Indian pharmaceuticals: A long-term story

Anjan Sen

The Indian pharmaceutical sector has grown at a double digit rate and is expected to reach ~$ 55 billion in sales by 2020, nearly five times that of the 2009 level, as per the IBEF Report, August 2012. The same report ranks India currently at third position in terms of volume and tenth in terms of value.

2012 saw a multitude of changes happening on the regulatory front which have severely impacted the outlook for the industry in the near term. The announcement of Pharmaceutical Pricing Policy, disallowing expense deduction for tax purpose on promotional expenses that are in violation of the uniform marketing code, court rulings invalidating patents granted earlier, allowing compulsory licensing to local companies for manufacturing patented drugs and clarification on the process to be followed for brownfield investments, etc. have raised many questions about the future direction of the industry. These seem to be issues pertaining to a general lack of clarity on some directives from the Government.

Some industry experts fear that the government is taking a stance which favours local players while others feel that India does not truly respect IP rights of innovator companies. There are also concerns with respect to implementation of the uniform marketing code and how it would potentially impact only the big industry players; while smaller regional Indian pharma companies continue with ‘business as usual’. The Indian Government has also stated that there will be new guidelines announced for the pricing of patented products.

In such a scenario, it will be prudent for pharma organisations to be cautious while designing strategies. A ‘wait and watch’ principle towards the external environment may make more sense considering the relative lack of clarity on certain key issues. However, these are very short-term trends. In the long run, India, as a pharma market, is still lucrative and is expected to provide enough opportunities for organisations to create and realise value. Government’s focus on healthcare inclusion, growing incidences of chronic and lifestyle diseases, better healthcare infrastructure, increasing health awareness, and deeper penetration of government sponsored and private health insurance schemes is expected to drive the Indian healthcare sector forward.

Considering these factors, pharma companies need to innovate business models to adapt to the changing scenario. They can leverage learning from the changing commercial model in the developed world, coupled with innovations used in the emerging markets to create a customised strategy for India. Three immediate areas of focus, impacting growth and revenue in 2013 that could be considered are Field Force Effectiveness, Institutional Access and Key Account Management (KAM), and Innovative Marketing Practices. These areas are outlined below in greater detail.

Sales force effectiveness

Effective sales force strategy is crucial for organisations to maximise coverage, improve sales, and optimise costs. Pharma companies are facing major field force related challenges due to high attrition rates, declining productivity, and limited attention span of customers. It is important to have an orchestrated approach to managing the sales force in order to increase return on investment (RoI). Below are the components of an effective sales force strategy.

Training and development

Regular training modules along with coordinated on-the-field training programmes can improve overall performance levels of field force members. Courses on motivation, self-development and leadership along with roadmap for career progression can be effective in increasing sales force productivity and help improve loyalty for the organisation.

Optimised coverage

Optimal territory coverage with limited investments is one of the growing needs for pharma companies. An optimal strategy for territory coverage depends on factors like the company’s product portfolio, potential of the territory, presence of customer specialties, access, healthcare infrastructure, etc. With intense competition and increasing pressure on margins, pharma organisations are in need for effective coverage planning that can deliver the desired RoI.

Performance review

It is important to use MIS tools/ platforms to optimise sales force performance through tracking of key parameters like doctor call records, details of pharmacists met, customer conversions, performance in training programmes and activation programmes launched etc. Such tools can be effectively used to understand the causal factors responsible for good/ bad performance in a particular territory which can be helpful for the organisation in improving its performance.

Differentiation

It is becoming increasingly necessary for pharma organisations to differentiate members of their sales force in a cluttered market like India. Limited attention span of doctors is creating severe challenges for players. Organisations need to effectively work towards differentiating their sales force members through innovative detailing techniques, usage of different mediums of detailing, improving confidence levels of members of the sales force etc.

Institutional access andKAM

Growth of corporate hospital chains and increasing government spend and consolidated buying through healthcare institutions have made organisations focus on the need to create dedicated institutional sales teams. Institutional access strategy is becoming crucial as corporate and government hospitals have operational dynamics that require different approaches. Contrary to popular belief, they do not all operate on an ‘L1’ or lowest bidder pricing model.

The institutional segment is becoming more important because of increase in proportion of inpatient spend; proliferation of large number of tertiary/ specialty care hospitals and entry and expansion of large organised players ; increased health awareness and better diagnostic facilities resulting in early diagnosis and higher hospital care utilisation; growing public healthcare spend through various government sponsored programmes, and deeper penetration of public and private health insurance schemes

This segment requires dedicated approach and strategy because of its complex procurement machinery and purchasing process. Multiple stakeholders form a part of the purchase process at various stages from drug introduction to demand sustenance. Each institute is different and requires an organic approach. Organisations need to take cognizance of the same while designing their institutional teams. Institutional strategies of pharma organisations typically depend on the product portfolio. The target set of key hospitals may vary from one product portfolio to another. It is also crucial for an organisation to understand the purchase process as it involves multiple layers of stakeholders in the decision making process. Strategies should include development of targeted sales and communication programmes at different levels of interaction and at different stages of the purchase process. Institutional teams should also build standardised modules and SOPs to improve system performance including KPIs, MIS etc.

Additionally, KAM is an evolving strategy being used by pharma organisations to deal with changing requirements of large corporate hospitals/ institutions. Many pharma and medical devices companies have started employing key account managers to take care of the special needs of that segment. KAM is different from a typical sales model in the sense that it partners with key customers and delivers solutions based on their business goals/ needs. Organisations will need a different set of skills and internal capabilities to effectively implement the KAM strategy.

Innovative marketing practices

The Indian pharma industry is highly cluttered. In such a stiffly competitive market that favours branded generics, it is difficult for organisations to create adequate brand recall. Key customers and institutions have also started putting restrictions on time/ slots for meeting company sales representatives. Thus, organisations need to break away from traditional modes of detailing to create an indelible brand image in the minds of customers.

Key opinion leaders (KOLs) are typically hard pressed for time. Additionally, launch of ‘uniform marketing codes’ by the government warrants for changes in the approach of pharma companies. Transparency and ethical practices will form the cornerstones of neo-marketing tactics.

Although the physician is still the decision maker, modern day patients are becoming more aware of their disease states and prescribed medications. Organisations are finding ways of connecting directly with them, albeit within boundaries of the regulatory landscape to spread awareness and improve outcomes through disease management programmes.

Besides pamphlets, companies have used social media tools like Twitter and Facebook to connect with patients by making them aware of the need for medications. Some organisations have used tele-counselling to improve compliance levels of patients on chronic medications. Rise of corporate hospital chains and institutions have led to dedicated and focused marketing activities aimed at increasing product awareness. Retailers play a critical role in brand choice and organisations need to include them as target audience while allocating marketing spends. Organisations will have to devise customised marketing strategies for doctors, patients, retailers and hospitals.

In conclusion, changes in the regulatory scenario in India are beyond the control of pharma companies. However, while companies wait for those regulations to take concrete shape, they should focus on internal improvements in their business and commercial models, in order to be on a stronger position to take advantage of the long term growth prospects.