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Healthcare costs has become a key component in adding to the deficits of developed countries, and it is natural that the western world find solutions to reduce this burden on the exchequer even as many companies want to provide the benefits to all citizens.
On account of ageing population and the benefit of healthcare that is extended to its population both the US and the European Union have been aggressively tackling the healthcare problem. The US found its solution to healthcare issues in Obamacare, which gives a person access to healthcare benefits, even if unemployed, through medical insurance.
The key to low healthcare costs for the developed world is cheap generics drugs. That is where Indian companies come in. These countries are now feeling the burden of expensive drugs provided by their local manufacturers and multinational companies.
In light of this, the decision by the European regulator to impose a fine on nine generics drug makers, including Ranbaxy, highlights the issue at hand. These companies have been fined for limiting the supply of cheaper medicines in what is called as “pay-for-delay” deals.
An inquiry launched by the regulator found that brand name drug companies were paying generics manufacturers not to deliver cheaper version of their drugs to the markets, which help in keeping prices higher and harming patients and the government too. Lundbeck, a multinational pharmaceutical company, one of the companies named by the regulator, paid the generics firms to keep its products from the market and bought stocks of the generic anti-depressant drug citalopram to be destroyed.
Apart from this case, the regulator is also working on other cases involving big companies like Johnson & Johnson and Novartis. It is for the first time that big pharmaceutical companies have been found dealing with generics companies and preventing them from tapping their markets.
The entry into the US and EU markets is difficult for generics players, given stringent norms and high cost of entry. Only the bigger, deep-pocketed generics companies are able to tap these markets. There is thus little fear of competition from smaller players. Thus, once the bigger generics players are ‘managed’, it is a field day for the local player or MNC.
The issue, however, brings out the opportunity that exists for the generics manufacturer. A number of bigger and mid-sized Indian companies have made entry in these markets and are marketing their own products. The judgement highlights the thinking of the EU governments and the regulator in keeping healthcare costs low, which is what Indian pharmaceutical industry is best known for.
