BackHealth insurance surge to put India in top 10 pharma markets
IMS Health report says health insurance premiums expected to reach `30,000 crore by 2015
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Mumbai: India’s drugs and pharmaceuticals market is poised to become one of the top 10 in the world in value with total sales doubling to $26 billion by 2016, driven by an expected surge in health insurance, according to the latest market prognosis report by drug market researcher IMS Health.
Some experts said the prospects for a twofold sales jump in three years time appears to be unrealistic, pegging growth a more conservative 13-14% annual growth. IMS is pinning its hopes on what it sees as an across-the-board expansion.
“Increasing government funding, rising standards of care and an overall boom in the opportunities for access to necessary treatment are all coming together to shape a dynamic and sophisticated marketplace (for) healthcare in India," said Chinmay Padhi, head payer (insurance), IMS, in a report titled Managing the Cost of Care: The Past and Future of Health Insurance in India.
The country’s drug market, worth ₹ 74,117 crore ($12.35 billion) as of May 2013, is ranked 13th now, up from 15th in 2006 with sales of $6 billion.
The 2016 growth projection is despite the value erosion that is expected to take place with expanded price controls from this year and the negative growth projections of overseas companies due to what they call a weak patent regime. Recently announced government healthcare plans and aggressive market expansion moves will help. The World Bank had estimated dramatic growth in Indian health insurance by 2015, covering at least 50% of the population or about 630 million people.
According to Padhi, health insurance is one of the most important areas in India’s rapidly evolving healthcare market.
The World Bank had said in a 2012 report that healthcare expenditure was one of the leading causes of poverty in India. Around 63 million individuals or 11.9 million households had been pushed below the poverty line by healthcare expenditure in 2004.
“If India is to truly have a place on the world stage, an efficient health insurance system is absolutely mission-critical," it said.
This process is already under way.
“Spurred in large part by pro-active government sponsored education, awareness and incentive programmes such as Rashtriya Swasthya Bima Yojana (RSBY) among others, the importance and value of the health insurance industry is on an upward trajectory," Padhi said.
RSBY is a health insurance scheme for below poverty line families launched by the government of India.
Padhi’s report showed that as of 2010, at least 25% of the country’s population had some form of health insurance.
Health insurance business premiums are expected to reach ₹ 30,000 crore by 2015 an increase of 302% from 2011, according to IMS. Health insurance coverage grew about 445% between 2004 and 2011, IMS said.
Muralidharan Nair, partner, life sciences, at consultancy firm Ernst and Young, expects growth to be much slower than what’s expected by IMS.
“A projection of about 100% growth in three years seems slightly unrealistic," he said, adding “India’s pharma market will continue growing at 13-14% in the next two to three years."
The health insurance market is likely to expand significantly to cover half of India population by 2015, according to an Ernst and Young analysis. In this coverage, RSBY will have a market share of 44% and other commercial insurance groups will enjoy 26% market share. While the share of state health insurance schemes and ESIS (employee state insurance schemes) will have a share of 16% and 6% respectively.
But such a pace of growth will depend on insurers building an appropriate pricing structure, besides stabilizing and legitimizing the claims process, the IMS report said. India’s new drug price controls may force big pharma companies to tap villages and small towns in search of more patients and volumes, Mint reported 4 June, citing industry analysts. The price controls are aimed at making essential medicines accessible to more patients in the country, especially in the rural and semi-urban markets, analysts said.
Although foreign drug makers are yet to commercialize many of their patented drugs in India, the expansion in insurance coverage will encourage them to introduce these, said an adviser at a foreign consultancy firm who didn’t want to be identified. He added that India’s patent regime will be robust enough to protect genuinely innovative products.
“But the value growth in the market, which is predominantly for generic drugs, will benefit both local and foreign drug makers," said the person.
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