Friday, 24 August 2012

Rx for Universal Healthcare in India

IT holds the key to Universal Health Coverage

Kiran Mazumdar Shaw- Chairman & Managing Director, Biocon

Tamil Nadu has taken an early lead in providing universal health coverage to its people by putting in place an effective drugs procurement and distribution mechanism as far back as 1994. Even more commendable is that Tamil Nadu created an IT enabled Supply Chain Management system that ensures delivery to real patients who need the medication, transparency to prevent misuse and stringent quality control to weed out spurious drugs and their manufacturers. States like Kerala and Rajasthan have also made significant progress in healthcare by implementing the TN model. Most recently, Karnataka and Gujarat have announced their willingness to follow suit.

India’s per capita public spending on health is an abysmal $32 or about Rs 1800 per annum. The neediest of patients are often denied drugs essential for their survival. Against this backdrop, the government’s decision to provide free essential drugs to all is a belated but welcome step in the right direction towards a much-needed Universal Healthcare Policy. This life-giving move is as important as – if not more than – the Right to Education. Together, they can help build the two primary pillars of socio-economic development – Health and Education.

The 12th 5-Year plan has proposed an outlay of Rs. 28,560 crore for Healthcare. It is important to ensure that the plan to provide Universal Health Coverage as a way to institute Right to Healthcare is well executed or else it will fall by the wayside like many other ambitious and well-meaning projects. The central government is doing well to study the TN model and use it as the blueprint for the national healthcare policy. To implement an effective policy, the government will need to put in place a robust IT infrastructure, stringent processes with checks and balances, quality compliance measures, and the physical infrastructure to procure and distribute drugs to almost half of India’s 1.2-billion population. With the right approach and implementation, India can build one of the most advanced healthcare system in the world.

Patients in need
- At present, 78% of the healthcare expenditure in India is out of the patient’s/family’s pocket. Drugs account for 72% of this expenditure.

- The new policy, to be rolled out across India by 2014, is expected to provide 52% of the population with free drugs by April 2017 at a cost of Rs   300 billion.

- Costs are to be shared by the Centre and state governments on a 75-25 percentage basis.

- The plan covers 348 drugs deemed as essential, ranging from standard antibiotics to antiretroviral drugs and cardiovascular treatments.

Meeting the healthcare challenge with IT
The challenge is monumental; but e-healthcare delivered on a robust IT infrastructure holds the key to success. E-healthcare can ensure transparency and accountability along with efficient supply and inventory management. This is fundamental to ensuring the delivery of free drugs to those who need them most when they need them.

As the TN model has shown, e-healthcare will ensure that the system is not abused. Water-tight processes can ensure that no one can avail of cheap medicines to sell in the open market and no procurement agency can collude with pharma companies to stockpile drugs or divert them to the open market. E-healthcare can accurately monitor, track and analyze requirements and overcome these challenges. A strong supply chain management backbone can optimize inventory and provide agility in responding to contingencies like epidemics or natural disasters. Such a supply chain can also help create buffers for states depending on the disease profile/burden of each.

Learn from the TN model
The Tamil Nadu Medical Services Corporation (TNMSC), a state-owned company set up in 1994, has been tasked with ensuring the availability of essential drugs to everyone at an affordable cost. To enable this, the TNMSC has built its entire procurement and distribution system on a well-designed IT architecture, ensuring that the entire supply chain from the manufacturer to the warehouses to the pharmacy and all the way down to the patient is closely tracked. For example, diabetics who want to avail of free insulin must return empty vials to have their prescriptions filled again. The IT system does not stop at enabling drug access and affordability. It also ensures quality compliance, transparency in procurement and distribution, and prevention of abuse by stakeholders.

This excellent model is being followed with success by Rajasthan and Kerala – and can provide the blueprint for India’s national healthcare policy. The objectives of the Centre’s rational drug use policy tie in nicely with the results shown by TNMSC. In line with this model, the Centre will ask state governments to set up autonomous corporations which will buy essential drugs in bulk through a tendering process.
Let us take a look at the Tamil Nadu model in greater detail to understand its strengths and weaknesses so that we may bridge the gaps while developing a national policy that can help build one of the most advanced healthcare systems in the world.

TNMSC as a role model
Tamil Nadu spends the most on drugs among all states. But its expenses on buying medicines have come down from 15.3% (2001) to 12.2% (2010) of its total Healthcare spend. With the government able to buy more drugs at around 3-10% of their retail price, it is the patients who are the real beneficiaries.
An efficient, transparent and cost-effective model of e-drug procurement and e-distribution that improves access to healthcare is what Tamil Nadu has achieved over the years.

Let us take a closer look at how the process works:
Quality control and transparency: The TNMSC’s competitive pricing system serves as a benchmark for the lowest possible price. The tendering process is efficient and is completed in a month. TNMSC purchases only from manufacturers that have Good Manufacturing Practice certificates. The organization follows a stringent testing process and sends all batches for laboratory checks. This system ensures that quality is not compromised. If the product fails in quality tests, the entire batch is returned to the supplier. If a supplier company fails to pass tests thrice, it is blacklisted and the names of both blacklisted products and suppliers are displayed on their website.

Procurement: Tendered drugs are received at a central warehouse where it is quarantined and sampled for quality testing. Once the tests approve the drug, TNMSC releases it to 23 warehouses located one each in its 23 districts. A centralized computerized management information system constantly keeps track of inventories in warehouses and helps place orders and clear payments within 15 days. The system ensures drug availability at all times without saddling the system with expensive surfeit of drugs.

Distribution: The key to TNMSC's success is its passbook system for distributing drugs. All government-run clinics and hospitals are issued with a passbook. Whenever they require a drug, the system informs the nearest warehouse, which fulfills the order. The name and value of the drug provided is entered in the passbook, which forms the backbone of the information system.

It is heartening that states like Rajasthan and Kerala have successfully implemented the TN model – but sad that economically strong states like Karnataka and Maharashtra have done very little in this direction. Karnataka’s expenditure on drugs has declined from 7.9 to 6 per cent of total health expenditure from 1996 to 2006 and the median availability of critical drugs in the public healthcare system in Karnataka was an abysmal 12.5 per cent. To think that this is a state that led India’s IT revolution!

With the Centre proposing to foot 75 percent of the health bill , state governments will have no excuse for failing to deliver healthcare for all.

Bridging the gaps in the TN model
At present, the government spends a meager 1.1% of its GDP on providing healthcare to its citizens. Once the scheme is implemented, the share will go up to 2.5% . However, its success hinges on availability and accessibility of crucial drugs and more importantly on the robustness of our health infrastructure. To ensure the scheme’s success, the Tamil Nadu model will provide the template but a few gaps will also need to be bridged.

For one, the health outcome of each patient needs to be tracked – this can be achieved through electronic health records (EHR) that can be easily updated through routine health check-ups at Primary and Tertiary Health Centres. By linking EHRs to patient level drug distribution, the impact of health delivery can be effectively measured.

The other important issue that needs to be addressed is procurement forecasting which must be mapped according to disease burden down to the district level in each state. This will enable efficient inventory management and timely delivery of essential drugs even in contingency situations like epidemics and natural disasters.

Complementing e-procurement and e-distribution with disease burden mapping and EHRs will create a comprehensive e-healthcare system that can deliver essential drugs in an optimal manner. This, I truly believe, can be a global bench mark for others to emulate.

Lessons for Big Pharma
TNMSC manages to save costs because it tenders and purchases generic drugs with no weightage for Branded products. In this new scheme of things, pharma majors need to get used to the fact that the day of branded generics may soon be coming to an end. The move clearly is towards bulk procurement where lower margins will be compensated with higher volumes.

Free medicines cannot fix an overburdened public healthcare system in which many hospitals lack up-to-date equipment and doctors. Thus, the free essential drugs scheme is just one of the many steps the government will need to take to ensure universal healthcare.

Using an e-healthcare system such as the Tamil Nadu model, can help to provide free medicines to those who need them in a transparent and efficient manner. In a country where 3.2% of the population falls below the poverty line many of whom are plunged into abject poverty because of illness and medical indebtedness, effective delivery of free essential drugs can make the difference between life and death – and help build a healthy, productive nation.


  1. “Ensuring equitable access for all Indian citizens, resident in any part of the country, regardless of income level, social status, gender, caste, or religion, to affordable, accountable, appropriate health services of assured quality (promotive, preventive, curative, and rehabilitative) as well as public health services addressing the wider determinants of health delivered to individuals and populations, with the government being the guarantor and enabler, although not necessarily the only provider, of health and related services”
    Healthcare in India

  2. “Ensuring equitable access for all Indian citizens, resident in any part of the country, regardless of income level, social status, gender, caste, or religion, to affordable, accountable, appropriate health services of assured quality (promotive, preventive, curative, and rehabilitative) as well as public health services addressing the wider determinants of health delivered to individuals and populations, with the government being the guarantor and enabler, although not necessarily the only provider, of health and related services”
    Healthcare in India