Address
Management Consultation on Health Care in India

D. R. Mehta

25th June 2007

I am glad that IIM Ahmedabad has organized this second comprehensive Health Care Consultation, addressing several issues of health care. Aptly, it is also a multi-disciplinary discussion. IIM Ahmedabad, apart of being a great center of management learning, is a sensitive institution. It concerns itself with matters of common good. I am thankful to Prof Ravi Chandaran for inviting me here.

2.   Let me start with the basics. The focus of the health care system has to be the patient. What is important is his health problem, his treatment, his affordability of the treatment etc. When one talks of patient he may be one patient or collectivity of patients. All other considerations, not directly related to the patients, are secondary. Despite this, in many of the discussions on health policy, in different parts of the world, the other more articulate interests tend to dominate them, with the patients in background only. The doctors, pharmaceutical companies, hospital managements, governments and NGOs undoubtedly have important roles to play in a comprehensive health care system. But, to repeat, the central figure is the patient. I am sure this consultation will be patient-centric.

3.   The second basic proposition is that health care is slowly but surely becoming part and parcel of the fundamental right to live. Our constitution guarantees this right to live. Negatively it means that one should not be killed. For decades mostly this was the interpretation. Now, with the heightened public awareness and aspirations as also increased judicial sensitivity, this right is assuming a positive tone and tenor. With this evolution, the right to live is likely to be interpreted or is being interpreted as a right to live in a disease free and dignified manner. All those in the health sector would do well to recognize this gathering constitutional trend and prudentially start adapting to this.

4.   The third basic point is that any health policy in India will have to have a substantial role for the state. It is all well to advocate that in the new economic milieu, the private corporate sector will be more involved in the health care system. But, this sector will be run according to the market principles. Such private hospitals or institutions will validly recover charges of treatment with suitable mark up. These, however, may be beyond the capacity of the patients whose income levels are low. Thus, they will be serving only the economically better-off segment of the society. With the changed economic philosophy in India, many of the persons working in the government are also advocating this paradigm shift to the private sector. In fact, it is the current fad and the fashion even in administration. But, this view has to be partially contested. Market forces alone cannot lead to the comprehensive health coverage. It also has to be recognized that the state exists for the weak and resource-less. For Kautilya to Socrates to modern political scientists raison d’ etre of the state is the welfare of the poor. Some of the most advanced capitalist countries of the world like Sweden, Norway, Denmark etc take full care of a resource-less person right from his cradle to his grave. England, another free market economy, has its famous National Health Scheme (NHS), which even an extreme conservative like Margaret Thatcher had to live with. The problem with many of our reformers is that they do not go beyond the capitalism of America and forget that there are well working other forms of capitalism which are more humane. Even in America, there is a big debate on the health policy invoking suitable role of the state.

5.   The state in India will have to continue its programs for primary health centers, regional health centers and government hospitals as also medical colleges and higher medical institutions. Every year the plan expenditure on health care will have to increase substantially. Both, the central and the state governments will have to play prominent roles in this sector. To repeat, the role of the state in the health care system will be a leading one. The private sectors would always be welcome to play a supportive role.

6.   No public systems can also ignore the fundamental requirement that the medicines and the treatment must be within the financial reach of the common people. Again it is the duty of the state, as a sovereign law making and enforcing body, to ensure this. For decades India has been luckier in this regard. The costs of medicines and treatment produced in this country are more reasonable than compared to those in other countries. But, lately the cost has been going up sharply. In the last few years, the increase has been substantial. In the absence of a developed health insurance coverage system, one fourth of the India’s population, which is below the poverty line, is partly outside the health care system. Particularly the old women, other un-earning women, handicapped and children in the families of such persons are getting neglected. The lower middle class is also finding the health costs unbearable. A consultation like this must seriously address itself this blatant problem of un-affordability of the cost of medicines and treatment.

7.   One reason given for the increased prices of medicines is the cost of research involved in development in the new medicines. Before, I deal with this; I would like to say that personally, I believe in economic reforms related to the health sector. This means more freedom to the pharmaceutical companies and hospitals. I also believe in research. I further believe that to develop new medicines, substantial funds have to be invested in research. Obviously there is a legitimate expectation of return on sums so invested. This obviously would the reflected in the prices of the medicines. I also recognize that if this is not readily accepted, there will be little research for treatment or more effective treatment of diseases. This would mean a loss to the humanity. But, I would add a caveat. It is that the cost of research must be reasonable and also disclosed in detail. Many responsible people believe that there is a lot of, what they call, creative accounting in the matter of calculating and disclosing the cost of research. The statuary authorities like the Indian Institute of Chartered Accounts, the Ministry of Corporate Affairs, and the Health Ministry, should play a more active and vigilant role in this matter of laying down the accountancy and disclosers norms, which are both transparent and stringent. We need legislation comparable to Sarbanes and Oxley Act of the USA for the health sector. Once the system becomes more rational and open, much of the criticism against the pharmaceutical companies in this regard will also automatically disappear. Purely in commercial terms this would be a good development for them too.

8.  Again while recognizing the importance of research and expenditure thereon, in some cases the argument of increased cost of medicines due to research is un-convincing. Research is taking place not only in the pharmaceutical sector but in all other sectors also. But, in the other sector the pricing trend is down side because of competition. The un-answered question is that how only in the medical sector more research means such cost escalations?

9.   I would also like to give the example of one particular medical product with which I am personally connected. I have been associated with Jaipur Foot project for last three decades. I know, that in this field, for the normal artificial limbs there has been very little research and yet the costs are abnormally high for some categories of artificial limbs. The artificial limbs have two parts – foot piece and socket. The foot piece commonly used in the west is SACH foot, the design of which has hardly undergone any change in last several decades. For the sockets now, instead of wood, polymers are being used. The latter are cheaper materials. Despite this according to Prof. C. K. Prahalad in his famous book –“Fortune at the Bottom of the Pyramid”, the cost of an ordinary artificial limb with SACH foot in the USA or Europe is or equal to US$ 8,000. He further says that the Jaipur artificial limb, using similar polymer materials for sockets but with Jaipur Foot, costs only US$ 30. I have raised this issue with large number of foreign and Indian medical experts, but did not get any satisfactory answer. There is some serious flaw somewhere. The worry is that in many other medical products, even more serious pricing problems exist. These need to be studied independently and objectively by the institutions like IIM Ahmedabad.

10. While on this subject of pricing, the role of WTO and Trade Related Intellectual Property Rights (TRIPS), also needs to be discussed. One result of the new free trade policy, the general core of WTO, is that the consumers anywhere in the world get the best products at the least price. This is because of the worldwide competition. But, paradoxically in case of medicines, the prices have gone up sharply. This is because of TRIPS, which creates monopolies, the anti-thesis of competition. While, need for research, patents and meeting the cost of research is recognized, where is the justification for giving patent protection for twenty years to the pharmaceutical companies? Many experts believe that such companies cover such cost of research in five to seven years. Even Prof. Jagdish Bhagwati a leading and ardent international advocate of globalization, could not digest the clout of the pharmaceutical industry with the Government of the USA and the role of the representative of the Government of the USA in the negotiations for WTO. It was with this combination that a subject like TRIPS got incorporated in the WTO regime. Even the life saving drugs and drugs dealing with epidemics are extremely costly. Morally, this is unsustainable. On some of these issues debates are going on in International forums. One only hopes that more sense and sensitivity would prevail, disregarding the more than reasonable claims of many of the pharmaceutical companies.

11. At the national level the Government of India and in the states, the state governments must take some concrete steps for regulating the prices. One is that, all the government and corporate hospitals must purchase generic medicines. This would immediately bring the prices of the medicines down. Medicines exist for patients and not patients for medicines. I can grudgingly understand the corporate sector resisting this. But, I am unable to appreciate the resistance of the medical fraternity to this simple solution to pricing. Some well-known expert committees have recommended this idea in the past but without avail.

12. While, I believe in free trade, medicines are essential for human beings. Thus this freedom of sale cannot be un-restricted. As a sovereign, legal body, charged with the welfare of the people in general, the Government must exercise its power and discharge its responsibility of ensuring proper prices of medicines. The concept of maximum retail price is morally, legally and practically justified. There could be some objections to such pricing of individual items but the basic idea is unassailable. In India self-regulation has hardly ever worked. I am saying this, having worked for more than a decade in regulatory bodies.

13. Another issue, which, should particularly be discussed in the portals of this famous institution of management, is the marketing system of the medicines in India. I am not aware of many studies on the subject. Out of politeness, the issues like the cuts or commissions given by the companies or their medical representatives may not be discussed. But, they are real ones and are responsible for the increased cost of the medicines.

14. While, I have argued for the paramount role of the state in the health care, I would also submit that the corporate sector and the NGO sector too should play their role. Many chains of hospitals by well-known groups have come up in the country. They have brought in new technology. They have added to the capacity also. This is all welcome. The only point is that such institutions must recognize that they are in real service sector and must keep the prices of the treatment reasonable. Proper accounting standards and requirements for disclosers must be invoked for them. Another infraction is that many of these corporate bodies projected themselves as social organizations and took the pieces of costly lands from the government virtually at no price. They also get tax concessions in the name of poor. The reality is that the poor can hardly enter them. It must be ensured that they honor their commitments.

15. About the NGOs also similar accounting and transparency norms are needed. Many of the NGOs are not ethical at all. They need to be exposed and eliminated. However, there are many others, which are rendering great service. Their great advantage is that unlike the Government hospitals or the corporate institutions, they can provide the element of sensitivity and greater service. Further the cost of overheads and administration for them is comparatively lower.

16. The other issues like preventive aspects, environmental preservation are also important. Yet, another aspect is that of the school and public education on health and hygiene. At one point of time health education school was prominent. That system should again be revived. This really would be the building block of the health system in the country. As part of promoting health education in public, I also suggest that some time of TV channels should be earmarked free for this purpose. In case of cinematic films the Indian law prescribes that all the cinema halls have to project documentary of public interest, before every show. I am not clear why the similar law cannot be made for TV channels.

17. My concluding submission is that the health care system in India should be discussed in the context of the patient. The system should be humane. It should be inclusive.

Thank you