In today’s Finshots, we explain how the government has been attempting to make medicines more accessible to Indians.

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The Story

Let’s say that you fall sick (hopefully not). You go to the doctor and get a prescription. They’ve scribbled a bunch of medicines on the note but you can’t read it. Because well…a doctor wrote it. So, you go to the nearest drugstore and hand it over to the pharmacist. He slips you the drugs. It’s quite expensive. It burns a little hole in your wallet.

Now you call up your friend and crib about this. You say, “Did you know that India has one of the highest Out-of-Pocket Expenditures (OOPE) on healthcare anywhere in the world? 50% of healthcare expenses in India are paid out of one’s own pocket!!! The per capita spending is ₹2,155. And 70% of this probably goes towards just buying medicines. How on earth do people survive?!”

And she asks — “Why didn’t you just go to a Jan Aushadhi Kendra? You could’ve got the drugs for half the price!”

You’re confused. You have no idea what she’s talking about. So you quickly Google to find out more and what you find shocks you!

See, some pharma companies do the hard work of putting truckloads of money into research and development. Just to invent drugs that can save countless lives. But they need to recoup the money. So they patent their drugs for 15–20 years. It’s a protection that prevents others from making the same drug. And the company has a monopoly over their branded drug.

But after a while, the patent runs out. And other pharma companies come in. These copycats manufacture the same drug. Or what’s known as a generic version using the same ingredients and formulation. Suddenly, the drug has become generic. One that anyone can produce. And it becomes widely available.

But…it could be a branded generic too. Because any copycat drug maker can simply slap a brand name and their company’s name on it now. And then market the heck out of it to build customer loyalty. They then bump up the price of the drug and pocket a tidy sum of money.

Think about Crocin or Dolo. These are the brand names. But both of them contain paracetamol. So they’re really the same thing. But depending on which company has marketed it better, the doctor might write you a prescription for that. Not for generic paracetamol which is cheaper for you.

And there’s a dark secret behind this. You see, there’s an unholy nexus between some doctors* and the pharma industry. Often, the pharma company doles out freebies to the doctors to get them to prescribe their brand of drug. They might sponsor international trips for medical conferences. Or hand them some goodie bags.

Remember how Micro Labs, which makes Dolo, ran into trouble last year? The company was accused of doling out freebies worth a whopping ₹1,000 crores to doctors. Just to get them to recommend Dolo.

And it doesn’t stop there. Even drugstores are in on the scheme. Because they can’t earn hefty commissions from unbranded and cheap generics, they often don’t stock these drugs. They only stock the branded ones.

So yeah, the result of all this is that nearly 80–90% of the drugs sold end up being branded generics. And that’s what you experienced when you took that prescription to the pharmacy.

Anyway, after seeing this burn a hole in people’s pockets for a few decades, the government hatched a plan to launch a pharmacy for the common folks. And they called it the Jan Aushadhi Kendra. It would only distribute generic drugs that were affordable. Not the branded generic kind.

And anyone could apply to launch the drug store — entrepreneurs or NGOs. They just needed to employ people who had a degree in pharmacy. And the government would dole out some incentives to get things moving. To help with sourcing generic drugs, the government might even place bulk orders from PSUs or private pharma companies. It would be a public-private partnership of sorts. A franchise.

Now here’s the thing. The Jan Aushadhi Kendra isn’t a new phenomenon. It was actually a scheme launched way back in 2008. So it has been around for 15 years! But the going was slow initially. 6 years after the launch, there were only 80 stores across the country. Probably because it was all managed by the government. It also meant that the stores weren’t accessible to most Indians. It didn’t make any impact.

But over the past few years, the government doubled down on this scheme. And drug stores started popping up everywhere under the franchise-type model. We now have over 9,000 of them across the length and breadth of the country. And for the first time ever, the Jan Aushadhi Kendras across India have managed to cross the ₹1,000 crore sales mark in a financial year.

It’s quite something.

More importantly, that means people who bought these generics have saved quite a bit of money, right?

Well, ₹6,600 crores worth of savings this year! At least that’s what the government claims. And that’s why it wants to celebrate things like the Janaushadhi Diwas on 7th March. It wants to get more people aware and involved.

But it’s not all hunky dory.

For starters, while the list of medicines covered under the scheme has expanded to nearly 1,800 drugs, it’s not like the drugs are always in stock. In fact, The Ken had reported that 30–50% of the drugs needed by patients were typically unavailable at the stores. So if you go to the store a couple of times and don’t find what you’re looking for, you could end up disappointed and might not return, no?

And to make matters worse, there have been allegations of poor-quality drugs being sold. For instance, a couple of years ago, the government had to recall 52 drugs after they failed quality tests. Even common ones that were typically used to treat high blood pressure. People’s lives were at stake. And as per Deccan Herald, the pharmacies were being dumped with short shelf-life drugs from private manufacturers and substandard drugs.

That’s not something that induces trust in the customer! No one will want to buy spurious medicines just because it’s cheap.

So yeah, while raising awareness about the scheme is one thing, what’s even more important is to clamp down on the problems of poor quality generics and unavailability. If that’s sorted, the savings on out-of-pocket expenditure on drugs could be quite massive for Indians.

Until then…

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*In defence of doctors, when they prescribe a branded generic, they could also be doing it because they trust the company behind it. They want the patient to feel safe about it too. Otherwise, what if they get a spurious generic drug from a pharmacy? It could have adverse effects and it could even spoil the doctor’s reputation.

Ditto Insights: Stop paying your medical bills out of pocket!

2/3rd of all medical bills in India are paid out of pocket. A bulk of it goes to fulfilling expenses related to your hospitalizations.

And it’s wiping out your savings

  1. You can’t expect to grow your investment if you can’t protect your savings. Even if you start with ₹1 Lakh and compound it by 10% every year, a trip to the hospital can wipe out your gains and your principal in a few short days.
  2. Medical inflation is growing at over 10% in India: While healthcare procedures have generally become more accessible, a stay at the hospital can set you back quite a bit, simply because the rooms are now expensive. A stay in a single private room in a private healthcare facility in Bengaluru can cost you over ₹10,000 a day. It’s insane.
  3. No tax benefits: When you’re paying for medical procedures out of pocket, you don’t get to have tax benefits. However, if you have insurance, you can protect your savings, avail tax benefits and beat medical inflation all at the same time. So here’s what you should do. Get yourself a comprehensive medical insurance plan right now before you start your investment journey.

And if you need any help on that front, you can talk to our advisors at Ditto. We only have a limited number of slots everyday, so make sure you book your appointment at the earliest:

  1. Head to our website — Link here
  2. Click on “Book a FREE call”
  3. Select “Health Insurance”
  4. Choose the date & time as per your convenience and RELAX!

Our advisors will take it from there!