When a slew of subsidised Amma pharmacies opened shop in mid-2014, very few would have thought of them as a window to the world of the pharmaceutical industry.
Yet, 10 months on, the real story behind the subsidised pharmacy outlets may not be the 15 per cent discount they offer, but the small profit they manage to make. In the first six months of operation (up to December 2014), the first 10 Amma pharmacies had made a cumulative profit of around Rs.9 lakh, according to information obtained through Right to Information requests.
“We didn't realise significant profit margins were involved in the medicine trade,” a government official said. “Some of the large private players are obviously making a killing in the name of healthcare,” he added.
The Amma pharmacy model has its own set of problems, with several of them currently plagued with poor location choice and low sale volumes, RTI data shows. But one indisputable message from the experiment seems to be that our pills and tonics could be a lot cheaper.
V.R. Muraleedharan, a health economist and professor at IIT-Madras, says: “A small set of drugs are under price control, but there are certain drugs in the market which have a 6,000-per cent profit margin."
The State’s Medical Services Corporation already buys drugs in bulk way below the market price, he says. “This is somewhat well known, but what people do not realise that it is as much as 7-8 times below market rate for some drugs.”
The State could vastly increase the number of such subsidised outlets, Mr.Muraleedharan says. “We need a public distribution system for drugs since the cost of drugs, as a part of the overall financial burden, is very high among families in the State. A diabetic, for example, has to spend Rs.2000-3000 a month even in the early stages.” If done right, the government can even earn a reasonable amount of revenue through these drug retail shops, he adds.
Private medical shop owners, however, insist they do not have any abnormal profit margins. “There are 348 drugs which are already under price control,” says N.Anandan of the TN Chemists and Drugists Association. “The government can always expand this list if necessary and use all the 30,000 retail shops in the State to take cheaper drugs to the people, instead of resorting to a branding exercise.”
Insisting that a price war is unnecessary, he says the government should ideally compete in terms of service and quality so that the overall customer experience would improve. “When it comes to health, discount should not be the primary concern and it is also not sustainable in the long run,” says Mr.Anandan.
