A new strain of coronavirus that originated in Wuhan, the capital city of the Hubei province of China, has thus far infected two thousand people on two continents (Asia and North America) and killed at least 56. As a precautionary measure, China has locked Wuhan down as well as placed travel restrictions within the city, home to around 20.5 million people. As it happens, new cases of the novel coronavirus’s infections are also being reported from Saudi Arabia, where an Indian nurse is being treated for the same disease in a hospital in Jeddah.
In these circumstances, how prepared is India to handle such a health catastrophe?
The Centre spends around 1.5% of the national GDP on healthcare. India’s per capita expenditure on health ranks 154 in the world, out of 195 countries – worse than Bangladesh, China, Pakistan and Sri Lanka, and even some West African countries. Chronic diseases – such as cardiovascular diseases and diabetes, respiratory conditions and cancers – are the biggest causes of death and disability in India, accounting for more than 30% of deaths.
By way of intervention, the Government of India launched the Ayushman Bharat scheme in September 2018, under which, as of January 24, 2020, the Centre had allocated Rs 6,400 crore, generated 7.28 crore e-cards and empanelled 21,259 hospitals across India. This is a welcome move, but it doesn’t answer questions about whether the scheme is actually improving Indian healthcare.
For example, Ayushman Bharat is targeted at the tertiary sector, which offers extended medical procedures involving the hearts, lungs, kidneys, etc. Given the current state of the Indian economy, the government is unlikely to be able to allocate more resources towards primary healthcare, which deals with chronic illness, maternity and childbirth and childcare. In fact, and more importantly, to meet the scheme’s targets, the government may have to squeeze resources out from the primary sector and channel it towards tertiary healthcare.
Number of infants dying before reaching one year of age in 2015. Source: World Bank Development Indicators
In terms of availability of doctors and the number of hospital beds, India lags behind the prescribed WHO standards. For instance, India has 0.7 physicians per 1,000 people whereas the WHO mandates 1 per 1,000. Most of these doctors are in urban areas and the ratio is worse in rural areas. In terms of hospital beds, India has 0.9 when the WHO requires 1.9 beds per 1,000 people.
Indeed, even after the introduction of Ayushman Bharat, almost 80% of the out of pocket (OOP) expenditure of those in rural India goes towards medicines, whereas in urban areas, the corresponding figure stands at around 75%. The insurance coverage in India for both indoor and outdoor treatments continues to be narrow despite the recent rise in the public-private partnerships (PPP) in health insurance, explaining why people have to still rely on OOP. People meet these expenses – some 47% of the cost of hospital admissions in rural areas and 31% in urban areas – by borrowing and through the sale of personal goods and assets. This affects their livelihoods and the education of their children, plus has an impact on inter-generational income flow.
A study of 55 low and middle-income countries revealed that only six of them did not require direct payment of some form at government healthcare facilities. The WHO estimates that as a result of having to pay out of pocket for healthcare, 150 million people are at risk of becoming poor.
What are the factors that contribute to the rise in the price of medicines and hence contribute to negative health outcomes? Obviously there is a GST of 5% on most medicines – which is an extra 5% from the pockets of sick people. There is also a 12% GST on a wide range of other important medical supplies, including bandages and sterile gauze, diabetic monitoring equipment, photographic plates used in X-rays, etc.
Even though India is a major manufacturer of medicines, it also relies significantly on imports, particularly for more modern medicines required to tackle non-communicable diseases. India has one of the highest tariff rates for pharmaceutical imports and is among the top five offenders on drug tariffs, with a levy of 10% across the board on all categories of imported medicines and vaccines.
In addition, there are major obstacles to trade in medicines, particularly at the border and behind borders. These so-called non-tariff measures (NTMs) include inefficient customs procedures, red-tape and hidden taxes. In India, around 3,958 instances of NTMs were reported on medicines, mainly on account of labelling and packaging requirements. Indeed, bureaucracy and red tape adds delays of between 400 and 500 days, according to figures from the UK’s Centre for Innovation in Regulatory Science.
Instead of reducing taxes and NTMs on medicine and medical products, the government has endeavoured to cap prices, causing an artificial shortage and injecting the market with substandard medical products. For example, after the National Pharmaceutical Pricing Authority imposed a price cap on cardiac stents, there have been reports that better quality stents are being replaced with substandard stents.
These measures are more prohibitive vis-à-vis health outcomes than one might usually suspect. The Indian government’s national intellectual property rights regime is also a mellow version that purports to promote innovation and entrepreneurship while ensuring access to healthcare, food security and environmental protection. However, no changes have been made to Section 3(d) of the Indian Patents Act, which prevents ever-greening of drug patents. A lax patent regime could also disincentivise medical innovation. For example, India’s generic drug manufacturing industry constitutes a healthy 10% of the volume of the global pharmaceutical industry – but only 1.4% of the value.
In the event of the coronavirus outbreak now, policymakers in India should be mindful of these shortcomings of India’s public healthcare system, and work towards resolving them to make the country more resilient to this and future incidents of similar nature.
Nilanjan Banik is a professor at Bennett University, Greater Noida.
