Access to healthcare— doctors, medical facilities and reasonably priced medicines—is highly skewed in India. It’s estimated that only 30% or so of the country’s 1.2 billion people have any degree of access to these facilities. The vast majority are left to fend for themselves.
This sad fact is often used, or rather misused, to make tenuous policymaking claims. One such being that 100% foreign direct investment (FDI) in the pharmaceutical sector is detrimental to improving the dismal state of affairs. Ranged in this debate on one side is the Planning Commission, which feels that 100% FDI in the sector through the automatic route should not be altered. On the other side, different ministries such as health and commerce, want changes in this policy. On Monday, Prime Minister Manmohan Singh is expected to take stock of this situation.
On the surface, the entry of foreign companies—which have been more than keen to lap up Indian firms—seems to point to “market failure.” Instead of setting up new units that will add to the supply of medicines and build pharmaceutical manufacturing capacity in the country, their effort, so far, has been to acquire existing companies— their marketing network, manufacturing facilities and, of course, market share.
By Shyamal Banerjee/Mint
This is a simplistic way of looking at matters. If anything, the rush for buying Indian firms points to failures elsewhere in the healthcare system. The fact is that at one level, the 1.2 billion number is illusory, from a market perspective at least. Until recently, the bulk of the population was dependent on government provision of healthcare: primary health centres (PHCs) at the block and tehsil level, hospitals at the district level and specialized facilities at the state capital level. The failures at PHC level are too many to be enumerated—absent doctors and supplies sold off in the black market being just two. Foreign firms have nothing to do with these failures.
This is changing. Today, as incomes have gone up, so have medical expenditures. Due to government failures in providing healthcare, citizens are flocking to private doctors. Foreign firms have noticed this and are changing their outlook. Restricting FDI in the sector will ensure that even in theory there is no chance of augmenting the supply situation.
At another level, the effort to link healthcare access to FDI speaks of a certain lack of confidence in the government. There are several tools at the government’s disposal to ensure that prices don’t get out of hand. What it needs to focus on is getting in new firms. Competition will ensure the rest. Will restricting FDI in the pharmaceutical sector improve access to healthcare? Tell us at email@example.com