Going viral: How is the pharma market coping with Janaushadhi Kendras?

Prem Thacholi of Ernakulam in Kerala is a happy man. Coming from a traditional warrior family, he has been distributing pharmaceuticals and fast-moving consumer goods for 35 years. Now, though, he is focussing on his Janaushadhi business, as he says the payment cycles are more regular and there is no pressure of meeting sales targets. He also earns a higher commission of 10 per cent from Janaushadhi, compared to the 1.5 to 3 per cent he used to earn earlier.

“I made a turnover of Rs 100 crore to Rs 110 cr­ore in FY23, and this financial year I aim to touch Rs 130 crore. If one considers the sa­me volume of drugs in the branded gener­ics spa­ce, the turnover would be much high­er — abo­ve Rs 140 crore in FY23, because Jan­a­­u­s­h­a­dhi drugs are sold at much lower pri­ces than branded generics,” Thacholi elaborates.

 

Generic drugs, copies of innovator medicines, are made once the patent ends. India is primarily a branded generic drugs market, where several pharma companies sell their own brands of generic molecules. For example, the paracetamol molecule can be bought in the market as Calpol, Crocin, Dolo and other trade names. These are thus referred to by the oxymoronic term of branded generics and these are what the common man usually buys.

Trade generics (generic generics, or those without a brand name) are also sold by pharma companies, but they don’t mar­ket it through doctors. Instead, these are pu­s­­hed directly into the distribution network. Trade generics are usually packed in thousands, and meant for hospitals and dis­pen­saries. In the absence of marketing costs, the prices of non-branded generics can be lower than those of branded generics.

Janaushadhi Kendras sell generic drugs that are priced 50 to 60 per cent lower than the popular brands. Right now, they are riding an almighty wave. The rapid expans­i­on of the kendras is not only providing live­li­hoods but also playing a critical role in saving out-of-pocket expenditure for patients.

In the Rajya Sabha in Decem­ber, Bhag­want Khuba, the minister of state for chemicals and fertilisers, said an estim­a­ted 1 million to 1.2 million people on an av­erage buy medicines every day from Jan­au­shadhi Ken­dras across India. During FY23, the Pha­r­maceuticals and Medical Devices Bur­eau of India (PMBI) sold Janaushadhi medicines worth Rs 1,236 crore, which led to savi­n­gs of Rs 7,416 crore for citizens. PMBI is the implementing agency for the Pradhan Man­tri Bhartiya Janaushadhi Pariyojana (PMBJP).

However, the rising penetration of trade generics is also denting the value growth of the Rs 1.9 lakh-crore domestic pharma market. Big pharma companies, such as Cipla, Alkem, and Torrent Pharma, sensing an opportunity in the huge volumes, have entered the trade generics space. According to Kotak Institutional Equities, the growth of the Indian pharma market can be dented by 70 to 110 basis points annually because of trade generics, at least until FY28.

 

Strategic expansion

On November 30, Prime Minister Narendra Modi unveiled the 10,000th Janaushadhi Kendra at the All India Institute of Medical Sciences in Deoghar, Jharkhand, and pled­ged to more than double the count of these affordable generic medicine stores to 25,000 by the end of FY26. Since then, the number of Janaushadhi stores has gone up by 373, taking the tally to 10,373 as on Janu­ary 3, according to PMBI. Currently, the PMBJP basket has more than 1,965 drugs and 293 medical consumables and equipment.
 

A Janaushadhi Kendra owner in the eastern suburb of Mumbai says it does brisk business and is open till 10 every night, this despite not doing doorstep delivery of medicines, which every other chemist in the neighbourhood does. This kendra, on the other hand, has customers queuing up in quest of affordable prices.

Many of Kerala’s Janaushadhi stores, Tha­choli says, are run by women entrepreneurs. The state is expected to add 1,000 st­o­res in the next three to four years, when the all-India count is projected to reach 25,000.

The government, for its part, is strategically executing the expansion. A senior government official tells Business Standard the­re are five warehouses across India now, in places such as Guru­gram, Bengaluru, Gu­wa­hati, and Surat (north, south, east and west).

“Distributors supply to stores, and there is a provision for stores to place orders dire­c­tly with the warehouse. This makes the sys­tem transparent and agile. The PMBI sources medicines only from facilities certified by WHO-GMP (Good Manufacturing Practices standards adopted by the World Health Organization). On top of that, there are quality inspectors who check for any substandard medicine getting into the system,” the official says.
 

Kotak Institutional Equities also noted in a December report that apart from opening more stores, the government is trying to improve the geospatial coverage of the stores. Currently, 33 per cent of the stores are in South India, with a skew toward Karnataka and Kerala. Among the states, Uttar Pradesh has the highest number of Janaushadhi stores, at 1,481.

“The government is targeting sales of Rs 1,400 crore for the PMBJP programme in FY24. Our channel checks suggest that des­pite the slight improvement over the past few years, supply chain challenges remain, and it will be particularly important to ensure continuity of supplies, amid the rapid store addition,” says the Kotak report.
 

Vinay Makhija, a Lucknow-based dist­ributor of Janaushadhi medicines, says there were barely 10 Janaushadhi Kendras in all of Uttar Pradesh in 2015, when he be­gan distributing to the centres. “Now there would be close to 1,400, and many of them are attached to government hospitals.”

 

Quality question

There is a reason branded generics rule the Indian pharma market; they carry a promise of quality. That is what brands do in any bu­s­iness, but the promise has unm­a­t­ched primacy in pharma, because medicines have a direct and immediate bearing on health.
 

In the absence of brands, such as in the case of trade generics, some consumers might miss that promise of quality. A recent report said that 15 per cent of the medicines produced by small companies failed to meet quality standards, as against the nat­ional average failure of 2 per cent. The Cen­tral Drugs Standard Control Organization, the drug regulator, in November began an enforcement drive — including action aga­inst testing labs and clinical research bod­i­es — to curb poor manufacturing practices.

Centrum Institutional Research noted in a December report that a western India dealer of medicines said around 40 per cent patients had shifted from branded drugs to generic medicines. This has happened because now doctors are expected to write the name of the salt, or molecule, in their prescription, and the patient can opt to buy it from a generic medicine store.

As the wave of generics spreads in the country, other countries have sought Ind­ia’s help to replicate this model of Janau­sh­adhi Kendra network. According to rep­orts, Nigeria wants to set up stores similar to these Kendras in an attempt to make availa­ble medicines available at affordable prices.

It seems the kendras might spread like a rash.