, illegal or otherwise. For such largesse, it could actually do well with help it can garner from all quarters.

Why then is the government alienating itself both from the domestic industry as well the international society? These policy flip-flops are confounding! Why would the Indian government risk global criticism by openly demonstrating clear indecisiveness? Is this driven by an argument about poor public sector performance in delivering health care? Undeniably, it has been lacking, which reflects in the dismal health outcomes in the country. Or as noted academic scholar, Kaveri Gill wonders in a blog post, is this seemingly open decision-making process merely a dangerous opaque shift in policy, which has very little to do with evidence and even less to do with broad-based consensus? 

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