Saturday, September 6, 2008

Pharma retail market characteristics


In society there are three main types of organizations: GOs (ie., governmental organizations), NGOs (non governmental organizations) and business enterprises. With the integration of the global economy marching ahead, and free market economies becoming all important, business enterprises are gaining in importance as societal organs. In a mixed economy, Govts., or governmental organizations are important entities supplying products and services to the society. In free market economies, private and public listed business enterprises are very important entities supplying products and services to the market. The key word to all business enterprises here is the MARKET. Understanding the market: its composition and characteristics, is vital for marketers.


Chemist retail bonus offers and pharma brand substitution

The Indian Pharma Market is controlled mainly by prescribers and to a large extent by the chemist retailers too. This is a special characteristic of the Indian Pharma market. A medical representative's job dosen't end with generating prescriptions. It entails managing the chemist retailers too. After all, the retailers should honor the prescriptions - if the prescription gets substituted with a competitor brand, the MR's efforts are in vain. Substitution of prescriptions is a peculiar phenomenon of the subcontinent. There is no guarantee that the brand prescribed is the brand dispensed. There can be understandings between the prescriber and the chemist as to the brand that needs to be dispensed. If a doctor has gained favors from a pharma firm or if the chemist has informed the doctor that a particular brand is available with very high 'bonus offers' ie., certain percentage of goods will be given free on purchase of the brand, for eg., for Brand X buy 10 bottles then get 2 bottles free, buy one box of a particular sildenafil citrate brand and get two or three boxes of that sildenafil citrate brand free; then that brand-on-the-scheme will 'run more on the chemist counter'. This approach is called offering retail schemes or retail bonus offers. There are newsletters mailed to chemists that advertise the bonus offers. Why is this done? Well, mere offering the retail scheme dosen't guarantee that the stockist (or wholesale distributor) will part with the scheme to the retailer. The wholesaler may part the scheme selectively, and get to enjoy the free goods himself. The goods are not marked as free, they come along with the MRP. So the stockist can bill these goods to the retailers too. Thus, to ensure that the retailer gets to know of the scheme, mailers and newsletters to retailers inform the details of the scheme, and the retailer can demand the scheme goods from the stockist sales boy. Pharma companies too prepare special leave behind literatures on scheme details that are distributed by the MR to the retailers. The obvious tendency of the chemist retailer is to dispense that brand on which he earns more, through the freebie goods. This is the pharma brand substitution characteristic of the Indian pharma market. Particularly in semi urban and rural areas, the 'retail offers' work magic in increasing the sales. In the case of dispensing doctors or doctors who have 'attached chemists', bonus offers work the magic in increasing the sales.

The retailer can also can get samples from MRs in lieu of 'official schemes' or in addition to the special retail offers, and these samples can be sold off to the unsuspecting or ignorant patient. This is called in local parlance 'chemist adjustment'. This approach of chemist and doctor adjustment with samples also helps the MR get POB (personal order booking) for his brands.

Briefly there was a season for generic-generics. This means generics that are unbranded. Normally, generics as such, are unbranded, however, in India, most generic medicines are branded. Generic-generics, there was a lot of hoopla about this concept a few years back, which has died down now, are not promoted to doctors. They are sold to retailers at low cost and on scheme too. However, these generic-generics have a high MRP. So the realization or mark-up for the chemist is very high - as high as 200% or even more! So the retailer dispenses these generic-generics and earns more from them. The patient is reassured about the content of the generic-generic and the quality if the patient inquires about the apparent substitution. However, the hoopla has died down after the Govt., took certain steps to suffocate this market. Nevertheless, today, a small generic-generic market continues to operate.

Retailer controlled sales

In USA, there are over-the-counter drugs (that which the patients asks for and buys legally), behind-the-counter drugs (where the pharmacist is authorized to dispense certain drugs, without any prescription from the patient; as such there is a talk that this category of drugs will be created shortly), and the prescription only drugs - they are dispensed on prescriptions only. In India, every thing is virtually over-the-counter and behind-the-counter. Thus, retailers in certain areas - where patients are not very educated, or in lower economic areas - the retailer gets to control the pharma market to a very large extent. Hence, in metros and urban areas, where retailers do not dominate the pharma business as much, MNCs get to dominate the market. In non urban areas, retail control on pharma business is very high.

Retailers also dispense several drugs over-the-counter to patients directly for the management of routine types of infections and illnesses, and also certain other products. Particularly in the case of sex rejuvenators and sexual health related products like ayurvedic sex rejuvenators, sildenafil citrate, and mifepristone (which is a huge OTX or over-the-counter plus prescription market; some of the top Indian pharma brands like Unwanted and MT Pill are mifepristone brands. This market is growing rapidly.) - the retailer is the 'sale generator'. Most often than not, the patient goes directly to the pharmacist to get the medicine. The pharmacist educates the patient on how to use the medication. Thus, retail offers are very high in this segment.

These are examples of market characteristics that are not textbookish. You go out in to the field and get to learn of them. Earlier, ORG the key market research organization for the pharma market, used to print 'blue books' of the market data, which used to have a compilation on the official bonus offers on various brands.

An important fall out of this retail bonus offers phenomenon is that competition between pharma companies gets fierce at the retail counters but the patient does not get any thing in return unless the retailer on his own, due to inter-chemist competition, offers discounts. This is one reason why chemists including chains like Medplus offer flat 10% discount to the patient.

Why are pharma retailers so powerful in India?

This has to do with a bit of history of medical profession in India. In the days of yore, doctors were responsible for diagnosis and dispensing of the medicines. In fact, among doctors who practice Ayurveda, the traditional form of medicine, most of the doctors are dispensers. This is in fact a subcontinental practice, as can be seen in Sri Lanka too, where dispensing doctors is a common phenomenon. Pharmacists to dispense only is a Western phenomenon, and has taken roots in India only after independence. Hence, today, the patient expects that pharmacists too dispense medicines on their own just as they do not mind doctors dispensing the medicines. Hence, addressing the characteristics, needs, and wants of pharmacists in a judicious way is inevitable to operate in Pharma India. THIS NATIVE INTELLIGENCE IS RESPONSIBLE FOR THE RAPID GROWTH OF COMPANIES LIKE MANKIND.

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1 comment:

girish agarwal said...

Hi Sunil. Your post was very informative. Would like to have a discussion with you on this trade practice in Pharma industry. Can we connect over email/phone? my email ID is

Girish Agarwal