Karunya Community Pharmacy
Discount Prices from an Indian Government Chain
Our visit to the Indian state of Kerala was to understand about the state’s drug procurement system, Kerala Medical Services Corporation (KMSCL). KMSCL is an autonomous drug procurement agency that is responsible for the procurement and distribution of drugs to all the public health centers in the state. During this visit, we were introduced to a novel initiative, Karunya Community Pharmacy, that KMSCL undertook in its ongoing endeavor to improve access to essential medicines.
The fact that drugs constitute a high portion of the out-of-pocket (OOP) expenditure on health has become common wisdom. In India, the proportion of drugs accruing in the health expenditure ranges from 16-65%, varying by state. The literature also shows the catastrophic impacts that OOP expenditure on health can cause to people. Various recommendations have been provided to the government to address this problem at a micro level by increasing access to essential and affordable medicines to individuals and households; and at a macro level by keeping a check on the increasing prices of drugs and modeling efficient supply-chain systems to make drugs available.
Karunya Community Pharmacy is a retail outlet that sells branded generics at steep discounts ranging from 20 to 60 percent. Karunya Pharmacy is an initiative by KMSCL and it is a pure for-profit chain of pharmacies. It is a business model that competes on equal terms with other retail pharmacies. The advantage Karunya may have over other pharmacies is cheaper prices through bulk procurement for the entire state and taking advantage of the streamlined procurement practices of KMSCL. The need for it’s existence has been necessitated by two factors: a) the strong nexus between government doctors and pharmaceutical sales representatives that results in a positive push for branded medicines and a negative push for pure generics (not unlike other Indian states); b) Kerala populace’s preference for higher quality products (unique to this state).
The modus operandi adopted by the pharmacy was to leverage the bulk discounts enjoyed by the KMSCL through centralized pooled purchasing of branded generics directly from the manufacturers. The reduction in the prices due to the bulk discounts and lack of middle-men margins are significant. The future plan for this initiative is to increase the number of pharmacy outlets to about 2,500 stationing them at all government district hospitals, taluk hospitals and community healthcare centers in the state. Karunya Community Pharmacy also plans to stock specialty drugs for the treatment of cancer, renal disease, hypertension where the discounts would impact the beneficiaries the most. In short, this community pharmacy would act as the sole carrying and forwarding agent for a majority of the pharmaceutical manufacturers.
The repercussions of the first pilot in Thiruvananthapuram have been very significant, driving three private pharmacies out of business within two months of operation, according to the MD of KMSCL, Biju Prabhakaran. The State had also announced its ambitious plans of having several such outlets in all the districts near the public hospitals. While it is an interesting and a good endeavor, its continuation requires political support and addressing the protests from the retail pharmacists and industry lobbies. This model has the potential to revolutionize the pharmaceutical retaining business in India if executed tactfully.