Cipla plans to partner Ayushman Bharat; start dialogue with insurance firms

Drug maker Cipla plans to collaborate with the government to not only supply low-cost essential medicines to the Centre’s flagship Ayushman Bharat Pradhan Mantri Jan Arogya Yojana (PM-JAY) — but also for upskilling the entire health care ecosystem around it. The company also plans to have branded packaging for medicines that would be sold under the scheme, besides opening dialogues with the insurance companies and hospitals empanelled in the scheme. 

The firm, which had changed the global HIV-AIDS scenario with its drugs priced less than a dollar per day, plans to tie up with the government to ensure access to affordable medicines. “We are exploring opportunities where we can tie up with the government in upskilling resources in the health care ecosystem,” said Nikhil Chopra, executive vice-president and head of India business, Cipla. 

He said the company planned to meet Ayushman Bharat chief Indu Bhushan to discuss models through which a pharma company like Cipla could participate in the programme to ensure the availability and access to affordable medicines. There is a plan to identify a list of essential medicines, including antibiotics, painkillers, injectables, etc, which the company may supply to the Ayushman Bharat-empanelled hospitals. The packaging of these medicines could be different from the regular Cipla packaging. 

Cipla is looking at opportunities at the bottom of the pyramid. As such, the Ayushman Bharat programme has brought in 1.5 million new chronic patients and 8.5 million new non-chronic patients into the system, resulting in $400 million incremental spend on health care. EY estimates the incremental market size for Ayushman would be $2.2 billion by FY21. 

Yogesh Mudras, managing director, Informa Markets in India, said as the net widens and more patients enroll through the Ayushman Bharat scheme, this becomes one of the growth areas to target Indian pharma firms. 

Ayushman Bharat, however, is restricted to hospitals. Cipla said it had at least 60 distributors, who supply exclusively to hospitals apart from 3,000 distributors for its prescription business and 5,000 distributors for its unbranded generics or generic generic business. The size of its generic generic business is around Rs 1,500 crore and it is one the leading domestic drug firms in terms of unbranded generic drug sales. 

According to Chopra, Cipla is open to dialogues with insurance firms and the hospitals empanelled in the scheme around procurement of medicines among other things. “We are already running pilots with insurance companies and hospitals for some of our oncology drugs where a partnership can be worked out between the parties such that the patient benefits,” Chopra said. 

Cipla gets almost a fifth of its domestic revenues from trade generics. Trade generics refers to unbranded medicine sales, as opposed to branded generic medicines. Drugs that are copycats of innovator drugs (after the latter’s patents have expired) are generics. 

Trade generics are pushed directly to the distributor and not marketed through a field force (or medical representatives). The company undertook a major restructure of its domestic distribution network over recent months. This had resulted in revenue loss of Rs 200 crore in the first quarter of the financial year. Cipla’s prescription business has seen 4-10 per cent growth between FY16 and FY19. 

While the gross margin on the trade generics business is lower than the branded business, given the limited investments on brand-building and no field force being involved, the business remains margin-accretive to the company, Cipla’s joint president and global chief financial officer Kedar Upadhye had said. 

“We can bring in our expertise in counselling patients. We have around 600 counsellors. We can help the government to run camps or clinics,” Chopra said, adding that the government is looking for public-private partnerships in the health care sector.

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