Uncle Sam’s dose to give Indian Pharma a High

With Barack Obama inking the Health Care reforms bill last month, the question is who, apart from the 32 million uninsured, would get a piece out of this trillion dollar pie coming straight out of tax-payers’ pockets? With India featuring among the 14 destinations that can offer cheaper drugs as named by the Congress, it is but certain that Indian pharma companies would be immense beneficiaries.

The healthcare reforms bill, and now the Patient Protection and Affordable Act, categorically promote the usage of generics, which offer similar therapeutic responses at only a fraction of the cost of innovator products. With such a clear signal from Obama’s office and a new found consumer base of 32 million Americans, promoters of Indian companies, which are masters at formulating generic copies of innovator products, would be smiling – though cautiously.

Though two thirds of the prescriptions written in the US are generic, what can probably spoil the party would be provisions in the same Act which could compel reduction in costs of branded products. As the innovators squeeze down on margins on their brands, the pricing advantage enjoyed so far by generics would diminish to an extent where an informed physician would rather prescribe the branded product. The branded drug industry too has agreed to this proposal which was aimed at reducing the cost of therapy for the Americans. In return, this will help manufacturers of branded products gain some ground against competitors in the market currently dominated by cheaper generics. This would mean that generics too would need to evolve beyond their current business models and stay competitive in the new market place by improving efficiencies and developing operational competencies to bring down production and distribution costs for their generic drugs. The generics would also take a hit on the Biosimilar front, with 12 year exclusivity given to innovator Biological products under the same Act, this would mean that generics in the Biological space would be a distant dream for now.

Obama plans to spread the net of affordable insurance to 95% of Americans and plans to fine those denying insurance to the tune of $300 odd for individuals and $2500 per employee not covered by an employer. The reforms surely would benefit the common American man, but another stakeholder here, is the Insurer. With pressure on him to use 80% of the premiums collected, insuring children with known illnesses and also the diseased, plus the ‘doughnut hole’ provision which covers elderly after their maximum coverage limit is hit, the Insurance companies also would need to revisit their drawing boards to chart out ways to sustain profitability. This cannot be achieved without lowering the cost of treatment and they will have to turn to their oldest friends in the trade (read generics) for the same. With largest number of US FDA approved plants outside US, India is ready and the party does not seem to be ending, atleast for the next 10 years until Uncle Sam is the host!

About the Author: Satej is MBA from Symbiosis Institute of Business Management and has great inclination towards healthcare and pharmaceuticals industry. He graduated in B.Pharma from University of Mumbai and later also pursued Fellowship in Clinical Research from Apollo Hospitals. Currently he is looking out for consulting opportunities in the healthcare domain.

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