Obama tonic for India Inc.

On March 23rd, when US President Barack Obama signed the 2,400-page healthcare reform legislation into law, he was not only opening the gates to some sweeping changes in the American healthcare system but was also opening the doors to healthcare players around the world. As the proposals of the Act are dissected by experts, it's becoming clear that India and Indian companies could be major beneficiaries—in particular, its generic drug makers, IT and BPO sectors.

Currently, the cost of medication in the US is one of the highest in the world. The Act promotes the use of generic drugs that are often one-tenth the price of the original version. Having the highest number of US FDAapproved manufacturing facilities outside the US, India, with its chemistry skills and low costs, is going to be an obvious choice for US pharma companies when they go shopping for generics. This situation was anticipated by many leading companies like Pfizer, GSK and Sanofi well in advance.

Recent deals between international pharma companies and Indian counterparts, like the tie-up between Pfizer and Aurobindo, could now get a boost with this. "This will result in market expansion as additional 32 million (uninsured) Americans will now get health cover and the resulting pressures on costs will move more business towards generic drugs," says G.V. Prasad, Vice Chairman and CEO, Dr Reddy's Laboratories.

The Act will also ensure a bump-up in demand for more cost-effective healthcare solutions and increased IT and back-office work in the US as a consequence of getting more people into health insurance. The US government is likely to spend anything between $15 billion and $20 billion on healthcare technology services alone, and a sizeable chunk of this business is likely to get outsourced either directly or indirectly to the major Indian IT and BPO firms. Says Kiran Karnik, former Nasscom President: "Indian IT companies have been playing a role in helping the UK National Health Service. They could use this expertise in the US also."

Obama's initiative could also trigger more interest in medical tourism to India as the US consumers and insurers look to more cost-effective destinations.

BOOSTER DOSE

• Increased volumes for generic drug companies.
• Will drive demand for Indian IT and BPO services.
• Can boost medical transcription with focus on electronic health records.