PremiumAmerican tech billionaire Mark Cuban, who acquired celebrity through the television show Shark Tank, is carrying out a revolution in American healthcare, with his company, Cost Plus Drugs. With a helping hand from President Biden’s vaunted Inflation Reduction Act, which allows the federal government to negotiate down the prices of drugs procured for government healthcare programmes, this proposal to hawk generic drugs online for a tiny margin over the cost price is likely to bring down the overall healthcare expenditure in the US and expand the market for generic drugs.
India with its famed digital stride, government healthcare programme, Aayushman Bharat, and pharma manufacturing prowess was ought to have been the pioneer of what Cuban has taken the lead on.
Expanding the market for generic drugs is of particular benefit to Indian pharma, which has a largish hold on the market for generic drugs worldwide.
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The US spends more than any other country on healthcare: 17% of GDP, a share that is 70% higher than the global average of around 10%. There are many factors at play, making for this outlandish level of expenditure: Britain, France, Germany, Sweden, all spend about 10-11% of GDP on healthcare, and deliver comparable, if not superior, levels of care. Outrageously priced drugs are one factor. Drug prices are not subject to control and, in 2015, a pharma acquirer managed to increase the price of a drug that used to sell for $13.5 per pill to $750 per pill (Martin Shkreli, the takeover artist who performed this miracle for the drug Daraprim, was sent to prison subsequently for unrelated securities fraud, a disease distinct from pharma price bloating).
So, when Cuban got an email from a Dr Alex Oshmyansky, seeking support for his non-profit that was trying to control drug prices by peddling generic drugs, he decided to move in. He convinced Dr Oshmyansky to trust, instead, the for-profit model and launch Cost Plus Drugs as a company. The company has been in operation since January this year.
In the American pharma universe, dominated by Big Pharma, with its lobbying prowess with the government, insurance companies, high-cost hospitals and Pharma Benefit Managers, who are supposed to negotiate drug prices on behalf insurers, government programmes and the like but have been accused of taking bribes from Big Pharma, it is difficult for a small low-cost drug peddler to make a big impact. This is where the federal government’s new power to negotiate drug prices would make a difference. Once certain generics are available at price x from Cost Plus, if the government or a hospital procures an equivalent drug from another source at 12x, that can raise a stink.
When Cipla launched generic versions of expensive anti-retrovirals for treating AIDS, back in the pre-2005, process patents regime in India, the cost of treatment for AIDS patients in African nations plummeted. In 2001, Cipla offered to sell a course of AIDS drugs, for which western pharma companies charged $10,000-15,000, for $350 to Medicines Sans Frontiers. This sent shockwaves among AIDS communities around the world, governments and, apparently, in the collective conscience of Big Pharma, all of whom brought their prices down to levels comparable to Cipla’s.
Now, with product patents having replaced process patents in all countries that comply with the rules of the World Trade Organisation, off-patent versions of drugs that are still under patent protection are not possible, except in the case of a national emergency. But drugs that have exhausted their 20 years of patent protection can swiftly be produced by generic drug makers to make their life-saving potency available to those who could not afford their high prices.
Clearly, Mark Cuban’s low-cost drug venture is not the first example of competition within the rules of capitalism combating some of the evils of capitalism, for the benefit of ordinary people. But the more such efforts, the more people gain, without their ire turning against the system that has generated, so far, far more benefit than harm for humanity.
With companies like Amazon entering the business of retailing drugs — its reported venture in Japan, set to launch in 2023, would let patients get information on the drugs they have been prescribed and get them delivered — the ability of quality generics to outcompete pricier versions in the market is likely to go up. This would boost the demand for generics, of whose global demand, India supplies only 20% by volume. This share will get a boost, if India maintains quality and reliability, even as the market for generics expands, driven by the likes of Cost Plus Drugs, Amazon and the Inflation Reduction Act.
The challenge for Indian pharma, however, is not just to avoid repeat stories of Maiden Pharma’s cough syrup that was accused in Zambia of causing dozens of child deaths. It is also entering into higher-tech areas of discovering new molecules and gene therapies. For this, there is scope for collaboration between the pharma and information technology industries — the three-dimensional modelling of protein shapes is computing-intensive, apart from being domain-knowledge-intensive.
While the likes of Mark Cuban seek to use capitalism to iron out capitalist wrinkles, Indian pharma faces a landscape of expanding opportunity.
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