India enacts policy of free generic drugs nationwide

Ben Taub

8 July 2012

By the end of this year, Indians who attend public hospitals and clinics will be able to get their prescription drugs for absolutely no cost, reports Reuters.  While the new policy could change the lives of hundreds of millions of people, big pharmaceutical companies are displeased – they don’t stand to gain at all.

Only generic drugs on an approved may be prescribed under the $5.4 billion plan, and public doctors will face punishment if they prescribe branded pharmaceuticals at the government’s expense.  Exceptions can be made if there is no generic equivalent to a necessary brand-name medication, but only up to 5% of the allocated budget.

This cuts pharmaceutical giants out of an ever-growing market opportunity. Projections indicate that emerging drug markets will constitute 28% of the world’s pharmaceutical sales by 2015, up from 12% just a decade before.

Under the new policy, the Indian government expects to provide 52% of the population with free drugs by 2017. India’s 2011 census indicates the population to be 1.2 billion, over 17% of the current global population.

The policy won’t completely eradicate big pharmaceutical business in India, however.  It only applies to prescriptions written by public doctors.  Indians who attend private hospitals and clinics will still have the privilege of paying for Bayer drugs, for example, instead of the less glamorous generic equivalent.

This isn’t the first time Indian policy has upset big pharmaceutical companies.  Apparently India’s patent laws have some loopholes, and they’ve been exploited before by for-profit companies with vaguely humanitarian objectives like Cipla, whose Lithuanian-born chairman Yusuf Hameid believes “the company should be judged not by profits alone, but by its contribution to healthcare in society.”

Up until 2005, Indian patent laws applied only to the process of creating drugs, not to the final products.  This allowed Cipla to legally reverse engineer medications such as its 2001 lifesaving AIDS treatment, offered at 1/30th the price of its competitors.

In 2005, India updated its policies to align with World Trade Organization (WTO) patent regulations, but maintained a loophole by way of “compulsory licenses.”  If a company notices that lifesaving drugs are priced out of reach of most people, it can produce and sell it for much less – as long as it pays the patent holder.

By this method, Cipla released an array of cancer treatments for 1/4th the market price in India this May, a move that garnered great praise from organizations like Médecins Sans Frontiers (Doctors Without Borders).

As a company oriented towards cheap production and distribution of generic drugs, India’s Cipla is set to profit enormously from the new government plan.


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