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On The Freeway To Health

On 1 November, Kerala kick-started a scheme to distribute generic drugs free to all patients in five government medical college hospitals and three general hospitals in Thiruvananthapuram, Kochi and Kozhikode. A total of 952 drugs, including antibiotics and those for cancer, respiratory, cardiac, ophthalmic and ENT ailments, will be procured and supplied by the Kerala Medical Services Corporation (KMSCL) to these hospitals.

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The scheme, designed to cushion patients from “unprecedented hike in the prices of branded medicines”, will cover the entire state in three phases. Eight general hospitals and 15 district hospitals will be covered in the second phase, followed by taluk hospitals and primary health centres (PHC) in the final phase.

Rajasthan started a similar experiment about a year ago. The side-effects on retailers are now apparent. According to the All India Organisation of Chemists and Druggists (AIOCD), the drug trade lobby which conducted a survey in the state, retailers have reported a 25 per cent fall in revenues since the start of the scheme.

Rajasthan, with annual medicine sales of nearly Rs 6,500 crore, accounts for 10 per cent of the Indian medicine market while Kerala’s annual sales turnover is Rs 3,000 crore, say experts. In fact, both Kerala and Rajasthan have taken the cue from Tamil Nadu, which has been successfully running the free drugs scheme for more than a decade. Gujarat, Madhya Pradesh and Chhattisgarh are ready to roll out similar schemes, as the central government wants the model to be replicated in all states.

Setting Standards
Tamil Nadu has successfully ensured the adequate availability and free distribution of essential medicines in each of its 3,000 PHCs and hospitals. It has kept costs down by supplying unbranded (generic) equivalents of branded medicines that have the same therapeutic ingredients but are cheaper. “We procure 44 crore paracetamol tablets and 17 crore tablets of metformin every year,” says Satyabrata Sahoo, managing director of the Tamil Nadu Medical Services Corporation (TNMSC).

In fact, TNMSC procures, stores and supplies 268 essential drugs and medicines, 84 suture and 63 surgical items to various government hospitals, PHCs and health sub-centres across the state. It also procures and distributes 114 veterinary drugs. The TNMSC helps other departments in the procurement, maintenance and operation of CT and MRI scanners, regional diagnostic centres and pays wards on a user-fee basis across the state.

“At any given point, we store nearly three crores (30 million) units of medicines and surgical items,” said R. Murugan, a pharmacist in charge of TNMSC’s 25,000 sq. ft central warehouse in Chennai. A quality inspection system at the warehouse ensures that medicines are released for distribution only after test results of random samples from each batch of drugs are received. While the central procurement system ensures better prices, regular tests guarantee quality, says Murugan.

Today, six million middle-income and poor families, or nearly half the 1.54 crore families in Tamil Nadu, get their medicines free through public health utilities, thanks to TNMSC, which procures and distributes medicines worth
Rs 1,000 crore (at market prices) at one-fifth of their value every year.

Rajasthan has followed in Tamil Nadu’s footsteps. Dr Samit Sharma, managing director of the Rajasthan Medical Services Corporation (RMSC), says that free medicine supply has increased considerably after the state adopted the Tamil Nadu model a year ago. “We procure 325 drugs, 42 surgical items and 71 medicines for the National Health Programme,” Sharma stated at a meeting of health secretaries in New Delhi, recently.

In Rajasthan, patient visits to government institutions have increased since the free drugs scheme was rolled out in October 2011. “A year ago, 44 lakh patients used to visit government facilities. Now, 62 lakh do so,” points out Sharma. As a result, the state government has raised the medicine budget from Rs 200 crore in 2011-12 to Rs 300 crore in 2012-13.

Like Tamil Nadu, Rajasthan too applies strict yardsticks for shortlisting supplier companies which, for instance, must have an annual turnover of at least Rs 20 crore, possess a ‘Good Manufacturing Practices’ certificate and should have no history of convictions. Since 1 April, all procurement is being done online in the state.

“Every day, we are giving drugs to more than 200,000 patients. The average cost per patient is only around Rs 30, which at market prices would have been around Rs 300 or Rs 500,” says Sharma. The state government, for instance, buys cholesterol-lowering drug atorvastatin at Rs 6.10 for a strip of 10 tablets; the same drug sold by Zydus Cadila under the Atorva brand name costs Rs 103 in the retail market.

Some of the states are experimenting with “fair price” medical shops. The Andhra Pradesh Medical Services and Infrastructure Development Corporation (APMS&IDC) has launched Jeevandhara outlets in select hospitals to provide low-priced generic drugs. “The response is encouraging... Nearly 78,910 patients have purchased medicines from Jeevandhara outlets and saved about Rs 1.7 crore,” says Ravi Uday Bhaskar, general manager of Jeevandhara, which has 56 outlets in 21 districts, with 46 outlets attached to district-level or tertiary hospitals run by the government.
Kerala has its Karunya Community Pharmacy chain started early this year. The plan is to set up 35 hospital-based outlets and sell branded medicines at a discount of 20 to 60 per cent.

More The Merrier 
Generic medicine schemes have opened up new lines of opportunities for pharmaceutical companies. And most states have a panel of qualified suppliers — a mix of big and small drug companies. For instance, AstraZeneca, GE Healthcare, Baxter, Biocon and Indian Immunologicals are among the 99 qualified suppliers to TNMSC this year. But, most states admit to choosing smaller companies as their preferred suppliers.

“We give small companies a 15 per cent preference in purchases. These companies are willing to quote lower prices as we purchase in bulk and make prompt payments. The payments are cleared centrally and completed within 30 days of the supply of medicines,” says TNMSC’s Sahoo. Though there are those who say that the minimum turnover criterion applied by some states eliminates most small companies, the fact remains that the government move is expanding the scope of the hospital supply business for pharmaceutical companies. “The government scheme is opening up a new market that consists of marginalised patients who were otherwise unable to access medicines. In any case, it does not mean that the retail market will vanish.

You have several government hospitals in Delhi. Does that mean that private hospitals are running empty?” asks Tapan Ray, director general of the Organisation of Pharmaceutical Producers of India, an organisation of multinational drug makers in the country. Currently, hospital supplies account for just 15 per cent of the Rs 65,000-crore domestic drug market.

Retail Rebound?
There is a section of the pharma industry that is a little worried about the government’s move: the 500,000-strong organised private retailers. “In Chennai where there is a huge floating population, the free drug scheme may not have an impact, but our surveys indicate that it has had an impact on our trade in Rajasthan,” says J.S. Shinde, president, AIOCD.

“If there is a successful national rollout of this scheme, it will have an impact on our trade. But we cannot, legally, technically or ethically, oppose any move to provide free medicines to the poor for the sake of trade. We are not against consumers,” says Shinde. In a proposal to the Ministry of Chemicals and Fertilisers, Shinde has offered to facilitate “free supply” of medicines in an “accountable” manner through the retailers under AIOCD’s control.

State associations of chemists, however, do not seem as worried. Says A.N. Mohan, spokesperson of the All-Kerala Chemist and Druggists Association: “Patients will get free medicines only when they visit a government hospital. Neighbourhood chemist shops will always be needed for secondary purchases.”

Ramesh Chandra Gupta, former president of the Andhra Pradesh Chemists and Druggists Association, thinks that chemists will be hurt only when the government starts buying branded medicines in bulk and distributing them free. Gupta also believes that people will not stop visiting private hospitals and doctors all of a sudden because of free medicines in government hospitals. Chennai-based R. Desikan, trustee of the Consumer Association of India, takes the argument further: “The government should also allow its dispensaries to provide medicines against prescriptions generated outside public healthcare facilities if more people should find the scheme interesting.”

The government, though, is not planning to extend the free medicine facility to people who opt for private healthcare. The scheme only covers those who do not currently access any kind of medical care at all and those who depend upon public healthcare facilities for their medical needs. According to the Planning Commission, about 20 per cent of the country’s patient population does not have access to any kind of medical care. Of the rest, only 25 per cent depends upon public healthcare facilities. It expects this number is grow to 40 per cent once free medicines are made available through PHCs. The additional 15 per cent will comprise those not getting medicines currently.

A study conducted by the National Health Systems Resource Centre (NHSRC), a technical support body set up under the National Rural Health Mission (NRHM), had shown that in Tamil Nadu, the hospitalisation expenses (on drugs) of a patient in a public sector healthcare facility was a mere Rs 102 as against the all-India average of almost Rs 976, and Rs 3,000 in some states. The study also testified to an uninterrupted availability of drugs in the state’s public health sector.

Taking the cue, a Planning Commission panel on Universal Health Coverage recommended, in November last year, the Tamil Nadu model for centralised procurement of drugs to achieve economies of scale. The panel wanted the central and state governments to establish a centralised procurement mechanism for purchasing drugs, vaccines and medical devices through an open, transparent two-bid tendering system. “The National List of Essential Medicines (NLEM), that is generic in nature and rational in content, should be the basis for selecting the drugs,” it said. The NLEM includes over a dozen cancer drugs and covers a wide range of therapeutic areas such as anti-AIDS, anti-pain, anti-ulcers, anti-psychotic, cholesterol-lowering agents, among others.

The central government has already budgeted Rs 100 crore for the initial rollout of the free drug supply programme this year. The Planning Commission estimates that this scheme will cost central and state governments about Rs 29,000 crore in the next five years. While the central government will spend 75 per cent of the funds required, the rest will be borne by the respective states.

 The newly set up Central Medical Services Society (CMSS), a central procurement agency on the lines of Tamil Nadu, is expected to become operational during the current financial year. CMSS is expected to initiate procurement of drugs and vaccines under various healthcare programmes, including the NRHM.

A pan-India rollout of the scheme should see free medicines being disbursed against prescriptions by government doctors from dispensaries attached to 640 district hospitals, 5,000 community centres, 23,000 PHCs and over a lakh sub-centres.

The key will be to have the nationwide free medicine scheme fully operational before the 2014 elections, given its potential to sway the popular mood.