India represents one of the most promising opportunities in the global economy; in 2014 alone, the country’s gross domestic product (the size of its economy) soared 7.3%, according to the World Bank, making it one of the fastest-growing markets in the world. This rate, which followed 6.9% growth in 2013, underscores the opportunity that exists for India at a time when many of the major markets – particularly in Europe and Japan – face sluggish or even negative growth.
Yet, despite this booming economy, healthcare spending has continued to lag for India. In 2013, the country spent just 3.97% of its economy on healthcare. Although this is a notable improvement over 2012’s 3.81%, it still lags far behind advanced economies and even China (5.57% in 2013), according to the World Health Organization.
Nonetheless, this issue has been a focus on the government in India, which may ultimately benefit the pharmaceutical industry via increased spending. The Union Budget 2016 disclosed the government’s plan to improve the health care conditions in India. Although healthcare has been amongst the most neglected sectors in India, it has been growing at a rapid pace and is expected to become a US $280 billion industry by 2020, according to Deloitte Touche Tohmatsu India (for perspective, the WHO estimates India spent just $76.9 billion in 2013 on healthcare). The healthcare budget presented by the finance minister Arun Jaitley includes certain encouraging features:
- A new health protection scheme which will provide health cover up to Rs 1 lakh per family has been announced. Additionally, for senior citizens of age 60 years and above belonging to economically weak category, a top-up package of up to Rs 30,000 will be provided.
- Plan to add 3,000 pharmacies under the “Jan Aushadhi Yojana” to provide generic drugs at affordable rates.
These two steps will go a long way to help more people getting access to proper healthcare in the country. They will also help address some of the various challenges that have gripped India’s healthcare system for years. These include:
- A healthcare system more focused on the urban populations than on rural communities. Nearly, 70% of Indians live in rural areas with limited or no access to hospitals and clinics, yet 80% of specialists reside in urban areas.
- Falling spending on healthcare over the past decade as a percentage of the economy (from 4.3% to 4.05%).-As a result, nearly 1 million Indians are believed to die each year because of inadequate healthcare facilities while close to 700 million cannot access specialist care.
- Low per capita spending on healthcare; according to Harvard School of Public Health (HSPH) in 2012, India spent about $40 per person annually on health care whereas the United States spent $8,500.
Notably, private hospitals and facilities, despite much lower funding than their counterparts in more developed markets, are seen as comparable in quality to facilities there The problem essentially lies with government hospitals and their infrastructure. The government facilities are understaffed, underfinanced and that these hospitals maintain very poor standards of hygiene forces many people to visit private medical practitioners and hospitals. In addition, the fact that India does not have universal healthcare (resulting in a large uninsured population) leads to high out-of-pocket expenditure.
Previous governments also planned various health care insurance plans to transform the health care system completely, partially inspired by US President Barack Obama's grand insurance-for-all project which is popularly known as ‘Obamacare,’ but to no respite.
With the new provisions added in the Union Budget 2016 for higher allocation of funds and spending, the government should make sure that the funds are used to improve the infrastructure and skill sets. There should be more transparency in the allocation of funds and its expenditure by Government Hospitals and Medical Officers.
Although these measures will not solve India’s historic underinvestment in healthcare, they do highlight the country’s movement toward prioritizing healthcare in the economy. Eventually, this push will create new opportunities for the drug industry, particularly if government insurance and acquisition of branded therapies becomes part of the solution.