How Health Insurance Will Influence Indian Pharma Markets

Anoop has completed his Post Graduation in Business Administration from Goa Institute of Management. He has has over eight years of experience in Pharmaceutical Industry and currently leading the validation/qualification and Analytical quality assurance department.

Indian Pharmaceutical Industry claims to be the Pharmacy of the world because of its export capabilities. It aims to provide high quality affordable medicines. India caters to about 50 percent of demand in Africa, about 40 percent in US and about 25percent of UK's requirement of generic medicines. It also satisfies the domestic market requirements of generic medicines through its large scale and small scale pharmaceutical companies. While most of the large scale pharmaceutical companies choose the lucrative option and export majority of their medicines to other countries, the domestic requirements are usually fulfilled by the small and medium scale pharmaceutical companies.

Though these companies find it difficult to maintain the high regulatory standards, they some how manage to gain profits because of the immense demand that Indian consumer creates. The Government of India controls the prices of some of the essential medicines through its regulatory agency, 'National Pharmaceutical Pricing Authority'. The NPPA regularly publishes lists of medicines and their maximum ceiling prices. These price capping have reduced the profit margins of the pharmaceutical companies and have hurt the MSME's the most.

While most of the large scale pharmaceutical companies choose the lucrative option and export majority of their medicines to other countries, the domestic requirements are usually fulfilled by the small and medium scale pharmaceutical companies

The Insurance system in India dates back to 18th century. It gained popularity after the Independence, but mainly it revolved around `Life Insurance' only. In the recent years `Health Insurance' is booming and can be directly correlated to increase in health related problems.The government has also started awareness about the Health Insurance and is evident from the tax exemptions given on the premium paid for Health insurances. Certain states in India, have also introduced health insurance schemes for the residents of the state. The coverage for medicines in these Health insurances is still at nascent stages. Only a few health insurance companies provide a complete comprehensive plan with inclusion of medicinal cost.

As compared to western countries such as United States of America(US), where medicinal costs are integral part of the insured amount of Health insurance. They have also introduced Obama care which is an alternative term for the Patient Protection and Affordable Care Act(ACA)of 2010. The aim with this plan was to make health care more affordable for everyone by lowering costs for those who can't afford them. The `co-pay' option is also prominent in US, wherein certain part of the money has to be paid by claimant while the other half is paid by insurer. In India, only for certain health insurances mostly for senior citizens, the `co-pay' option is included. In other cases, in order to lure customers in India, the `co-pay' option is not included and the health insurance pays the entire sum insured amount.

In India, the demand for medicines is created by consumers and in US, the demand is created by both consumers and health insurances. Also, in US, health insurance companies take the help of agencies called as `Pharmacy Benefit Managers'. These `Pharmacy Benefit Managers' act as a middle man between hospitals, pharmacies, insurance companies and pharmaceutical companies. Because of this critical position, these agencies play an important role in driving the price of medicines. The higher the number of people are insured, the more power rests with these agencies. This often leads to increase in prices of the medicines. With the upsurge in awareness of importance of Health Insurance in India, we can expect a similar situation in India and if that happens it will impact the Pharma guild in more than one way.

In India, the per capita income is lesser compared to US. If there is increase in price of medicines, the people who are insured will have to pay higher premium and those who are not will have to shell out more money for their medicines. The small scale and medium scale pharmaceutical companies who were already struggling to achieve a profit margin because of cost of maintaining high regulatory standards will face more troubles. Their survival will be on the mercy of the large scale players who will leave no stone unturned to exploit the situation. Monopoly in a particular Pharma segment such as cancer, diabetes is possible. This won't be a good sign for the Indian economy and the Government actually cannot do much about it to maintain a level playing field. The National Pharmaceutical pricing authority will have cumbersome task to identify the list of medicines which needs to be capped in order to strike the balance between affordability and survival of MSME's.

The pharmaceutical industry in India is currently valued at $50 Billion. India is a major exporter of Pharmaceuticals, with over 200+ countries served by Indian Pharma exports. India has become the enormous exporter considering the huge profit margins. But it is also important to consider the potential of domestic markets. With health insurances on the rise, the rules of the game will change and whoever senses and adapts to it will survive.