What's in a brand?

-Aniruddha Sen, Co-founder, Kenko

Covid and my daughter

A month or so back, I had to buy a bunch of medicines because my daughter was quite ill. I suspect it was covid, but I just didn’t put in the effort to get her tested. Instead, we self-medicated for some time with paracetamol and the likes, and after a day or so, I got a prescription for some antibiotics over an online consultation.

I vaguely recollect having paid about ₹1200 for the medication, and perhaps my wife shelled out another ₹300 or so for the online consultation. In sum, my daughter’s 4-day flu, cost us ₹1500 to fix. It may not be a large amount for us, but it certainly would have been a significant portion of someone’s savings, especially at the end of the month.

₹1500 = Cost of treating flu

But that’s not what this story is about.

Eureka 1 💡

A few days later, I came across an article in the papers about generic medicines and the government’s “Jan Aushadhi” stores. I’m not a particularly bright guy, and I haven’t had many eureka moments in my life, but that article hit a chord. And I haven’t been able to stop thinking about it since.

Remember the ₹1200 I ended up spending? Turns out, thanks to the government, it could have been something around ₹100. Think about all the things that could mean:

1. Families with strained finances don’t have to borrow money to pay for regular medicines, especially if there are aged parents at home

2. Hospital bills can potentially be half of what they are (more on this later)

3. Insurance companies can launch OPD schemes and plans that are super affordable

How does all this work? Especially Pt 2……

Enter Generics.

Let’s say you have a fever and need to buy paracetamol. Each strip of Crocin costs ~₹20.

Turns out that there is a paracetamol available, which is manufactured in government and WHO-approved factories, which costs about a 10th of Crocin i.e.: ₹2. While it may not strike you or me as a big deal, it’s a HUGE deal for those who need the money and need to save every bit of it.

These medicines are called generics - they’re unbranded drugs that have pretty much the same ingredients/formulation and do pretty much the same thing - at a fraction of the cost. Something like white-labelled/house brand staples in a retail store.

There are generics for common drugs such as paracetamol as well as more complex formulations that are used to treat serious conditions and even drugs that are used by hospitals for their treatment.

Eureka 2 💡

This brings me to Pt 2.

This was my second eureka moment of late. Here’s the headline statement:

40-80% of a hospital bill is actually OPD!

*Source: The Captable

Upon close examination, one realises that more than half of what hospital charges for are:

💊 Medicines

🩺 Doctor visits

🔬 Diagnostic tests

Sound familiar? These are what we usually consider OPD. Hospitals usually charge 4x of retail pharmacies for the same medication. A full-body checkup by 1mg, comprising well over 15 tests, costs ~₹1500. Hospitals unbundle these tests and charge separately for each test. When you put it all together, you end up paying about ₹6000-₹7000 for the same tests!! That’s 6-7x!

*Typical hospital bill with the breakup of charges - drugs and diagnostics are half the bill amount

I’m all for commercially viable operations, but human healthcare shouldn’t be a free-for-all. If the hospitals were to replace their branded drugs with generics, every hospital visit could potentially cost only ~30% of current costs, including room and establishment charges.

Of course, changing this system is a herculean task. But that shouldn’t stop us from taking baby steps. If healthcare costs are reduced, it will lead to cheaper insurance and OPD plans. We, at Kenko, have set ourselves the task of creating OPD plans for middle-income families that cover the cost of generic medicines, supplied by the government Jan Aushadhi centres and fulfilled/delivered by Kenko. The government, through NHA, has quietly gone around creating a world-class, efficient and scaled-up mechanism for generics in India - it may well be the largest of its kind in the world.

There will be huge challenges in getting this actualised, but my colleagues and I haven’t been this pumped in a long time. We didn’t start building our own company to do more of what is already being done, so it’s up to us to push the envelope.🚀