Affordable medicine, smarter insurance: The blueprint for lowering India’s healthcare costs

India’s healthcare system is at a crucial juncture. Despite significant government efforts to popularise generic medicines through initiatives like the Pradhan Mantri Bhartiya Janaushadhi Pariyojana (PMBJP) and regulatory frameworks ensuring affordability, the impact on healthcare costs remains limited. Nearly 63 million Indians are still pushed into poverty annually due to healthcare expenses, with out-of-pocket expenditures constituting 60 per cent of total healthcare costs. This gap between policy intent and patient outcomes highlights the need for a more integrated approach—one that combines the promotion of generic drugs with broader systemic support, particularly from the health insurance sector.

The affordability of generic drugs has long been touted as a solution to this crisis. Yet, adoption within India remains alarmingly low compared to global benchmarks. For instance, generic drugs account for only 55 per cent of total prescriptions in India, while in countries like the US, that figure exceeds 90 per cent, saving billions annually. What’s holding us back?

This is where health insurance can step in—not just as a safety net but as a catalyst for transformation. By integrating the promotion of generic drugs into insurance frameworks, India can address the dual challenge of affordability and accessibility.

Learning from Global Models

Countries with robust healthcare systems demonstrate how insurance-driven generic adoption can slash costs without compromising care quality.

The US Success Story: In the United States, policies like the Generic Drug User Fee Amendments (GDUFA) streamlined approvals for generic drugs, while insurance providers offered incentives like zero copays on generics. This led to an estimated $338 billion saved annually for the healthcare system and patients combined.

European Union’s Tiered Pricing: Across the EU, tiered reimbursement policies incentivise patients to choose generics over branded drugs. Germany’s health insurance providers reimburse up to 80 per cent of generic drug costs, leading to savings of over €25 billion annually.

India can replicate or innovate these models by creating insurance frameworks that promote cost-effective choices, particularly in rural and underserved areas.

Addressing the Data Gap challenge in India

Despite the availability of affordable generics, consumer behavior and systemic inefficiencies hinder their adoption. A 2023 study by IQVIA highlighted startling gaps that say otherwise.

Doctors’ Preference for Branded Drugs: Over 70 per cent of prescriptions in urban areas are for branded drugs, driven by a mix of misinformation and aggressive marketing.

Patient Trust Issues: A survey revealed that 56 per cent of Indian patients perceive generics as inferior, despite regulatory guarantees of equivalence.

 

Health insurers can act as the bridge between these gaps. For example, insurers could integrate educational campaigns within their plans, highlighting the efficacy of generics and encouraging doctors to prescribe them.

Driving down costs through policy innovation

Health insurers have an untapped opportunity to reshape healthcare costs through generics by implementing Differential Coverage Models. Insurers can offer lower premiums for plans that encourage generic prescriptions. A similar approach by Canada’s public health programs reduced healthcare expenditures by $4 billion annually. On the Other hand, Direct Negotiations with Pharma Companies could be another way. Insurers could negotiate bulk purchase agreements for generics, as seen in Australia’s Pharmaceutical Benefits Scheme (PBS), which saved the government over AUD 12 billion between 2018 and 2023.

The Third and very vital step could be claiming data analytics. By analysing prescription patterns, insurers can identify high-cost treatment areas where generics could make a significant impact. For instance, claims data in Thailand helped insurers shift to generic antiretroviral drugs for HIV treatment, cutting costs by 35 per cent.

Tackling rural healthcare inequities

Rural India, home to 65 per cent of the population, remains underserved in terms of both health insurance coverage and access to affordable medicines. Expanding coverage in these areas with a focus on generics could be transformative.

Consider the Ayushman Bharat Health Insurance Scheme, which has begun to include provisions for covering generic drugs. Data from early adopters in states like Gujarat shows a 20 per cent reduction in treatment costs when patients switched to generics, a trend that could scale nationally.

Need of changing the patient narrative

The key to success lies in altering public perception. The real life anecdote has to be published and made popular through various mediums. Sunita, a school teacher in Jaipur, managed her chronic diabetes with branded medication costing Rs3,000 per month. After switching to generics covered by her health insurance, her monthly expense dropped to Rs700 without compromising her health.

Stories like Sunita’s show the potential of aligning health insurance with generic drug adoption to make a tangible impact on everyday lives.

The Path Ahead: A Collaborative Effort

Policy Reform: The government must mandate a higher inclusion of generics in insurance plans and cap reimbursements for branded alternatives.

Awareness Campaigns: Insurers and pharmaceutical companies should launch campaigns to educate patients and doctors about the equivalence of generics.

Technology Integration: Digital tools can help track and promote generics use, creating transparency in prescriptions and claims

India stands at a crossroads in its healthcare journey. By integrating health insurance and generic drugs into a unified strategy, it has the potential to revolutionise healthcare access and affordability.

The numbers speak for themselves: Every 10 per cent increase in generic prescriptions could save the healthcare system over Rs15,000 crore annually, money that could be reinvested in infrastructure, innovation, and expanded coverage.

It’s time for insurers, policymakers, and pharmaceutical companies to come together, backed by data and global best practices, to ensure that every Indian has access to quality healthcare without financial strain.

India’s healthcare revolution isn’t just about making medicine, it’s about making medicines work for everyone.