Pfizer India, the local arm of one of the largest global pharma companies, has begun discussion with standalone health insurance firms in the country to introduce coverage of prescription drugs.

Pfizer has appointed a consultancy firm to devise business models that could make it viable for health insurance companies to consider extending coverage to medicine along with morbidity.

For now, Pfizer is working with the health insurance arms of Religare and Max India Group and may soon add to the list the new entrant on the block ? US insurer Cigna. Cigna joined hands with the diversified TTK Group to enter the domestic market three months ago.

Confirming the plan, Kewal Handa, managing director, Pfizer India, told FE, ?We are partnering with standalone health insurance firms to chart out an evolution path through which every stakeholder in the ecosystem ? the consumers, the insurance firms and the pharma companies ? stands to benefit. For that, it is extremely important that health insurance companies extend coverage to outpatient department too.?

At present, almost all health insurance firms offer plans which mandate a proof of over 24 hours of hospitalisation to claim entitlements.

This has not only resulted in limiting choices, but has led to severe trust deficit between different stakeholders caused by multiplication of cases where the insured went in for hospitalisation even when it was not required.

?We are mainly focusing on roadmaps to extend coverage for drugs prescribed in chronic diseases,? Handa added.

?Health insurers are keen to provide drug coverage, but face a massive, paper-based distribution system with little flow of information and hundreds of thousands of points of dispensation. Automation of billing and records at the pharmacy level and development of formularies would go a long way towards making prescription drug coverage possible, but will likely depend on retail consolidation and integration between retail chains and insurance providers,? said Glenn Snyder, principal, lifesciences strategy and opeations at Deloitte Consulting.

Also, the modest income of most of the population keeps specialty and patented medicines unaffordable. Therefore, sales of expensive niche drugs depends on the growth and maturity of the health insurance sector. ?Because health insurance is such an important enabler for future demand in the Indian market, MNCs will need to work with the health insurance industry as it matures, but must also be prepared for this to occur very slowly,? Snyder said.

According to a WHO estimate, private out-of-pocket expenditures account for over 75% of the total healthcare spend in India, mainly flowing from inadequate and substandard public healthcare facilities and underdeveloped private insurance.

However, economic growth and increasing purchasing power has resulted in greater demand for health insurance coverage.

This is evident by the annual growth rate of total health insurance premiums which stood at 36.2% between 2002 and 2005, an indicator which is expected to sustain the momentum with an expanding middle-high income bracket (more than $2,000 per year), according to a Deloitte study, which projects that the middle income bracket would include 800 million people by 2015.