THE STATE OF HEALTH CARE AFFAIRS

PHARMALEADERS 2016 SUMMIT & AWARDS

HEALTHCARE BACKGROUND CHECK

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Introduction

The Opportunity

India has one of the fastest growing healthcare markets in the world. Rising income levels, an aging population, increasing insurance coverage and the imbalance in demand-supply presents a big opportunity for healthcare providers to increase bed capacity and for further investments in this sector.

Healthcare has evolved into one of India's largest sectors - both in terms of revenue and employment, growing at a brisk pace due to an increasing expenditure by public as well as private players.India's competitive advantage lies in its large pool of well-trained medical professionals and also its lower cost for health care delivery when compared to counterparts in Asia and Western countries, whereby the cost of some surgeries in India are about one-third that of the US and Western Europe.

Market Size: The overall Indian healthcare market today is worth US$ 100 billion and is expected to grow to US$ 280 billion by 2020, a compounded annual growth rate of 22%. Healthcare delivery, which includes hospitals, nursing homes and diagnostics centers, and pharmaceuticals, constituting 65 per cent of the overall market.

Rural India, which accounts for over 70 per cent of the population, is set to emerge as a potential demand source. India requires 600,000 to 700,000 additional beds over the next five to six years, indicative of an investment opportunity of US$ 25-30 billion. Given this demand for capital, the number of transactions in the healthcare space is expected to witness an increase in near future. The average investment size by private equity funds in healthcare chains has already increased to US$ 20-30 million from US$ 5-15 million, as per a report by Price Water House Coopers.

Medical Tourism : The Indian medical tourism industry is pegged at US$ 3 billion per annum, with tourist arrivals estimated at 230,000. The Indian medical tourism industry is expected to reach US$ 6 billion by 2018, with the number of people arriving in the country for medical treatment set to double over the next four years. With greater number of hospitals getting accredited and receiving international recognition, India has the potential to become Asia's healthcare hub soon.

Medical e-commerce: In the coming years, the Deloitte report expects significant adoption of e-commerce in the retail medicine sales market, which is expected to reach $55 billion in 2020 as more firms enter the segment with innovative business models, backed by global investors. However, regulatory bodies should provide clear guidelines for online sales of medicines, to avoid counterfeit drugs.

Telemedicine: Medical infrastructure in India is concentrated in the urban areas, while a substantial section of the population lives in rural areas with limited access to such facilities. Through the use of technology, this divide can be bridged. Consultation through mobile devices using video, images, and conference calls can help rural patients access basic medical advice. In 2010, the Indian telemedicine market was estimated to be Rs.50 crore and is expected to grow at 20% CAGR.

Electronic medical records (EMRs): It is expected that  India is  to adopt EMRs in a big way, and though the large healthcare providers may adopt non-compatible EMRs in the initial stages, they believe that converging standards for EMRs will emerge. With adoption of EMRs, healthcare data analytics are expected to be game changers in the way ailments are diagnosed, monitored and treated. Once medical records are available on a cloud platform, a patient's history can be made available to the doctor for better diagnosis. EMRs can also be used by specialists to establish healthcare trends (epidemic diseases, prevalence of deficiencies, etc.) in the country and digital connectivity can be used to disseminate critical information for both prevention and cure.

Predictive healthcare analytics: A significant development in healthcare will be in the area of predictive healthcare analytics wherein the vital components of a human body can be monitored and any deviation that may result in a medical emergency, is detected in advance. The entire process, can work without human intervention through wearable devices that monitor a person's vitals and using the data available on a cloud platform to warn the patient in case of anomalies or even inform a doctor who can then monitor the patient remotely. This could help channelize funds through various government and corporate programmes in the right direction.

New Products and Alternate forms of treatment such as, Stem Cell Therapy, Genetic Engineering, and Molecular Biology may help improve healthcare delivery in the future. Around 80 per cent doctors and 75 per cent dispensaries serve 28 per cent of India’s population.

 The importance of ensuring healthcare access cannot be overstated for a developing country like India. This is because apart from the straightforward thesis that links health care to the well-being of citizens, it also enhances the productive capacity of its population thereby enhancing economic growth of the country.Part IV of the Constitution of India talks about the Directive Principles of State Policy. Article 47 under part IV lists the “Duty of the State to raise the level of nutrition and the standard of living and to improve public health”. Despite the consensus among political and academic circles of living up to the principle, successive governments have failed to address India’s health-care needs for a vast majority of its population. This state of affairs has persisted for a number of varied reasons.

Behind the health-care deficit

First, India’s health-care infrastructure is largely inadequate to serve its vast population. To begin with, the total number of hospitals and health-care professionals, public and private included, fall short of addressing the total demand for health-care services, despite being large in numbers. According to the latest KPMG report, around 80 per cent of all doctors and 75 per cent of dispensaries serve 28 per cent of the country’s population. Also, the focus of policymakers has been to address the demand-side issues rather than the supply-side inefficiencies. This is evidenced by the focus on improving hygiene and environmental concerns to prevent the spread of ailments and diseases. Although commendable, these efforts have failed to match demand with supply.

Second, dismal health-care expenditure has aggravated the inadequacy of our health-care infrastructure. India accounts for over 17 per cent of the world’s population while spending less than 1 per cent of the world’s total health expenditure. Our total healthcare expenditure stands at 4.1 per cent of GDP, which is among the lowest in the world. The way these funds are disbursed to the States and utilised adds to the problems. There is usually a considerable delay of funds disbursed for utilisation in critical government schemes rendering them ineffective. Moreover, the funds allocated for skill building of health-care professionals are usually not utilised owing to lack of such human resources.

Third, problems of governance deficit and regulatory capture arise due to myriad laws and regulations which impede the normal development of this sector. A large number of institutions and health-care providers like doctors, equipment manufacturers, drug companies, and hospitals are not formally recognised by the state due to a host of laws and regulations. This has inhibited access to health care, and it is important to see how this can be improved, and more effective health care is provided to a larger number of people. The inefficiency in the sector also creeps up with the widespread corruption that ails both the public and the private sector.

Finally, the lack of awareness and monitoring of diseases as well as the steps needed to eradicate them pose a serious challenge to the health-care problem. The success of polio eradication in the country provides a case in point. It was the result of incessant awareness campaigns and active participation of all stakeholders from healthcare providers to the beneficiaries, supplemented by strict monitoring by the government. This kind of holistic approach is required for tackling the large number of diseases that still exist in India and are proliferating among its vulnerable population. India remains one of the few countries where both communicable and non-communicable diseases are so largely prevalent. The changing disease patterns pose another serious challenge to the health-care sector and finding innovative drugs that can cure a large number of diseases should remain a priority.

 Need for an integrated plan`

 India requires an urgently integrated action on health care to make it universally accessible and affordable at the same time. This will not just address the country’s health needs but also have a positive impact on its poverty and growth levels. Professor Amartya Sen has repeatedly argued for the same. He has been critical of the suggestion that countries should grow economically first and then invest in their social sector later. Comparing India’s and China’s growth rates, he argues that the main reason for the latter’s explosive growth cannot be attributed to the nature of its government, but to its higher investment in health and education.

Similarly, Japan’s rapid growth since the second decade of the 20th century can be understood in light of the higher investment in health and education after the Meiji restoration. India needs to follow a similar strategy to make its citizens more competitive and act as an asset to the country’s growth.

The Indian Health care industry is growing at a rapid pace (CAGR of 17 per cent) and is expected to become a US $280 billion industry by 2020. Even so, nearly one million Indians die every year due to inadequate healthcare facilities and close to 700 million people have no access to specialist care.

There are wide gaps between the rural and urban population in its health care system. A staggering 70 per cent of the population still lives in rural areas and has no or limited access to hospitals and clinics. Around 80 per cent of specialists live in urban areas.Improvement in health care infrastructure and facilities and ease of access to them is the only way India can fight against diseases. For that to happen, government spending on healthcare must go up. However, the state of affairs, as they are now, is not very encouraging.The average growth in expenditure on total healthcare is not only lower than the average GDP growth rate, the expenditure is still lower (as a % of GDP) than the expenditure of even low-income countries, as classified by the World Bank (See Graph).

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India is a low-middle income country as per the World Bank classification. In fact, the growth in expenditure on total healthcare in India has been decreased from what it was a decade ago (from 4.3 per cent to 4.05 per cent).

 

India spent about $40 per person annually on health care where as the United States spent $8,500. The entire GDP of India was $1.6 trillion then while the US health care spending alone was $2.6 trillion.

The problem essentially lies with government hospitals and their infrastructure. While there are many universal health care schemes being run by the Central and the State Governments in India and the government hospitals offer treatment and essential drugs free of charge, the fact that the government sector is understaffed, underfinanced and that these hospitals maintain very poor standards of hygiene forces many people to visit private medical practitioners and hospitals.

Besides the lack of overall healthcare infrastructure, the second most important influence on India’s healthcare industry is its lack of a medically insured population and high out-of-pocket expenditure.

According to Annual Report to the people on health by the Ministry of Health and Family Welfare, Government of India (December 2011), about 71 per cent of the total health care expenditure in the country was borne by households out of their pockets. Out of pocket expenditure is any direct outlay by households, including gratuities and in-kind payment, to health practitioners and suppliers of pharmaceuticals, therapeutic appliances and other goods and services whose primary intent is to contribute to the restoration or enhancements of the health status of individuals or population groups, as per the definition given by the World Bank. Out of Pocket expenses figures by World Bank for India stand much higher at 86 per cent for the year 2012.

The government’s allocation to healthcare as a percentage of GDP has fallen to 1.05% in 2015-16 from 1.47% in 1986-87

The evolution of healthcare in India over the past 25 years has been a mixed bag. While key health metrics such as the infant mortality rate (IMR) and maternal mortality ratio (MMR) have come down substantially, healthcare expenses have shot up—a direct fallout of lower public health spending. The government’s allocation to healthcare as a percentage of the country’s gross domestic product (GDP) has fallen to 1.05% in 2015-16 from 1.47% in 1986-87.India has failed its citizenry when it comes to expenses on healthcare. Health surveys by the National Sample Survey Organisation (NSSO) show that since the 1990s, the dependence of Indians on private healthcare has risen sharply. In 1986-87, 60% of people availed of public health services and the rest private healthcare, according to the 42nd NSSO report. But by 2014, this trend was reversed, with only 41% availing of public healthcare, according to the 71st NSSO report released last year. The decline in dependence on public healthcare is sharper in urban areas—from 60% in 1986-87 to almost 32% in 2014.

Out-of-pocket expenditure is the main cause of worry for the patients. A number of people fall from above poverty line (APL) category to below poverty line (BPL) category because of this. Nearly 70% of out-of-pocket expenditure is due to medicines. That has to be addressed. The rise in out-of-pocket expenditure is a direct outcome of the fall in the government’s budgetary support to healthcare.

The increasing burden of both communicable and non-communicable diseases, too, is a challenge. While diarrhoea, respiratory infections and pre-term birth complications continue to affect India, lifestyle diseases such as heart diseases, stroke, pulmonary diseases and diabetes are now leading causes of premature death. Non-communicable diseases such as cardiovascular diseases, cancer, chronic respiratory diseases and diabetes account for nearly 60% of all deaths in India, according to the WHO.

 The economic burden of these lifestyle diseases accounts for about 40% of all hospital stays and roughly 35% of all recorded outpatient visits, according to a 2014 report by the World Economic Forum and Harvard School of Public Health. The report further added that the probability of dying during the most productive years—between 30 and 70—from one of the four main non-communicable diseases is a staggering 26%.

 

Indian Pharma Sector 2016 Overview

The Indian pharmaceutical market (IPM) has registered a strong growth of 15.3 per cent to Rs. 9,643 crore during August 2016 as against 13.2 per cent in the August 2015.  It also clocked the highest incremental value over last year to Rs. 1,278 crore.   Average growth for the quarter worked out to 8.1 per cent against 12.9 per cent during last year. The incremental value added in August is 55 per cent of the combined value of April-July 16. According to AIOCD Pharmasofttech AWACS report, market also crossed the Rs. 9,000 crore mark continuously for the last 2 months and gastro intestinal markets cross Rs. 12,000 crore on MAT basis.Market has added Rs. 1,278 crore over last year, whereas last year the market had added up Rs. 977 crore.  For the month of August the GDs 9.1 per cent in volumes, 2.9 per cent in price increases & 3.3 per cent in NIs. August quarter saw a volume growth of 4.0 per cent & price growth the lowest in last 6 quarters at 3.8 per cent.The FDCs related market de-grew at 11.5 per cent whereas the non FDCs market grew at 15.9 per cent. The non FDC market in August-16 showed slightly better growth than April-16 at 7.0 per cent.

 

 From a GD perspective, the FDC containing market showed a huge volume degrowth of 16.8 per cent. Indian companies degrew by -11.1 per cent in the FDC portfolio whereas the MNCs degrew by 16.1 per cent for August-16 month.

 

Among the major players, Macleods grew at 26.8 per cent, Alkem at 21.1 per cent followed by Sun Pharma at 20.3 per cent. Out of top 50 companies, 29 corporates have crossed the growth of IPM for the month of August. Centaur has registered highest growth of 42.5 per cent followed by Bharat Serums at 34.4 per cent and Apex at 34 per cent. However, 36 corporate showed growths more than 10 per cent.

 

Abbott HC grew at 11.5 per cent whereas Abbott India grew at 10,9 per cent for the month of August. Zuventus grew at 37.9 per cent being the fastest growing as a stand-alone company amongst top 50 companies. 15 companies got launched in last 36 months in the IPM. Indian companies have grown at 17.1 per cent versus 9.0 per cent for MNCs in August. Amongst the top 50 in MNCs, Janssen grew at 23.2 per cent followed by Sanofi at 13.4 per cent and Abbott at 12.6 per cent. Under the non-NLEM category Indian companies grew at 19 per cent whereas MNCs grew at 11 per cent.

 

The NLEM 2013 containing molecules market grew at 4.8 per cent whereas the non-NLEM market grew by 17.3 per cent resulting in an overall growth of 15.3 per cent for August. NLEM & non- NLEM category showed unit growth of 14.9 per cent and 9.6 per cent respectively.

 

From therapy perspective 6 therapies have outgrown the IPM growth. Respiratory market grew at 32.3 per cent, gastrointestinal market grew at 14.2 per cent, pain & analgesics market grew at 15.4 per cent whereas anti-infectives grew at 19.6 per cent. Anti-diabetic market grew at 19.0 per cent & cardiac at 11.6 per cent, neuro/CNS at 9.5 per cent in chronic business. Anti-malarials grew at 38.6 per cent, VMS market at 11.4 per cent. Derma market grew by 12.2 per cent and urology market at 15.0 per cent.

 

From regional perspective 13 regions have outgrown the IPM growth.  Vidarbha market grew the highest at 31.0 per cent followed by Karnataka market at 27.4 per cent & South Maharashtra market at 25.2 per cent. All regions had positive growth in August, 2016.

 

Amoxycillin+clavulanic acid market grew at 23.6 per cent & glimepiride+ metformin market grew at 28.4 per cent. The markets of paracetamol grew at 47.2 per cent, atorvastatin 9.3 per cent, probiotic microbes at 36.2 per cent, bacillus clausii market at 41.1 per cent, cefixime at 23.7 per cent, pantoprazole at 11.7 per cent, montelukast + levocetrizine at 40.6 per cent, glimepiride + metformin + pioglitazone at negative 16.4 per cent, vitamin-D at 3.7 per cent, hydroquinone + mometasone + tretinoin at negative1.6 per cent, voglibose + metformin + glimepiride at 47.2%, rosuvastatin at 23.2%, protein supplements at 22.6 per cent and azithromycin at 21.4 per cent.

 

The major brands like Mixtard leads the pack with Rs. 44 crore followed by Monocef at Rs. 35 crore, Glycomet GP at Rs. 33 crore & Lantus at Rs. 29 crore for August. Few brands who have gained ranks include Monocef O, Ascoril Plus (+54), Deriphyllin (+43), Udiliv (+32), Revital H (+28), Minipress XL (+25), Allegra, Ecosprin AV (+23), Istamet, Gemer, Duolin, Clexane (+23), Combiflam (+20), Rantac (+19), Gluconorm G (+17), Ultracet, Sinarest (+15), Pantocid (+14), Trajenta (+13), Mikacin (+12), Calpol (+11), Novomix, Rosuvas, Orofer XT, Pan D, Meronem, Azithral (+10), Zifi, Dolo, Mucaine (+9), Levipil, Telma H, Mox (+8), Lantus, Duphaston (+7), Zoryl-M (+5), Janumet, Budecort, Ceftum (+4), Clavam, Synflorix (+3), amongst top 100 brands over August – 15.

 

Total 340 brands & 629 SKUs launched in August 16. Top 5 new brands for August are Isofer, Acogut, Himcocid SF, Oxra & Clostop. Biggest launch by MNCs – Tasigna HGC by Novartis. Sun enters the SGLT2 market with Oxra in dapagliflozin. Within the VMS category Jointace C2 Plus (Meyer), Colatage B (Koye), Inmela (Veritaz) moved up. Similarly, within cardiac new brands like Jbros (JB Chemicals), Nebesel (Zuventus), Besicor (Ajanta) entered the market.