India's pro-poor policy may be getting "healthier"

Discussion in 'Economy & Infrastructure' started by ejazr, Jul 5, 2012.

  1. ejazr

    ejazr Stars and Ambassadors Stars and Ambassadors

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    BREAKINGVIEWS - India's pro-poor policy may be getting healthier | Reuters

    A $5.4 billion plan to provide free generic drugs to millions could mean the government is finally beginning to address its woeful healthcare system. Medicine has lost out to food and fuel subsidies for too long. The drugs plan may spook Big Pharma, but long term even foreign drugmakers could benefit.

    Only seven governments in the world spend less on health than India as a percentage of GDP, according to the Organisation for Economic Co-operation and Development. India allocates about 1.2 percent of output annually - lagging behind, say, China, at 2.3 percent. The number of children who die before their fifth birthdays, mainly from preventable diseases like malaria and diarrhea, stands at 66 per 1,000, compared with 19 in China and 21 in Brazil.

    India's left-leaning government, in power for the past eight years, has done surprisingly little to address deficiencies in public health. Instead too much policy emphasis has been placed on food and fuel subsides. Though intended to help the poor, many benefits accrue to households well above the poverty line. The total cost of these subsidies amounts to 9 percent of GDP, the OECD reckons.

    But the government does want to double the amount it spends on health. With a fiscal deficit already touching 5.9 percent, it will need to scale back elsewhere to finance that goal. The new plan could be a good first step towards a healthier balance of pro-poor policies.

    Indian makers of generics, like Dr Reddy's and Cipla, should benefit from the new initiative. Big foreign drugmakers, by contrast, may feel hard done by. Providing free generics but forbidding doctors from subscribing branded medicines appears to cut them out of the loop. But 90 percent of India's drug spending is already directed to generics, and it's logical that the government should concentrate on the cheaper end of the market.

    India's already a two-tier market. The growing middle class spends an additional 3 percent of GDP on private care, and it will continue to consume more branded drugs. And as India develops, greater public consumption of healthcare should untimely lead to a relaxation of the rules on generic products. That could be a long term boon for the foreign firms too.

    CONTEXT NEWS

    - India has put in place a $5.4 billion plan to provide free medicine to hundreds of millions of people, Reuters reported on July 4.

    - India's public doctors will soon be able to prescribe free generic drugs to all comers, vastly expanding access to medicine in a country where public spending on health was just $4.50 per person last year. Under the plan, doctors will be limited to a generics-only drug list and face punishment for prescribing branded medicines.

    - Within five years, up to half of India's 1.2 billion people are likely to take advantage of the scheme, the government says.

    - In March, India granted a license allowing a domestic drugmaker to manufacture a copy-cat version of Nexavar, a cancer drug developed by Germany's Bayer. The move unnerved foreign drugmakers but enabled India's Natco Pharma to sell its generic drug at 8,800 rupees per monthly dose, a fraction of the 280,000 rupees Bayer's branded version cost.
     
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  3. thakur_ritesh

    thakur_ritesh Administrator Administrator

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    I wonder a lot of times, should these ratios be worked around the GDP or the annual budget.

    Let's see.

    PRC's GDP: 7.8t usd. Budget: 1.5t usd. 2.3% of GDP should mean 12% of their annual budget.

    India's GDP (exchange rate 47.78): 1.88t usd, Budget: 312b usd. 1.2% of GDP should mean 7.23% of our annual budget.

    Now so as to match it and make it comparable to that of the PRC, our Health care to GDP ratio should be 2%, and we shouldn't have the 2.3% figure in mind. Calculating this way means, one is trying to live within the available means, and lets not forget the borrowing we do to sustain our budget is a lot more compared to what the PRC does.
     
  4. ejazr

    ejazr Stars and Ambassadors Stars and Ambassadors

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    ^^^The real issue is that we spend $40 Billion almost in fuel and related subsidies of various kinds which takes up more than 10% of the budget. This money that could be better spent on health care and education.

    And while China spends close $50 Billion on similar fuel subsidies, their central budget last year was close to 900 Billion USD. So they spend half of what we spend as a percentage of budget on fuel subsidied now. Only five years back in 08-09 era both India and China were spending about the 10% of their budget on subsidied but post 2008 crisis, China has been able to cut out fuel subsidies and pass on the price increases. Ofcourse, they don't have elections to worry about but that just allows them to rechannel their spending elsewhere.

    I just hope that this "heathcare" policy doesn't end up becoming like some pharmaceutical version of the Food PDS system.
     

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