Pl ans Procurement & Inventory Management case study

India's Generic Drugs and Consumer Surplus Novartis of Basel, Switzerland, patent holders of Gleevec/Glivec (imatinib mesylate/imatinib), a highly acclaimed drug for Chronic Myeloid Leukemia (CML), enjoyed monopoly in the pharmaceutical world till Indias NATCO came up with its generic version, Veenat, selling at a fraction of the price that patients paid for Gleevec. Its efficacy was established when Veenat became the standard drug prescribed and provided by Government Hospitals in India in place of Gleevec. The stories of Ranbaxy's Lipitor, Dr Reddys Zyprexa and Sun Pharma's generic Seroquel are some of the other examples strengthening the impact of increased consumer surplus on supply chain performance. In India, generic Gleevec manufactured and marketed by "CIPLA" is available for only Rs. 300 i.e. is around $7 per tablet while Gleevec 400mg costs Rs. 3000/, which is around $70, or 10 times higher. With assured equal value to the patient, the price differential between the two appeared as the Consumer Surplus and catapulted the Indian generic drug industry to one of the world's largest. The direct impact of consumer surplus on supply chain performance was thus dramatically demonstrated. It is interesting to observe that the availability of Indian generic drugs has had a profound effect on the functioning of Organizations like Medecins Sans Frontieres (MSF). "Our reliance on Indian generic drugs for treating patients with HIV/AIDS across all our programmes in MSF is particularly acute-around 80 percent of the AIDS medicines we use are generic drugs made by Indian companies", says MSF pharmacist Janice Lee'. In fact even other major donors such as the Global Fund, PEPFAR, UNITAID, and UNICEF rely of generic drugs. Such preponderant reliance on Indian generic drugs would not have been possible but for the substantial consumer surplus these drugs provide. A year's treatment with tenofovir, disoproxil fumarate (TDF or PMPA). marketed by Gilead Sciences under the trade name Viread, from an originator company costs $613. And in some middle-income countries that price rises to over $1000. The generic version costs only $176 in a fixed dose combination pill. The attraction of generic drugs is obviousii. India tops the world in export of generic medicines worth $11 Billion and currently the Indian Pharmaceutical Industry is one of the world's largest and most developediiiii. In this connection we need to explore the following issues relating to increasing demand for generic drugs the world over: 1. Why are generics cheaper than the patented drugs? 2. Why the demand for generic drugs is high both in the developed and developing world? Are the underlying reasons for this increase in demand the same in both cases? 3. Which part of the supply chain can be identified as the major contributor to reduction in the cost of generic drugs? Field News: Why India's Generic Medicines Industry is So Important, Interview with MSF pharmacist Janice Lee. November 5,2010. - These comparison are not intended to supersede medical opinion or suggest alternative drugs. Medical advice must always prevail. - A brief Report Pharmaceutical Industry in India March 2012