How a govt healthcare scheme is boosting pharma revenues

The number of Jan Aushadhi stores has increased approximately nine-fold in the last five years, with sales reaching Rs 8.5 bn as of December 2022 and drug coverage expanding by 3.6 times to 1,759.

The pharmaceutical industry in India grew 6.8 percent and had a Rs 1.93 lakh crore turnover in calendar year 2023. This growth was fuelled by the fast growth of domestic branded pharmaceutical companies and a government scheme that promotes the sale of generic drugs.

The Rs 10,000-crore generics market forms a small segment of the Indian pharmaceutical market. It is dominated by Cipla, Alkem, and the Jan Aushadhi scheme. The Jan Aushadhi scheme, a central government scheme, aims to provide quality medicines at affordable prices (at least 50 percent cheaper, and in some cases, up to 90 percent cheaper).

What is the Jan Aushadhi scheme and why was it launched?

The Pradhan Mantri Bharatiya Janaushadhi Pariyojana (PMBJP) was launched by the Department of Pharmaceuticals to provide quality medicines at affordable prices to the masses through special kendras (Pradhan Mantri Bharatiya Janaushadhi Pariyojana Kendras).

The programme targets launching 20,000 new pharmacies in the upcoming fiscal year, Ravi Dadhich, chief executive officer, Pharmaceuticals and Medical Devices Bureau of India (PMBI), the government arm that executes the scheme, had said in an earlier interview with News 18.

Jan Aushadhi Kendras, which are run by private entrepreneurs with support from the government in the form of incentives, have been able to provide around 1,800 types of medicine and 300 types of surgical devices.

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Who owns the Jan Aushadhi kendras and who supplies medicines?

An individual, partnership, charitable society or a government agency submits an application to open a Jan Aushadhi Kendra. Medicines are procured through an open tender system from private manufacturers and public sector drug manufacturers. Each batch of procured drugs is tested at laboratories empanelled with the National Accreditation Board for Testing and Calibration Laboratories (NABL) and then sent to the Jan Aushadhi Kendras.

How has the scheme impacted the top line of domestic pharma companies?

The number of Jan Aushadhi stores has increased approximately nine-fold in the last five years, with sales reaching Rs 850 crore as of December 2022 and coverage expanding 3.6 times to 1,759 drugs.

“However, shortages of medicines and stock-keeping units (SKUs) persist,” said a recent report by HDFC Securities. In addition, expenditure allocation has seen a 1.6-fold increase, reaching Rs 280 crore for FY24-25, up from the revised allocation of Rs 11o crore in FY23-24, according to interim budget documents.

“Patients and doctors often associate low-cost medicines with poor quality, creating a mental barrier that may delay the acceptance of generic medicines to some extent,” the HDFC Securities note adds.

Kotak Securities notes that the expansion of Jan Aushadhi Kendras would hamper the growth of the branded generics market in India. “With Jan Aushadhi’s rapid expansion, there is a risk of this hit on IPM (Indian Pharmaceutical Market) swelling further. As seen earlier and more recently with NMC (National Medical Commission), the government is keen on pushing generics,” it said.

The Indian Pharma Market grew in 2022 and 2024 because it was allowed to hike prices linked to WPI for the National List of Essential Medicines. On Mar 27, 2023, the NPPA announced the calculated annual change in WPI as 12.1 percent for CY22 over CY21. This translated to a significant price hike of ~12 percent (~10.8 percent in FY22) vs a normal hike of 2-3 percent for 800+ scheduled drugs and medical devices from 1 Apr 2023. Price benefits started reflecting in 9M’24 performances.

However, for FY 25, in line with the wholesale price index (WPI), the government is set to allow only a .0055 percent increase in prices of drugs listed in the National List of Essential Medicines. The benefits enjoyed in the previous years will not continue in FY 25.

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