In an effort to reduce in-pocket health expenses from 71% to 50% in next four years, the government will distribute free generic medicines to all through its hospitals and will take its Jan Aushadhi (People Medicine) stores to every block of the country.
To make the plan work, the government will set up a national body, Central Procurement Agency to specify uniform standards for procurement of generic medicines and help state governments procure the medicines at cheapest possible rates.
"Transparent systems should be built to ensure that all procurements adhere to the highest standards," said Planning Commission deputy chairperson Montek Singh Ahluwalia.
Tamil Nadu has shown the way by ensuring free medicines to all in-house patients in government hospitals in the state.
The Tamil Nadu Medicines Supply Corporation procures generic medicines in bulk up to 1/20th of the market price from pharma companies and supplies them to the government hospitals.
Ahluwalia said the Tamil Nadu model should be replicated in other states for managing procurement and logistics for "free medicines for all" programme for which the Central government was willing to provide financial assistance.
The model is demand based, instead of traditional supply driven and needs adequate preparatory work.
Senior plan panel officials said it will require construction of warehouses, building of cold-chain and training of personnel.
The Centre will provide money for the same through to be launched National Health Mission, subsuming the existing National Rural Health Mission.
The Central Procurement Agency at the Centre and similar ones at the state governments will also supply "rational drugs" to Jan Aushadhi stores to be opened in each of 6,000 blocks in the country to provide medicines at reasonable price.
As of now, there are only a few hundred stories running in a few states such as Punjab, Orissa and Himachal.
With the panel suggesting the stores to be transferred to health ministry from department of pharmaceuticals, the government believes that the expansion will be feasible in next three to four years.
Ahluwalia said the Centre would substantially increase health budget from 1.1% of the GDP to 2% which is lesser than the demand of health activists of 2.5% of the GDP. It will cost the Centre a health budget of about Rs. 1.5 lakh crore.
"Providing free medicines, upgrading all district hospitals to medical colleges and expansion of medical education were priority areas for the government during the 12th plan to be finalized by end of this month," the deputy chairperson said, adding it was required to tackle India’s poor health indicators.
The Planning Commission’s steering committee on health had attributed high health costs as a prime reason for country’s poor health indicators, worse than its neighours having similar per capita income such as Bangladesh and Sri Lanka.
An average Indian pays at least 71% of his or her health expenses from pocket, which has been steadily increasing.
"With these proposals we aim to reduce pocket health expenses to 50 % by 2017," an official said.