Infrastructure

The healthy competition of an open market

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India’s healthcare standards have significantly improved over the past decades. Life expectancy has doubled from 35 years in 1950 to 70 years today. Most infectious diseases have been brought under control. Many key indicators of rural healthcare have also improved: infant mortality rate has reduced from 161 per thousand in 1960 to less than 30 per thousand today.

A direct outcome of the 1991 economic reforms was the huge improvement in India’s healthcare space. Liberalization moved the economy from a closed market characterized by extensive regulation, protectionism and public ownership towards an open market-based system that relied on fair competition with the private sector playing a greater role. The entry of private sector players led to huge improvements in the accessibility and quality of healthcare across the country. Today, the private sector provides almost 80% of outpatient and 60% of inpatient care. It led to the relaxation of foreign investment curbs in the hospital sector, medical devices and pharmaceuticals manufacturing and insurance.

Economic liberalization thus brought a sea change in the Indian pharma industry. Exponential investments were made by leading Indian pharma companies in order to become global players through a combination of rapid indigenous expansion and overseas collaborations. India became a biotechnology and pharmaceuticals hot spot and a hub for manufacturing small molecule generics, vaccines, insulins and other biologic therapies.

Today, India’s vaccine industry led by the Serum Institute of India, Bharat Biotech, Biological E and others accounts for 50% of the global vaccine capacity. By 2006, Shantha Biotechnics and Bharat Biotech had disrupted the monopoly of multinational corporations for Hepatitis B vaccines not only in India but throughout the developing world with the help of the World Health Organization. Likewise, Biocon and Wockhardt have broken the insulin stronghold that Novo Nordisk, Eli Lilly and Sanofi had enjoyed for decades. Biocon has not only been instrumental in increasing affordable access for diabetics in India but serves patients the world over.

The economic reforms agenda for the healthcare sector will remain unfulfilled till India is able to truly achieve universal health coverage. Public spending on health has been stuck at around 1% of GDP for close to 15 years, much below the average of 3.6% in BRICS countries. Low public health expenditure has meant 63% of total spending on health in India is out-of-pocket, one of the highest globally. The lack of healthcare reforms has led to the squandering of much of the gains from economic reforms among the poor.

India set the ball rolling on universal health coverage with the approval of the National Health Policy 2017. The emphasis of a national policy on preventive and promotive healthcare with universal and affordable access has led to the 2018 roll-out of the Ayushman Bharat programme.

Universal healthcare coverage by 2030 is a pivotal commitment for India, as it will be critical to the achievement of all other UN Sustainable Development Goals.

The Indian healthcare industry has expressed its willingness to partner with the government. The government, on its part, needs to invest much more if it wants to attain the target of healthcare spending reaching 2.5% of GDP by 2025 from about 1% currently.

To come up with advanced healthcare products and technologies, India needs to invest in creating world-class research institutions and infrastructure, high-end technical skills, and incentivize higher private investments in research and development.

Despite a historically low public expenditure on research and development at just under 1% of GDP, India is home to a large number of scientists and more than 100 research centres. These scientists and research centres have led the way in the development of vaccines, anti-virals, diagnostic kits and novel therapies for covid-19.

The government needs to increase funding to these institutes, establish new research parks, support more incubators and cooperate closely with academia and industry to leverage the latent R&D prowess in the country.

India must also make itself very competitive in the manufacturing of pharmaceuticals, medical devices and other healthcare products because we already have the necessary skills and capabilities. Considering that this is a highly capital-intensive sector, there is a need to provide incentives for investment in greenfield and brownfield projects and pharma parks; fast-tracking of clearances for pharma projects based on jobs and investment; and subsidies for improvements in quality infrastructure.

The covid-19 crisis has made it evident that India will need to invest massively in expanding its hospital infrastructure. In addition to viability gap funding to public-private partnerships for hospitals in tier-II and III cities, financing for both capital expenditure as well as operating expenditure should be considered.

In addition to building and improving hard infrastructure such as hospitals and medical equipment, there needs to be a focus on soft infrastructure. We need more doctors, both general practitioners and specialists.

The Indian government recently approved the introduction of two-year postgraduate diploma courses in eight broad specialties for applicants to pursue after completing their MBBS. This is a very important reform as there is currently an 80% shortage of medical specialists in government hospitals. This could add at least 30,000 to 40,000 specialists in the next two years, thus helping plug the deficit in medical personnel in public hospitals. The hunt for effective treatments and vaccines for covid-19 has also demonstrated the importance of having a strong clinical trials industry. Re-establishing India as a clinical trials hub can generate a million potential clinical research associate jobs and boost the healthcare industry as a whole.

Strong political will and decisive administrative action will help India build a future-ready, resilient healthcare industry in India. A reprogramming of national economic priorities will ensure that the task started 30 years ago finally reaches fruition.

Kiran Mazumdar-Shaw is executive chairperson of Biocon.

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