CHINU SRINIVASAN

India,

Srinivasan is demonstrating how to get affordable medicines to India's hundreds of millions of citizens who cannot pay the current commercial prices.

This profile below was prepared when Chinu Srinivasan was elected to the Ashoka Fellowship in 2002.

INTRODUCTION

Srinivasan is demonstrating how to get affordable medicines to India's hundreds of millions of citizens who cannot pay the current commercial prices.




THE NEW IDEA

Srinivasan is setting out to break the logjam in the Indian drug industry that has kept drug prices so high that they are unaffordable and inaccessible to a majority of India's citizens.

After a period of demonstrating the efficacy of his low-cost production idea while contracting for the use of spare capacity in the drug industry, he is now moving to direct production. This model unit will function as an important alternative source of medicines to those groups and individuals seeking to circumvent the virtual monopoly drug manufacturers currently enjoy. Equally important, it will demystify the production process and demonstrate that drugs can be manufactured and sold well below current market prices. Srinivasan hopes his prototype will help catalyze public resistance to the current artificially high-price arrangements.

The production facility will allow Srinivasan and his colleagues in the cooperative he helped found, Low Cost Standard Therapeutics (LOCOST), to supply desperately needed drugs at low cost initially to fifteen percent of the Indian voluntary sector - 300 organizations. Their approximately ten million end users are only a tiny percentage of those that need LOCOST's help, but by serving them all across the subcontinent he will be creating an invaluable model. The new production unit will give Srinivasan the independence to build on the comparative advantages that have made his work possible so far: location at the center of the drug industry and near suppliers of raw materials, technical competence, and the elimination of high-priced marketing campaigns and fancy packaging.




THE PROBLEM

The average Indian earns $300 a year. The prices charged by national and international pharmaceutical houses are generally beyond this citizen's reach. That is true of basic medicines, and is even more so of the increasing number of more advanced, more specialized medicines being developed and increasingly prescribed.

A further threat to poor consumers is the central government's plan to decontrol the prices of between sixty to seventy percent of the current list of scheduled drugs as part of its overall liberalization program. For example, the price of Aerocort, a drug used to treat asthma, has already risen to 116 rupees from seventy-eight; an average worker earns thirty to fifty rupees per day, and many rural laborers earn much less.




THE STRATEGY

By cutting production costs and eliminating the middleman, Srinivasan and LOCOST are able to sell drugs directly to voluntary organizations that, in turn, provide them to their customers at below market, far more affordable prices. A maximum retail price of ten to fifteen percent above cost is stamped on each formulation LOCOST produces.

Keeping the ideal of low profits is integral to Srinivasan's business plan: if voluntary organizations try to charge higher prices, their supply is cut off. LOCOST itself makes a profit of about ten percent on its products, compared with an average of fifty to sixty percent among the mainstream drug manufacturers.

Once capital expenses are repaid, Srinivasan's new unit will be able to run subsidy-free and increase the number of drugs it produces to eighty, more than eighty-five percent of the drugs listed by the government as essential for primary health care. The product line will expand until all formulations required for the provision of community health are available. The guiding principle at work is a commitment to rational drug therapy: "staple food" is the goal, not "cake" like the nonessential drug formulations produced by the large drug industries and then glamorized through elaborate marketing campaigns. LOCOST, for example, will not manufacture tonics and vitamins, even though a great market demand exists. Profits the factory generates will be recycled to continue the work, through (1) setting up a trust; (2) giving rebates to customers; and (3) expanding LOCOST's efforts to provide information to voluntary organizations on the correct use of medications.

Srinivasan knows he is at a stage where he must expand his work. In order to expand his customer base, Srinivasan will work closely over the next few years through his contacts in the voluntary health sector, relying heavily on volunteers and word of mouth to make his service known across India.

Srinivasan is also beginning to explore whether LOCOST's techniques could be applied to making children's books more affordable and therefore practically accessible.




THE PERSON

Srinivasan grew up admiring a father who was very much committed to his work as a civil servant in the Indian Administration Service. He remembers his father encouraging him to serve by challenging him to bring electricity to the villages surrounding their home in Tamil Nadu.

A graduate of India's two most prestigious professional schools, the Indian Institute of Management and the Indian Institute of Technology, Srinivasan never considered the easy, well-traveled path leading to a career in business. Instead he sought out a path that would allow him to use his education to serve more important goals.

He worked for the Voluntary Health Association of India and he could not help seeing how the existing drug prices denied care to hundreds of millions of Indians. He became a writer and organizer pressing for a more rational drug policy. Gradually he began applying his management and technical skills to the job of providing affordable medicines. After testing his idea and its distribution channels using contract production facilities, he is now launching his alternative approach to providing affordable medicines on a large scale.