Sunday, February 28, 2010

Seize the opportunity!

Opening quote:

Sales is vanity, profit is sanity and cash is reality!!
- Adi Godrej, Chairman, Godrej group, on page no. 19, Economic Times, dt., 26.2.2010

The pharma industry is always on a roll in India! Check the growth of pharma industry in India as depicted in the bar graph below:We observe that the Indian retail pharma industry has grown from Rs. 25307 crores (June 2006 MAT) to Rs. 36527 crores MAT June 2009. This has happened in 3 years - if we extrapolate this growth it is not an exaggeration to expect the pharma industry to become a Rs. 50000 crores (retail pharma formulation sales only) industry by say MAT Dec 2012. Around Rs. 13000 crores to Rs. 15000 crores of extra retail pharma business will take place (over and above Rs. 36527 crores) by MAT Dec 2012, as per my hunch. So the moot point is who will take this business? Definitely there will be some smart pharma companies who will be a part of this growth when the Indian retail pharma formulations market may reach size of Rs. 50000 crores (ie., by MAT Dec 2012)!

While it is vital to understand that the 4 Ps (Product, Price, Promotion and Placement) will be critical to grow in the Indian pharma market - the PRODUCT itself will play a key role.

The pharma product is an interesting entity that can be understood at three levels:

a) THE CORE PRODUCT: The generic is the core product. For eg., when a patient is prescribed Calpol tablets, the doctor may be prescribing it for the generic it contains ie., PARACETAMOL 500 mg. However, Calpol or any other brand is much more than the core product. The brand is not merely the generic.

b) THE ACTUAL PRODUCT: This part of the product is built around the core product.

For eg., assume some hypothetical features of a brand of a paracetamol suspension. This product contains paracetamol 120 mg per 5 ml. The doctor may be prescribing it for this generic. However, the suspension is much more than the generic offered by it.

The actual product features include:
  • a specially designed diameter of the mouth of the bottle that helps in pourability
  • the strawberry flavour that promotes patient compliance
  • a cute measuring cup that is attractive to the paediatric patient
  • a superior formulation that disperses suspension easily and uniformly on shaking
  • taste masking excipients that mask the bitter taste of paracetamol
  • and the polymer PET bottle that makes the product attractive, safe, unbreakable and patient friendly.
These are the aspects of ACTUAL PRODUCT FEATURES that enhance marketability and acceptability of the product.

Similarly, pharma marketers enhance actual product features by incorporating innovations such as Alu-Alu pack, calendar pack for oral contraceptive tablets, informative and educative patient information leaflets, very attractive packaging ... so on. Such innovations in the actual product help in product differentiation, brand recall, brand loyalty and finally marketability.

c) THE AUGMENTED PRODUCT: refers to the additional services and benefits that are offered with the core and actual product. The augmented product features are most important in pharma marketing. Doctors are not prescribing merely for the core product features or actual product features. This is the major difference between consumer goods and pharma goods. Doctors are prescribing for the additional services and benefits associated with that of a pharma brand.

Pharma marketers build in augmented features in the product through their MRs. The field personnel offer clinical reports, share clinical experiences, offer gifts, sponsorships, samples, freebies, and other packages as part of the augmented product that helps raise prescriptions and sales.

Today, the augmented product is under threat due to strict guidelines of Medical Council of India (MCI). This has been widely reported in the media. For eg., Chronicle Pharmabiz, dated, 11.2.2010 on page no. 28 states that MCI warns doctors of cancellation of registration for accepting freebies from companies. Now to what extent this will work in India is a million dollar question! In all probabilities this will not work much because freebies are a major part of the relationship between pharma marketers and doctors. Without it pharma marketing is a limp force!!

In any case, what this development indicates is that pharma marketers should reduce focus on the freebies associated with augmented pharma product. It means that in India, pharma marketers should take up to more of CME (continuing medical education) based marketing. Since, doctors cannot be sponsored air tickets and stay facilities (as per MCI guidelines), pharma marketers should see to conducting virtual CME programs, video conferencing based CMEs and and offer more print and electronic inputs (like CDs etc) on technical issues, communicate through internet, sms etc.

Furthermore, pharma marketers will obviously start focusing on services and offers to chemists/pharmacists. The augmentation of the product towards the chemist retailers will only increase because come what may, for a pharma marketer sales should happen!

Pharma marketers will also work on actual product and core product features to overcome any obstacles in offering augmented product features to doctors who create demand for healthcare products through their prescriptions. So pharma marketers may start using active ingredients that have more crystalline purity or laevo chirals to create more talking points on their products. However, products like ELECTROLYTE ENERGY DRINKS (manufactured with Tetra Pak aseptic technology) for management of dehydration and debility will see increased consumption because they score very high on ACTUAL PRODUCT FEATURES.

Thus, we are at a very interesting phase of pharma marketing in India. On one hand there is abundant potential. The Indian retail pharma formulations market is poised for higher growth and say by Dec 2012 or Jan 2013 it may reach Rs. 50000 crores. So another Rs. 13000 crores to Rs. 15000 crores will be added to the figure of MAT June 2009 figure of Rs. 36527 crores. However, there are obstacles, MCI has come out with strict guidelines that affect pharma marketing. If doctors do not take freebies (ie., augmented pharma product features are curbed), then obviously doctors will not have great pleasure or incentive to increase consumption through more prescriptions. So pharma marketers have to find a way out - particularly the big national companies. It will not be a surprise to observe that small PCD, regional and subregional companies will continue to offer freebies in their areas of operation. Their activities will go unnoticed at the national level. These companies are too local to attract attention, so regional and subregional companies will probably grow very aggressively in the next three years, when the Indian retail pharma market will reach the magic figure of Rs. 50000 crores.

Nevertheless, pharma and healthcare marketers who have better core product or actual product features for their product portfolio (such as electrolyte energy drink in aseptic technology category) will fare better.

We are seeing the Indian Retail Pharma Formulations Market in yet another interesting crossroad type situation in its journey to the magic figure of Rs. 50000 crores! So let us see what interesting pictures unfold!! Thanks for reading this blogpost, please scroll down and do read all other blogposts. Kindly recommend this blog to your acquaintances.

Thursday, February 11, 2010

Rubbing shoulders with college goers, for a change

Its been a long time since I had been to a college! My M Pharma in pharmacology was completed way back in 1992 - it was a full time course. My PGDMM was from IGNOU (an open university) through distance learning while working (part time learning). So I had not experienced any college life for a long long time until...

I duck any requests for giving a talk at colleges as it stresses my work life. However, this timeround, Dr. Arshia, Prof. and HOD of Dept. of Quality, Krupanidhi College of Pharmacy, Carmellaram, Bangalore was inviting me to give a talk on pharma marketing to the outgoing students of M Pharma and B Pharma. After 6 months of dilly dallying I gave in ...

Actually, Dr. Arshia was my junior - when I was
in M Pharma I think she was in 1st or 2nd B Pharma. She was a very hard working student fully focussed on studies, research ... so naturally she has progressed a lot in life having completed M Pharma and Ph D. I also observed she is very committed towards student development. Today it is nice to see her professional growth, achievements, and marvelous commitment to her occupation.

So I sort of gave in to her request and gave a talk to the student community at the College where she works.

In my talk I started out by saying that there is a lot of difference between working life and student life. The major difference, I said, is that we lose a lot of protection. At college we get a lot of protection:

parents provide us with financial protection and guidance (by the way in India, parents support children till they are 'settled' that means till he is up to may be even 22 years of age or beyond that)

teachers guide students to help students achieve their goals.

In professional life - all these protection mechanisms disappear, parents want us to be self reliant and support them, the organization to which we belong starts using us as a human resource to achieve company objectives (career development is not the primary focus of commercial organizations). So this will be a very important change to absorb.

The other points I stressed on: College education is focussed on syllabus oriented learning. However, in professional life a well rounded personality with the ability to learn new things (adaptability) is required. Furthermore, college education does not stress on communication competency. This is however of paramount importance in professional life.

This was followed by a brief on the Indian pharma market, which students are not normally exposed to. For eg., the no. of companies in India, the top 10 pharma companies in India, the top 10 pharma brands in India (WHEN I TOLD THEM THAT COREX IS THE TOPMOST PHARMA BRAND IN INDIA, THERE WERE GASPS OF SHOCK AND SURPRISE!). ...

All in all, it was an interesting experience for me. Dr. Arshia appreciated and thanked me and my employers for my participation. I am glad to have represented my company very well, as per her observation.

There were pleasant surprises - some of the teachers at Govt. College of Pharmacy, Bangalore where I had done my M Pharma were there as contract teachers (after retirement). In fact, one of my teachers Mr. K T Basavanna (who teaches statistics) was there throughout my talk, and he gave me a small souvenir too (on behalf of the college). I took it with all happiness from my teacher of M Pharma years...

In the above photo, Mr. Basavanna gifted me (I am wearing a blazer) with a souvenir of remembrance

When I remarked to Mr. Basavanna that he has hardly changed in appearance he smiled and said: "Yes there is no significant difference"!


The above blogpost was slightly different from the routine, I will be back with my regular type of blogposts, please do scroll down and read all other posts ...

Saturday, February 6, 2010

Sales, margins and control

I GOT THE ABOVE IMAGE FROM HERE (one of my all time favorite business mags of India).

At the end of the day or rather at the end of the month after the "sales closing" the pharma game for pharma companies is about sales, margins and control. In the past many big Indian pharma companies pushed in a lot of monies towards drug discovery research only to be disappointed. In fact, there is a lot of soul searching going on now on this matter. Businessworld has highlighted this pharma R & D dilemma, in its 29th Jan 2010 issue. A patented molecule remains the elusive panacea of pharma marketers. So once again, it is all about sales, margins and control.

The holy grail is sales, margins and control!

It is no doubt that pharma biggies in India had thought that the holy grail in pharma is to come out with a new drug that becomes a standard for disease management. However, reality has rudely awoken them - the reality being that the pharma game is about SALES, MARGINS, AND CONTROL.

The pharma market complexities are many

Having a super - duper patented drug holds a promise but will not necessarily provide super duper sales, margins and control. This is because of the sheer market complexities! These market complexities are not mirrored in ORG IMS reports, but they have a lot of impact on company performance at the ground level. You can see the intensity of such market complexities by reading below:

Recently I had a very interesting conversation with a gift supplier. This person is an "old hand" at supplying gifts to pharma companies and as we are aware, pharma companies in turn provide them as Rx and sales boosters to doctors and chemists. The gift supplier was saying that in the recent past (say about 3 to 5 years), there is an explosion of tiny pharma companies. Let alone regional pharma companies who operate in a few states of India, there are pharma market operators who work only in just a few districts (or one district) and are doing good business. In fact, this old Jain gentleman made a very vital observation in his typical trader Hindi accent, "those pharma companies who take a lot of loan and run their business will be in trouble, those who have less loan and overheads - they will find the going easier!!"

Based on the above conversation I dipped in to some market grapevine conversations about these very small (tiny or subregional) companies:

a) I hear there is a MOON PHARMA (c'mon if we can have Sun Pharma why can't we have Moon Pharma?!) in Tumkur started by a guy who came back after studying MBA at London. Today, operating Moon Pharma only in Tumkur and may be another district, he is having a very tidy take-home income! b) There is a very old medical retail shop at Tumkur by name Gandhi Medicals, owned by a Jain gentleman. When I was with Themis I have gone to this pharmacy too on work. I am given to understand that this gentleman has started a pharma company (again on PCD ie., propaganda cum distribution lines) called OCEAN PHARMA. And the grapevine says he has a monthly turnover of Rs. 40 lakhs in Tumkur alone!! OK may be it is slightly exaggerated, however, it is very indicative of the trends at the ground level in pharma India.

And all these tiny and regional pharma companies are making life very difficult for big pharma companies. It reminds me of the Romans versus Gauls!!

Another senior pharma executive I know of, remarked that he himself knows about a dozen senior MRs (his compatriots) who did not bother to take promotions and they are in to this tiny pharma business - they are all doing exceedingly well! Period!!! I couldn't help recollecting a small to regional pharma company which had started in the mid 1990s, the company being TPRL (Tumkur Pharmaceutical Research Laboratories). One of the distributors had started this company. And this pharma company (TPRL) is still there going on quite fine!!

The best remark came from another pharma executive - there is still place for more!!

So understandably pharma is now more a game of streetsmart sales, margins and control. There is little room and time for philosophy and may be expensive R & D, because sales, margins and control are under a lot of stress.

What will happen next?

Pharma will get in to a round of consolidations. Pharma companies who are under pressure and cannot maintain healthy margins due to overheads and cost of sale, will starting merging or selling out. Big pharma companies will also try to buy out the regional and tiny pharma companies. They will also use their influence with regulators and other agencies to put obstacles to the tiny and regional sort of companies. However, it will not work. In India, malls have to learn to live with the small traders. Big fish eat up small fish. This is the traditional rule of businesses in the West. However, it cannot happen in India. The reason is simple:

People in India do not have this sell out culture. Many companies abroad sell out and the sellers chill out! However, in India one cannot afford to do that. After selling out what??!! The sellers (if at all) will certainly not chill out or cannot afford to do so in India!! Mainly because Indians are working for their families, their children, rather than for personal careers. So big and medium pharma companies need to work out strategies to live with the small fish (regional and tiny pharma market operators) and succeed despite their presence.

Pharma marketing is not just about promo inputs, price, and technology

Pharma marketing success is well known to depend on power of promotional inputs, price and technology, however, there is another very vital ether of pharma marketing ie., relationships. The MR to doctor, PCD seller to doctor, Company to doctor or chemist relationships matter a lot. This factor cannot be quantified successfully, however it is a very important criterion of pharma success.

When a now leading Hyderabad based pharma company launched operations they were said to be innovators in targeted gifting to big doctors (the key doctors were said to have been given Standard 2000 cars as gifts, a luxury car during those days). However, the times have changed. Small companies have taken a leaf from this very company and small companies are doing targeted gifting!!

I still remember one of my first field work calls in Mumbai, in 1992, where a leading physician jokingly said to our company MR, "I can't prescribe your brand of atenolol, because when I put on the AC, only company T's products flow out of my pen"!! Today, the regional and tiny companies are all giving it in the same coin to the big companies!!

The net result is that sales, margins and control processes in companies are under severe pressure in all established pharma companies particularly those who have a lot of overheads, such as R & D. So R & D downsizing has occurred!! DEATH OF A DREAM (click here!).

SO WHAT NEXT ? ! Obviously shakeouts, mergers, buyouts, downsizing and other facets of consolidation will take place.

What does it mean for marketing?

Marketing and sales unlike in nonpharma companies are intimately linked in pharma companies. Normally, in nonpharma companies, marketing and sales are slightly divorced, they have a somewhat tug-of-war relationship. However, in Indian pharma companies, marketing and sales are very closely related functions. Unless, this happens, pharma sales cannot occur!

Pharma marketing guys need market picture inputs from the sales team, and conversely sales personnel want material and nonmaterial inputs (campaigns, strategies, training etc) from marketers. This is not because of any philosophy, it is simply because both require each other for day-to-day functioning. It is a symbiotic relationship.

Overall, pharma marketers do long range things, try to be one-step ahead so that selling gets facilitated. And for this pharma marketing guys need to be closely in touch with sales guys to provide timely and relevant inputs. Planning is significant in marketing. Sales is about real-time action.

Inevitably customer centric

Today, most pharma companies are inevitably doctor, chemist and patient centric mainly from the point of view of the sales personnel; all other organizational employees too need to have this customer centric approach. Unless the image of an unsatisfied customer haunts the distribution, QC, and manufacturing guys, customer centric organizations cannot be created.

Let us see a simple analogy. Who are the most 'concerned' employees of any organization? They are inevitably the frontline personnel who are in constant touch with customers (customers: the people who need to be delighted and from whom monies are collected!!). So the waitresses at Cafe Coffee Day, the waiters at hotels, the receptionists, and such other people who are most liable to get the stick or bouquet from customers directly are the most 'concerned' of the employees of any organization. However, when all organizational members share this intense concern for customers (typically seen in the frontline personnel) it is only then that the organization gets customer centric. In fact, regional and tiny pharma companies are hugely successful because of customer intimacy and lesser overheads.

So the era of a rededication to sales, margins and control starts in Indian pharma!! Thanks for reading this blogpost, please scroll down, click on older posts, please do read all other posts and encourage your acquaintances to read this blog!!