De-wafering healthcare Waste, Fraud and Error (Wafer)
Waste, Fraud and Error (Wafer) are leeches that bleed healthcare. Unless we fix them, spending money on healthcare will be like fire-hosing a flame with petrol.
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It is clear that de-Wafering healthcare can be a tremendous opportunity to bring down healthcare costs. A mix of tightly enforced regulations can be used to do this. Going completely generic may be a good thing to start. |
Low GDP per capita limits the headroom for spending on healthcare
Discussions about healthcare and the need to move towards universal healthcare (UHC) centre around how much money should be spent on UHC as a share of GDP.
Comparisons are drawn with other countries that deliver UHC are problematic; India has a large GDP but GDP per capita, a measure of ability to spend on services by individual citizens, is comparatively low (eg. USD 2099 for India vs USD 43,000 for the UK). A more apt calculation is – what per cent of GDP per capita can we spend on healthcare? And when we do the math, we find that we need to raise spending to 67 per cent of GDP to match what the UK (whose National Health Service is a paragon among UHC models), spends per capita on healthcare (after adjusting for purchasing power). This is obviously not possible.
Need to increase productivity in healthcare
We need to look at alternative ways to fund the incremental spend. One obvious way is to make healthcare spend more productive. The investment required to generate a desired clinical outcome is one way of measuring productivity in healthcare. For example, if we take infant mortality rate (IMR) as a sample metric, how much additional spend do we need to put in to achieve a 10 per cent reduction in IMR.
The costs that go into healthcare are obvious – wages of healthcare workers, cost of capital on building and equipment, cost of medicine… Buried in this is a hidden cost that remains unmeasured and unconsidered, the cost resulting from unchecked Waste, Fraud and Errors in healthcare delivery (Wafer, is convenient shorthand). We believe that reducing this hidden cost can save a humungous nearly INR 40,000 to INR 50,000 crore. Fund that can subsidise the incremental cost of delivering healthcare to every Indian.
Example of Wafer
Waste, Fraud and Error are inextricably intertwined. Fraud increases waste and waste can spur fraud. Similarly, fraud can result in errors and errors can result in waste. We will illustrate this with an example. Doctor X, responding to incentives (bribes) from pharmaceutical industry representatives, ‘overprescribes’ an expensive new class of antibiotics. Over time, bugs develop resistance requiring even more expensive antibiotics and even treatment in intensive care.
While prescribing unneeded antibiotics to earn a kickback from the pharma company is an example of fraud, the adverse consequence to patients can be considered iatrogenic or physician-induced and, therefore, an example of error. The herculean efforts and costs to manage the unleashed epidemic of antibiotic resistance is an example of waste that could have been avoided. In other words, there are no watertight compartments sealing off the three sins of waste, fraud and error.
Cost of Wafer in India
If we are to achieve our objectives in healthcare, we need to wage a war on Wafer. There are no systematic studies of Wafer in Indian healthcare. But we estimate, based on data from other countries and patches of data available for India, that the cost of Wafer is around INR 80,000 crore.
It may not be possible to eliminate this entirely. But, with the right checks in place, we can bring this down by as much as 50 per cent. The resulting INR 40,000 crore in savings can subsidise high-quality healthcare for all citizens as part of universal healthcare.
Shift to generic medicines
The lowest hanging fruit in the context of Wafer is the use of branded medicines when equivalent generic medicines can do the job. Shifting to generic medicines at scale is not a new idea – it was proposed by the Modi government at the start of its first term. Branded medicines and their generic equivalents are exact replicas.
A memorable brand name merely adds cosmetic value and is intended as a mnemonic for doctors; a constant nudge to prescribe the brand. For that cosmetic difference, the patient pays a huge premium. For example, the popular cholesterol-lowering drug known by its generic name as Atorvastatin is known as Atorva when sold by Zydus pharma and as Lipikind when sold by Mankind Pharma and simply as Atorvastatin when sold by the low-price Jan Aushadhi Pharmacies. The respective prices for a 10 mg tablet are INR 9.18, INR 3.69 and INR 0.56. There is a 16-fold difference between the top brand and the generic. Would you accept a 16-fold difference in the price of a commodity like atta or salt? Then why do customers accept this difference? Simply because the roles of prescriber and payer are separated.
The doctor chooses the brand that rewards him and the patient has to go along since she cannot act otherwise without offending the doctor (the dispensing pharmacist and the doctor often work in nexus since the pharmacist also gains from dispensing the higher-margin drug and there is no incentive to substitute a cheaper equivalent).
The only way to break this nexus is to ban the branding of medicines altogether and identify medicines only by their generic name. Companies can be allowed to tag their company names after the name of the generic ingredient, eg. atorvastatin-Zydus or atorvastatin-Mankind, so that there is sufficient skin in the game for pharma companies to ensure product quality.
In one stroke multiple intertwined sins can be eliminated – ‘overprescribing’, doctor kickbacks, ‘misprescribing’ due to confusingly similar brand names and the doctor’s ignorance of pharmacology (if you know medicines only by their brand name you are less likely to know or care about the pharmacology of the drug ingredient). A big bite can also be taken from the healthcare bill – about INR 10000 to INR 15000 crore is our estimate.
Pain in the short term but innovation and quality over long term
Going generic cold turkey will be easy to legislate, but there will be pain, as many subscale pharma companies will shut down and marketing jobs will be lost. The long-term benefits will, however, outweigh the short-term pain. Pharma companies will be forced to innovate since a brand name will no longer offer a moat for their products. Jobs in research and development and regulatory science will grow.
There will also be an improvement in drug quality (ever wondered why the USFDA pulls up Indian companies so very often whereas the Indian drug regulator seems to see nothing fishy at all?) since that will be the only differentiator distinguishing different versions of a generic drug.
Eliminating Wafer has to underpin implementing UHC
Eliminating Wafer from the practice of medicine has to be a journey with many incremental steps. But the reward, not just financial, but the consequent improvement in the quality of healthcare is very attractive. In an environment where resources have to be stretched to meet the objective of UHC, eliminating Wafer is a necessary first step. A critical tool enabling the elimination of Wafer is transparency on prices and clinical outcomes, combined with a gatekeeper function for primary healthcare and a shift from fee-based to value-based healthcare. If we ignore this when healthcare budgets are going up steeply, the increased liquidity will be unproductive, since it will simply fuel growth in Wafer.
