How healthcare economics and pricing impact access to medicines

Healthcare access in India remains a challenge despite economic advances. Even as India ranks as one of the world’s fastest-growing major economies, a substantial proportion of its population, especially in the lower and middle-income groups, struggles with healthcare affordability issues. In turn, this is exacerbated by the high out-of-pocket expenses (OOPEs) for medical care. 

Low healthcare spending

In India, the total percentage of government expenditure on healthcare stands low at 2.9 per cent. In contrast, the US (18.9 per cent), Japan (17.2 per cent), the UK (15.9 per cent) and China (10.1 per cent) have higher healthcare spending.

Additionally, the combined Central and State Government spending in public health expenditure was constant at around 1.3 per cent of India’s GDP between 2008 and 2015. In 2016 and 2017, this rose marginally to 1.4 per cent. By 2025, the National Health Policy 2017 proposes to increase this to 2.5 per cent.

Along with the private sector, the complete health expenditure is estimated at 3.9 per cent of India’s GDP. Of this, around 30 per cent represents the public sector’s contribution. Again, this number is lower than that of other developing and developed nations. The statistics imply that individual consumers bear the cost of their healthcare expenses. To minimise the burden of OOPEs on the people, the Centre must increase its healthcare spending. 

Pradhan Mantri Jan Aarogya Yojana (PMJAY) insurance scheme

Heeding these concerns, the Centre launched Ayushman Bharat (Pradhan Mantri Jan Aarogya Yojana or PMJAY) in 2018 – one of the largest health assurance schemes globally. While this marks a significant step towards healthcare support, its coverage is limited mainly to hospitalisation, leaving out critical areas such as daycare, OPD consultations and regular medications. This gap directly affects the middle class, who are ineligible for official schemes yet unable to bear high healthcare costs independently.

Annually, around 63 million people are said to fall below the poverty line due to healthcare expenses. Ayushman Bharat seeks to mitigate this situation by providing health insurance coverage of up to Rs 5 lakh to 120 million families under PMJAY.

Within five years, this is believed to have benefitted around 56 per cent of eligible beneficiaries. As per the National Health Authority, an autonomous body under the Ministry of Health and Family Welfare that implements PMJAY, 30 crore Ayushman cards have been provided as of January 12, 2024. 

However, studies in different states reveal that empanelled hospitals for the registered beneficiaries are insufficient and OOPEs on health remain high. 

To address these issues pertaining to health coverage and insurance, the Central Government has already issued a ‘call for action’ to the Indian start-up community. While this is a work in progress, other solutions should be explored. For example, a co-pay system meant for the middle class could be a viable option. The success of a salary-based beneficiary system suggests a similar approach may be adapted to offer broader healthcare coverage. Additional insurance schemes backed by the government are also vital to help the middle class.

Demographic dividend, collaborations and funding

Meanwhile, India’s huge population should be deemed an opportunity, rather than a burden, to enhance healthcare systems. Innovative access to treatment, value-based healthcare and outcome-based agreements can be strategies to optimise healthcare delivery in a resource-constrained setting such as India.

The importance of partnerships between the government and the healthcare industry must also be considered. Collaborations can lead to more comprehensive care models, especially in areas such as rare diseases, drug provision and pricing. 

The pandemic highlighted the criticality of public-private partnerships. In early 2021, India began a COVID-19 vaccination campaign for what was then the world’s second-largest population, aiming to implement it in the shortest possible period. Given the vast geography and diversity in demographics, religions and ethnic groups, the challenge was formidable. The digital divide between urban and rural regions further complicated matters. This highlighted the need for efficient resource allocation, innovative pricing strategies, and sustainable funding models to ensure healthcare delivery.

Building on the lessons learned from such large-scale health initiatives, it is evident that long-term commitments are indispensable in building partnerships to enable sustainable healthcare solutions. In addition, extensive funding is required for healthcare initiatives to succeed over the long run. Hopefully, the Centre will announce adequate outlays in the 2024 Union Budget to support such schemes and expand the country’s overall healthcare coverage. This is crucial because the role of preventive measures, including vaccination programs, cannot be overlooked in promoting better public health.  

In the case of vaccines as well as in boosting access to treatment and improving patient outcomes, the role of Health Technology Assessment (HTA) is important. HTA is a global gold standard offering a broad template to undertake a comparative analysis of cost, clinical effectiveness, safety and equity. HTA can help ascertain if a specific initiative would be cost-effective. This is particularly essential in nations where cost constraints are a core concern. HTAs can also be most useful in introducing new vaccines into the National Immunisation Program. Therefore, the industry at large should enhance its HTA capabilities to improve patient outcomes and access to treatments.

The path forward

As mentioned earlier, an increase in allocations is necessary to improve access to healthcare. Herein, the Government needs to lead from the front in addressing diverse healthcare challenges across India. Furthermore, healthcare campaigns should be supported by active industry partnerships to drive better outcomes. The potential and resources are all available for improving healthcare accessibility and efficiency throughout the country. What is required are concerted efforts and the determination to drive change constantly and consistently. 

Disclaimer: The Statements of fact and opinions expressed are those of the writer individually and, unless contrary, are not the opinions or position of any organization. No one endorses or approves and assumes no responsibility for the accuracy or completeness of the information presented.