PROJECT REPORT ON

MARKETING STRATEGY OF PHARMACEUTICAL

UNDER THE GUIDANCE OF: MR. SUNIT MADAN (Business Development Manager)

SUBMITTED BY: HIMANSHU MOHNIA REG. NO.: 200620703

SYMBIOSIS CENTRE FOR DISTANCE LEARNING (SCDL), PUNE

ACADEMIC YEAR: 2006

ACKNOWLEDGEMENT
The present work is an effort to throw some light on Marketing Strategy of Pharmaceutical Industry. The work would not have been possible to come to the present shape without the able guidance, supervision and help to me by number of people.

With deep sense of gratitude I acknowledge the encouragement and guidance received by my organizational guide Mr. Sunit Madan (Business Development Manager) I convey my heartfelt affection to all those people who helped and supported me during the course of completion of my Project Report.

HIMANSHU MOHNIA Reg. No.: 200620703

NO OBJECTION CERTIFICATE

This is to certify that Mr. Himanshu Mohnia is permitted to use relevant data/information of this organization for his project in fulfillment of the Post Graduate Diploma in Business Administration Specialization Marketing Management Batch: (2006)

We wish him all the success. Signature of the competent authority of the Institute / Organization

Mr. Sunit Madan (Business Development Manager) Place: New Delhi Date:

DECLARATION BY THE LEARNER

This is to declare that I have carried out this project work myself in part fulfillment of the Requirement for the Post Graduate Diploma in Business Administration Specialization Marketing Management Batch: (2006) Program of SCDL. The work is original, has not been copied from anywhere else and has not been submitted to any other University/Institute for an award of any degree/diploma.

Date: Place: New Delhi

Signature: Name: Himanshu Mohnia REG NO. 200620703

CERTIFICATE OF SUPERVISOR (GUIDE)

Certified that the work incorporated in this Project Report Marketing Strategy of Pharmaceutical Industry submitted by Mr. Himanshu Mohnia is his original work and completed under my supervision. Material obtained from other sources has been duly acknowledged in the Project Report.

Date: Place:

Signature of Guide: Mr. Sunit Madan (BUSINESS DEVELOPMENT MANAGER) Zydus Neurosciences, Cadila Healthcare Ltd.

EXECUTIVE SUMMARY
The Indian pharmaceutical industry is highly fragmented -- there are now more than 20,000 domestic manufacturers of end-use pharmaceuticals, particularly because of the industry's low capital requirement and the lack of product patents. Only about 300 of these are in the organized sector. This structure causes intense competition, especially in the bulk drug markets, with profitability falling as demand expands. The import of finished pharmaceuticals is almost negligible, and confined to very specific types like anti-cancer drugs. In 1994, the import of drugs, pharmaceuticals and intermediates was estimated at $450 million, and included the following: antibiotics, penicillin and its salts, erythromycin and its preparations, vitamins and provitamins, vaccines (polio, human and veterinary), preparations containing insulin, caustic and other hormones, and tetracycline and its preparations. For value purposes, drugs in India are generally classified into two categories -- bulk drugs and formulations. Due to India's low overhead costs, bulk drugs comprise the largest sector in the country's pharmaceutical market. Indias bulk drug sector also makes up about 6% of the international bulk drug market. Drug intermediates are used as raw materials for the production of bulk drugs, which are either sold directly or retained by companies for the production of formulations. Formulations can be subdivided into generic drugs and branded or "ethical" drugs, the latter of which are made under process patent and sold under a separate brand name. Expected short-term growth for the two types of drugs has been 20% for bulk drugs and 15% for formulations. Pharmaceutical Industry is one of the most intense knowledge driven industry, which is continuously in a state of dynamic transition. Indian pharmaceutical industry is climbing up the value chain from bringing a pure reverse engineering industry focus on domestic market. The industry is moving towards basic research driven expert oriented global presence and providing wide range of value added quality product and services. The pharmacy formulation market varies radically from the consumer market in many ways. The rules governing the pharmacy market are different except a few over-thecounter (OTC) drugs. Pharma companies are not allowed to publicly market their products. Marketing has to be restricted to promotional campaigns, advertisement only in medicinal magazines, journals etc., through medical representatives.

TABLE OF CONTENT
Chapters 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. Introduction Objectives and Scope Limitations Theoretical Perspective Methodology and Procedure of work Analysis of Data Findings, Inferences and Recommendations Conclusion Summary of the Project Report Annexure i. Questionnaire ii. Proposal iii. References iv. Lit of figure v. Lit of Table Page Nos. 01-05 06-07 08-09 10-59 60-62 63-85 86-90 91-93 94-95 96-109 97 102 107 108 109

CHAPTER -1 INTRODUCTION

INTRODUCTION
PHARMACEUTICAL MARKETING IN INDIA: A MACROSCOPIC VIEW
Drug & pharmaceutical industry plays a vital role in the health care of the any country. Rapid growth of this industry requires further attention because even after 50 years of independence, India, with around 15 percent of the World population, accounts for less than 2 percent of the drug production in the world. Annual per capita consumption of medicine in India is less than 2% of that in Japan. Health care expense in India is a dismal 0.8 percent of GDP compared with 12.4 percent in U.S.A. 6.5% in Japan and 6.2 percent in the U.K, despite higher incidence of disease and malnutrition. The poverty and disease in India on one hand calls for higher standard of healthcare and pharmaceuticals production and on the other, stultifies the growth of industry due to poor affordability of an average Indian. Drug & Pharmaceutical industry has therefore, encountered a tough situation which most industry have always found difficult, to provide abundant quantity of quality products at low prices.

The Indian Pharmaceutical industry, valued at $46.2 billion has been witnessing attractive growth rate of 15% to 20% consistently over the past decade. This growth was build by India's large population, increasing allocation of income to healthcare spending and exports. Exports which currently accounts for 20% of the production value has grown by a compound annual growth rate of 34% in the past few years due to competitive price advantages from India's low labor and other input cost The Indian market for pharmaceutical products stands at an enormous $58.8 billion. The big 10 companies account for over 30% of that, take away 45 marketer and average sales don't even come any where near the $2.5 million marks, that's how fragmented its is some 50,000 brands from over 20,00 companies growing fast enough to embarrass rainy day mushrooms and enough diseases to savage Indian population all several times over and turn Dr. Dolittle into Dr. Don't care.

GOVERNMENT POLICIES
In a country lacking the assurance of free health care for all (not to talk of an effective health insurance system), it is the poor patient's family who must pay the bill. This was the justification for the policy. But it killed any incentive to invest in R& D (Research and Development), which makes global drug manufacturers what they are: leader of mankind's war on disease. India's per capital consumption of drugs is said to be just $3. In the US its over $100 and in Japan, over $400. India has about 20% of the world's disease burden (with just 16% of its population). Western spending is high because in a system where the government pays the bills, the patients get themselves prescribed all sorts of pills for ailments that aren't terribly serious. But why is Indian spending so low? Only 35% of the population has access to modern (read allopathic) medicines. India has alternative system of medicines, Ayurveds, e.g. are not quacks, neither are homeopaths who make their own medicines. India also exports sizable quantities of drugs & pharmaceuticals. More companies are now venturing into traditional health care systems beside modern medicine. With the launching of new drugs policy, all bulk drug formulation and intermediaries except five bulk drugs have been de-licensed. Many drugs that were hither to under price control have been taken out of such control. Actually the list of controlled drugs has been halved and is limited to 73 items. Higher rate of return has been allowed for those drugs that are still under price control. Companies with 51 percent foreign equity have been brought on par with wholly Indian companies, automatic clearance would be given for 51 percent foreign equity automatic approval would be given for foreign technology agreement as well. Earlier such companies had restriction on the product they could manufacture or import. A National Drug Authority is to be set up to monitor quality control and rational use of medicine. A national pharmaceutical pricing authority is also to be set up to fix prices in respect of drug, which would continue to be under price control (Ramaswamy & Meerakumari 1988). Recent budget proposal has announced a 10 percent drop in the peak customs duty, which will benefit formulators and transnational pharmaceutical companies with high raw material import contents, but falling traffic barriers also threaten the future of the

10

bulk drug players. However, the 8 percent increase will not have a negative impact on formulators as the increase will enable a full set off under MODVAT (Modified Value Added Tax). Similarly, the 10 percent reduction in the tax on income from royalty and technical fees paid to foreign companies may not affect domestic companies at all. But high spenders on R & D like RanbaxyTM, CiplaTM and WockhardtTM will gain. This along with the rising of investment limits in overseas joint ventures and offices under the Export Earners Foreign Currency Account, will provide a strong dose of incentive for India's pharmaceutical companies to go global. (Sakaria 1988) The Indian pharmaceutical sector is likely to witness major changes as a result of liberalization and pressure from GATT (General Agreement on Trade and Tariff) and WTO (World Trade Organization). Price control are gradually being dismantled with less than 50% of the drugs coming under purview of DPCO. This number is likely to decrease further. In addition, as a signatory to WTO by 2010, India will be require to follow the same product patent laws governing the west. MNCs (Multinational Companies) in the past, have been constrained in launching new products because of strict patents enforcement law governing their home countries. Product patent will provide greater freedom to introduce new an advance international portfolio products. Indian pharmaceutical companies on the other hands are likely to suffer as a result of patent protection. It will become increasingly difficult for them to introduce new product without investing in basic research. Intensive research requires large investment that can be only recover by spreading costs over a greater volume, there by reducing average costs. However, because of high industry fragmentation and a lack of research, few domestic company are able to reap the benefit of scale. To end the dominance of foreign drug companies, the Indian government enacted a series of policies designed to foster self-sufficiency in the production of basic drugs. Because these measures lowered barriers to entry, thousands of medium and small Indian pharmaceutical companies entered the market challenging the MNCs for control. These actions laid the foundation for todays highly competitive domestic industry that is capable of offering some of the lowest drug prices in the world. These policies ended Indias dependence on expensive foreign drugs, fostered the development of a competitive pharmaceutical industry, and guaranteed the Indian public access to inexpensive drugs. Nonetheless, the Indian pharmaceutical industry also became one of the countrys most heavily regulated. The industry currently faces restrictions on 11

imports, high tariff rates, ration requirements, and equity ceilings for foreign participation. Against this backdrop, the companies most likely to succeed will be large companies with a wide product portfolio, those that have the ability to undertake research and develop a strong product pipeline and those that gain or sustain export competitive environment, it will be critical for companies to build sustainable competitive advantage. In addition to the strategies discussed earlier, companies have opportunities to gain an edge over their competitors, by actively managing their product portfolio, by executing a sound globalization strategy or by becoming an integrated healthcare company. The Indian pharmaceutical industry is highly regulated, essentially on three aspects: Patents Price Product quality The various legislations that govern the Indian Pharmaceutical Industry are: The Indian Patents Act 1970 (and the amendments thereafter) Drug Price Control Order (soon to be replaced by Pharmaceutical Policy 2002) The Drugs and Cosmetics Act 1940 The legal framework for the industry should be such so as to increase the strengths of the industry, mitigate the weaknesses, void off the threats and cash in on the opportunities.

12

CHAPTER 2 OBJECTIVES AND SCOPE

13

OBJECTIVES AND SCOPE

The present study of the pharmaceutical industry of India revolves around the following basic objectives: To understand how pharmaceutical company launch their product To know what promotional strategies are used by pharmaceutical companies to sell their products in the market To understand what is the role played by sales representatives in this regard

14

CHAPTER 3 LIMITATIONS

15

LIMITATIONS
The process employed to select the sample was simple random sampling. Simple random sampling refers to that sampling technique in which each and every unit of the population has an equal and same opportunity of being on the sample. In simple random sampling, which item gets selected is just a matter of chance. Random sampling technique is generally employed to extract the fruitful results. This includes the overall design, the sampling procedure, the data collection methods, the field methods and the analysis procedures The pharmaceutical industry is one of the major, most successful also rapidly growing industries worldwide. It contributes significantly to the economies of many countries all around the world, both as a major employer and as an export earner. Marketing and sales of pharmaceutical products is very different from other products such as say groceries, cosmetics, food items, vehicles, etc. One, pharmaceutical products (apart from over the counter OTC drugs) can only be obtained from a chemist on a doctors prescription. Thus here the customer is the doctor, who is well versed in pharmacology. Two, medicines and drugs can only be prescribed by a doctor only when it is deemed necessary for the patients recovery from illness; that is, it is ethically wrong for a doctor to needlessly prescribe medicines. Under these medical and ethical constraints, how does the pharmaceutical company promote its products? This is the purpose and objective of the study.

16

CHAPTER 4 THEORETICAL PERSPECTIVE

17

THEORETICAL PERSPECTIVE
Historical Prospective
The production of bulk drug was virtually non existent in India at the time of independence in 1947. It increased from a meager $715 million in 1962 to $2.4 billion in 1980 and further about $8.4 billion in 1990. Production of formulation is increased from $90 million in 1947 to $14.4 billion in 1980 to $36.3 billion in 1990. The demand for pharmaceuticals increased due to increase in population, increase in affordability of a section of population and government emphasis on health program. The industry grew despite claims of price & production control. By the year 2000 the demand for pharmaceuticals is expected to reach up to $6.72 billion per annum. There has been 1000% growth in the number of drug manufacturers in India since 1970. That was the year when the Indian Patent Acts and Drug Price Control Order (DPCO) came into force (The Eastern pharmacist 1988). While the first accorded intellectual property protection to manufacturing processes (not product formulas), the second began regulating prices to ensure that drug manufacturer who were being allowed to copy foreign drugs would make them cheaply available to the common man. Indian Drug and Pharmaceutical (D & P) industry presents a picture of fast development. Today, India manufactures most of its requirement of bulk drugs and formulation. In fact, more than 30,000 different pharmaceutical formulation worth $210 million are manufactured and sold in India. There are 45 major pharmaceutical firms, each with a sizable investment and sales turnover. Investment ranges between $1.47 million to $4.2 million the sales ranges between $2.10 million to $54.6 million per annum. Growth in this industry was to the tune of 23.4 per cent in 1997-98. This was phenomenal in comparison with the other industries most of which have run into losses or very nominal profits leading to a slowing down of the growth.

18

Table: 4.1: Indias Pharmaceutical Industry Indias pharmaceutical industry is one of the fastest growing segments of the Indian economy with an average annual growth rate of 14 percent during 2005-2008. Overall, the Indian market for pharmaceuticals is projected to grow at an average annual rate of between 15 and 20 percent during 2005 - 2010. The surge in production has been driven by legislative reforms, the growth in contract manufacturing and outsourcing, value added foreign acquisitions and joint ventures, Indias mastery of reverse engineering of patented drug molecules, and Indias efforts to comply with its World Trade Organization (WTO) Trade Related Intellectual Property Agreement (TRIPs) obligations. When India joined the WTO in 1995, its pharmaceutical exports were valued at less than $600 million. By 2009, its exports had grown to $3.7 billion and accounted for more than 61 percent of industry turnover. Currently, Indian pharmaceutical companies produce between 20 and 22 percent of the worlds generic drugs (in value terms) and offer 60,000 finished medicines and nearly 400 bulk drugs used in formulations. The pharmaceutical industry in India is going through a major shift in its business model in the last few years in order to get ready for a product patent regime from 2009 onwards. This shift in the model has become necessary due to the earlier process patent regime put in place since 1972 by the Government of India. This was done deliberately to promote and encourage the domestic health care industry in producing cheap and affordable drugs. As prior to this the Indian pharmaceutical sector was completely dominated by multinational companies (MNCs). These firms imported most of the bulk drugs (the active pharmaceutical ingredients) from their parent companies abroad and

19

sold the formulations (the end products in the form of tablets and capsules, syrups etc.) at prices unaffordable for a majority of the Indian population. This led to a revision of Government of Indias (GOI) policy towards this industry in 1972 allowing Indian firms to reverse engineer the patented drugs and produce them using a different process that was not under patent. The entry of MNCs was also discouraged by restricting foreign equity to 40%. The licensing policy was also biased towards indigenous firms and firms with lesser foreign equity. All these measures by GOI laid foundations to a strong manufacturing base for bulk drugs and formulations and accelerated the growth in the Indian Pharmaceutical Industry (IPI), which today consists of more than 20,000 players. As a result the Indian pharmaceutical industry today not only meets the domestic requirement but has started exporting bulk drugs as well as formulations to the international market.

LEADING INDIAN PHARMACEUTICAL MANUFACTURERS

Indias leading pharmaceutical companies are striving to compete not only in the domestic Indian market, but also in the global market for both generic drugs and original products. Sales for Indias largest 200 pharmaceutical companies grew from $7.9 billion in 2007 to $8.6 billion in 2008, or by 9 percent. By 2008, 9 of the top 10 Indian 21 drug makers were Indian-owned firms accounting for more than 44 percent of total industry sales. Indias top five pharmaceutical companies, in terms of sales, are Ranbaxy Laboratories, Dr. Reddys Laboratories, Aurobindo Pharmaceutical, GSKIndia, and Cipla. These companies manufacture a wide range of generic drugs (branded and non-branded), intermediates, and active pharmaceutical ingredients (APIs). In terms of total sales, Ranbaxy Laboratories is Indias largest pharmaceutical company and one of the worlds top ten generic drug makers. In 2009, exports accounted for nearly 80 percent of Ranbaxys sales and the United States is Ranbaxys largest market. Ranbaxy accounts for 23 percent of Indias pharmaceutical industry revenues. Ranbaxy is a vertically integrated company with a presence across the pharmaceutical value chain, offering a range of unbranded and branded generics, active pharmaceutical ingredients, and biotechnology products. Ranbaxy markets its products in more than 100 countries, a sales presence in 23 of the worlds top 25 pharmaceutical markets, and has manufacturing facilities in 8 countries. Cipla, Indias second-largest pharmaceutical

20

company, is best know for its anti- AIDs drugs, and Dr. Reddys Laboratories, Indias third-largest pharmaceutical company, also rely heavily on exports as its revenues. Table: 4.2: Indias top 10 pharmaceutical company sales ($million)

MNC PRESENCE IN INDIA:

Many of the worlds leading pharmaceutical companies have subsidiaries or other operations in India. Multinational companies like GlaxoSmithKline (GSK) Baxter, Aventis, Pfizer, Novartis, Wyeth, and Merck have been active in Indias pharmaceutical market mainly through subsidiaries. The re-introduction of product patents precipitated the return of a large number of other MNCs, some of whom left during the process patent era. MNC pharmaceutical companies have also been attracted by tax holidays, the deduction of capital R&D expenditures, and other financial incentives offered by the Indian government. Industry sources indicate that the most significant challenges facing MNCs are the uncertainly over pharmaceutical price controls and data exclusivity. There are approximately 34 foreign drug companies engaged in the Indian pharmaceutical market and among them are 15 of the worlds 20 largest pharmaceutical companies. According to FICCI, although MNCs have not launched new products they have invested in new production facilities and R&D centers and many are engaged in contract manufacturing, clinical trials, and other forms of outsourcing. In 2008-09, MNCs invested more than $172 million in Indias pharmaceutical industry and FDI has grown by a compound annual growth rate (CAGR) of 62 percent during 2002-06. 21

However,

many industry experts believe that the return of the worlds leading

pharmaceutical companies will gradually erode Indias cost advantages. According to the Organization of Pharmaceutical Producers of India, multinational drug companies currently command 24 percent of the domestic Indian market, through their share could rise to 40 percent by 2010.

MARKETING FUNCTIONS
Promotion means any activity undertaken, organised or sponsored by a member company which is directed at healthcare professionals to promote the prescription, recommendation, supply, administration or consumption of its pharmaceutical product(s) through all media, including the internet. A marketing program in order to be successful must have a right mixture of marketing mix, not to mention market research, a quality product, extensive distribution network acceptability, strong dose of promotion coupled with a right price. A unique feature of the pharmaceutical market is that it is one of the most fragmented markets in the country. The maximum market is held by small companies, the largest pharmaceuticals company holding only 6 percent of the market share. This leads to unique marketing mixes. The Indian pharmaceutical market is small, both by Western standards and in terms of per capita consumption. Although India is the worlds leading producer of generic drugs, its annual per capita consumption of pharmaceuticals is among the lowest in the world at approximately $4.50 per person, as compared with $820 in the United States and $13 in China in 2006. The value of Indias pharmaceutical industry nearly doubled from $3.2 billion in 2000 to more than $6.2 billion in 2009, or by an average of 12 percent annually (table 10). According to the Associated Chambers of Commerce and Industry of India (Assocham), the Indian pharmaceutical market grew at an average annual rate of 13.6 percent during 2006-2010 to reach $9.5 billion in sales by 2010. This 51 growth is expected to be driven by: access to low cost, high volume generic drugs; mergers and acquisitions: industry consolidation; and Indias growing importance as a pharmaceutical contract manufacturing and services location. Approximately 80 percent of domestic industry production consists of formulations, with the remainder consisting of bulk drugs.

22

Considering the healthcare of the Indian Public, the Govt. of India encouraged the domestic pharmaceutical companies in India. When the international norms recognized the product patent, the government of India enacted the Indian Patent Act in 1970 (process patent), with the objectives of allowing the domestic companies to grow. The Indian Patent Act recognized the Process to manufacture a product and not the end Product. Indian companies took advantage of the Patent Act and succeeded in producing molecules, which were under Patent Production else where, at a cost that was lower than the original research cost. By taking the cost advantages, the Indian Pharmaceutical companies fixed their prices lower than the prices fixed by the Multi National Companies manufacturing the drugs. Apart from the Indian Patent Act 1970, DPCO, FERA and increased imports tariffs also helped the growth of the domestic pharmaceutical companies. With a view to the above effect, the Multinational Companies market share, decreased from 100% in the year 1947 to 80% and 33% in the years 1970 and 1991 respectively with corresponding increase in domestic companys market share. LARGE MARKET SHARE FOR GENERIC DRUGS As there was no efficient patent protection between 1970 and 2005, many Indian drug producers copied expensive original preparations by foreign firms and produced these generics by means of alternative production procedures. This proved more cost-efficient than the expensive development of original preparations as no funds were required for research, which contained the financial risks. This spending block may come to as much as EUR 600 m for only one drug. This kind of money could previously only be raised by large corporations in the industrial countries. The competitiveness of generics producers is based on cost-efficient production. In this field, Indian companies are currently in top position. At one-fifth, Indias share in the global market for generic drugs is considerably higher than its share in the overall pharmaceuticals market (approx. 2%). At the same time, Indias pharmaceutical companies gained know-how in the manufacture of generic drugs. Hence the name pharmacy of the poor which is frequently applied to India. This is of significance not least for the domestic market as disposable income is as little as EUR 1,900 per year for roughly 140 million of the total of 192 million Indian households1, which means the majority of Indians cannot afford expensive western preparations.

23

Fig. 4.1: Market Share of Corporate

Fig. 4.2: Market Share of MNCs & Local Companies Between 1996 and 2006, nominal sales of pharmaceuticals on the Indian subcontinent were up 9% per annum and thus expanded much faster than the global pharmaceutical market as a whole (+7% p.a.). Indian companies strongly expanded their capacities, making the country by and large self-sufficient. Nonetheless, with total sector sales of roughly EUR 10 bn, India commands a less than 2% share in the worlds pharmaceutical market (1966: 1.5%). This puts the country in twelfth place internationally, even behind Korea, Spain and Ireland and before Brazil, Belgium and Mexico. Among the Asian countries, Indias pharmaceuticals industry ranks fourth at 8%, but has lost market share to China, as sales growth there was nearly twice as high and sales volumes nearly four times higher than in India.

24

Globalization has not caused traditional medicine to be abandoned but with higher education, rising income and a change in lifestyle, western medical treatment is gaining in importance. At present the population especially in rural areas still sees western medicine as a stop-gap cure which is unlikely, though, to provide a lasting solution to health problems. Today, about 70% of the population on the Indian subcontinent depends entirely or at least in part on traditional Indian medicine which is cheaper and more easily available than western drugs. Indian companies have recognized the opportunity presented by western pharma in search of lower costs and higher profits, and are exploiting the low cost base and pool of highly skilled labour in their market to develop a thriving outsourcing industry, positioning India as a key provider of contract research and manufacturing services. India is increasing its R&D and biotechnology focus and taking advantage of the low R&D productivity of developed markets to gain partnerships with western players. These alliances enable the companies to gain expertise in discovery and development as well as maximizing revenues if and when products reach the market. Pharmas and biotechs in the US, Europe and Japan have realized the increasing role of India at a global level. Many players are outsourcing non-core activities of the research and manufacturing process. Outsourcing is a popular option, while offshoring via direct investment, joint venture or acquisition is also proving successful.

Function of Sales
In India front and marketing (doctor convincing and sales) is where the action is. The point of differentiation has been the relationship with doctors (through medical representatives) But doctor aren't always enthused. Says Savita Mikhi, who runs a private clinic in Delhi, "many companies believe wrongly that a nattily clad medical representative or literature printed on glossy paper makes for impressive communication.

25

Advertising The various dimensions of pharmaceutical marketing are Demographic (age, sex, family, etc), Generic (as per generic equivalent present in them), Therapeutic group, Competitive (depending upon number of competitors present), and fifth dimension is the time. In pharmaceutical markets, major segments considered are: a) Consumer or Prescription markets: These consist of individuals who go to practicing doctors. b) Institutional markets: These contain large hospitals, Public and Private sectors along with governments hospital including medical colleges. c) Industrial markets: These consist of bulk drugs and their formulations. d) Over the counter (OTC) markets: Drugs, which are non-prescription medicines and can be sold directly to end-users. Based on product category, the pharma industry can be divided into: a. Bulk Drugs: (The active ingredient for making formulations.) b. Formulations: (The final form, in which the drugs are sold i.e. Syrups, c. Injections, Tablets and Capsules) In general, business in pharmaceutical market is conducted in two major ways, that is, either by institutional selling or through trade business. Pharmaceutical marketers in the USA, having just been allowed to advertise drugs on Television, have taken the big risks. They are advertising like crazy and even have the websites to keep patients fully informed of diseases dosages side effects and so on. In India too, earlier this year MAA. Bozell set up Lewis Grace. Bozell, is a subsidiary responsible for pharmaceutical advertising. Now, Ogilvy & Marther and Redeffusion are reportedly considering similar moves. To begin with, they will try to bring their skills to the ordinary business of making audiovisual, prints or multimedia sales pitches 26

to the doctors. This could improve the communication of OTC products, which have been turning more love and care oriented. Johnson & Johnson's touch therapy commercial is good example of the use of emotion. Advertising agencies will have to educate themselves well, because the main reason that in house publicity departments manage to torpedo the suggestion of agency help is the fact that no body wants their wonder pills to be handled by bubble gum jingle makers. Says the marketing manager of a small, but fast growing Indian company, "Advertising agencies may be good for selling the image of the company as whole but at the level of each brand, what can they do? They don't know anything." Pharmaceutical marketing experts are aware that well timed advertising directed to doctors tends to boost sales of the brand that spent the marketing dollars. In the case of marketing directly to health professionals, the question is whether promotion is (as most drug companies claim) primarily information on how the drug works or is intended to persuade doctors to prescribe the drug more frequently. Although there has been a lot of research on the persuasive versus informative role of drug promotion, there is little consensus and certainly more investigation is needed in the context of developing countries. Nevertheless, a WHO commissioned literature review of existing evidence in this regard reveals that while doctors opinions on the usefulness of the information from drug companies vary, most believe that such information is biased. The analysis revealed: Generic names of drugs are not revealed in more than 10% of advertisements. Only 22.7% disclosed any adverse effects. Just 25.1% provided any precautionary information. Only 51.7% cited any references. The Thai and Indian examples contradict established norms of ethical practice in this area. The WHO Criteria clearly states that advertisements in all forms to physicians and health related professionals should be fully consistent with the approved scientific data sheet for the drug concerned or other source of information with similar content.

27

Moreover, advertisements that make a promotional claim should at least contain summary scientific information. While these examples of advertisements focus on specific countries and companies, this should not be interpreted as evidence of a higher prevalence of information quality problems compared to other countries or companies. It is clear however that the poor quality of information provided to doctors in developing countries cannot be dismissed as infrequent and isolated cases, but rather can be viewed as a systemic breach of responsibility and ethical norms by market leaders. Research shows that there is a strong correlation between irrational prescribing behaviour and the use of commercial sources of information. The impact of flawed and incomplete information is ultimately passed on to the worlds poorest and most vulnerable consumers. Evidence suggests that doctors in developing countries, like their counterparts in other countries, rely heavily on drug companies for drug information, particularly for new drugs. However, while doctors in countries like the US, UK and Australia have access to independent sources of drug information, this is not the case in many developing countries. This is a major challenge in terms of providing doctors with reliable information that can then be passed on to consumers.

Marketing Research Function

Marketer, in order gain information, conducts market research, which in Indian pharmaceutical industry can be as simple as chatting with doctors, retailers and hospital administration or as complex as surveying a nationally representative sample of specialists or corporate hospitals and identifying the emerging health care needs. The pharmaceutical major are fond of syndicated data. Many companies routinely buy ORG (Operation Research Group) panel study and C-MARKTM studies for different brands and keep them in computer memory for easy retrieval and analysis. For them, it just feels good to know that data can be accessed when needed. But when it comes to developing strategies for their brands, these companies do not operate on the basis of this data. On the contrary, CadilaTM Health care (ZydusTM) group, takes the data very seriously. It has meetings with all of the brand managers every month to study the implications and develop strategic actions along with top management teams. This company is using information actively, whereas many other companies use the

28

information either as an academic appendage during a presentation of low immediate relevance or as a defense shield during a performance review. Marketing research data only provides a base for action in the market place, the action which has to be implemented through various mix's of promotion. It is important to understand that the promotional mix for any brand or organization is dependent upon the mix of advertising, personal selling and public relation. Over use of personal selling in pharmaceuticals via medical representatives and limitations on advertising pharmaceutical products due to FDA (Federal Drug Administration) restrictions, presents an opportunity to explore the role of and exploit the Public Relations function in the pharmaceutical industry. Pharmaceutical marketing is quite different than marketing of any other goods. Within pharmaceutical products, marketing of prescription products is a way different from that of over-the- counter (OTC) drugs and actual behaviour of prescribed drug market may vary based upon various parameters. In case of prescribed drug market, typical sales process is as follows:

Fig. 4.3: Drug requiring prescription In this case, the patient customer - do not have much or any say in purchase of the product, perhaps other than spending the money. The decision makers are the

29

physicians or doctors treating the patient. They will prescribe drug of a particular brand if they are: Aware of the product. Convinced about the utility and usage of the product. Reasonably certain that the prescribed drug can be made available by the drug retailer in required amount of time. After following the above logic, the doctor prescribes the drug, but the drug retailer plays a major role in effecting actual sale and he may: Not have the prescribed product in the ready stock. Not consider that the prescribed product has sufficient demand to stock the product. Suggest or just substitute product of the competitor company having similar composition, most of the times without even knowledge of the prescribing doctor. All this will perhaps happen just because there is less brand awareness as a consequence of less promotional efforts by the product company.

USE OF PUBLIC RELATION

Very few pharmaceutical marketers in India use public relations as a marketing tool. Many of them think Public Relation entails sending out a few press releases, holding a few conferences and conducting some event when company launches a new molecule or product. In reality, Public Relation usually ends up making a point at a very personal level. Its impact in the industry is seen at several levels affecting doctors and brands. Some years ago, CiplaTM was forced to make use of Public Relation tools when its major communication medium--medical representatives turned--un-cooperative. The company conducted meetings for not more than 10 customers at a time and ensured that thousands of such meetings took place at different locations in the country. This helped ciplaTM in building one-to-one relationship with its customers. Prudent use of Public Relation has also helped the organization in creating a positive platform for direct response communication. 30

DRUG DISTRIBUTION
Many a times drugs promoted through professional service representatives do not appear on the shelves of the retailing chemist. This can be attributed to ineffective distribution system. Although distribution is recognized in India as an important function, many pharmaceutical marketers accord it a mere supportive role; so the distribution system has remained traditional with little or no innovations. Superstockists/stockists, distributors and C& FA's (Carrying & Forwarding Agent) have traditionally been very loyal to pharmaceutical marketers. As a result, strategic changes in distribution arrangement were rarely recommended or carried out. Problems, if any, were always sorted out amicably and changes, when at all, were concerned only with adding or deleting stockists in the distribution chain. Over time when AIOCD (All India Organization of Chemist & Druggist) mobilized retailers in every state, pharmaceutical companies found their freedom to appoint stockist restricted by retailer pressure. There have been other changes too. One may view the distribution set up as a concentric pattern with patients at the center with each ring representing a link in the chain. It must be noted that some rings prefer by passing the next one. Some companies, for instance, deal directly with stockists, whereas some high end products that require highly sensitive servicing are distributed directly to doctors. Some innovative ideas have been coming from such companies like HoechstTM, SarabhaiTM, Sandoz (NovaratisTM) and now Nicholas ParimalTM. In 1988 Sandoz decided to make changes in its method of giving discount to C&F

(Carrying and Forwarding Agents) through a simple innovation. Instead of paying direct percentage on sales to agents it started paying on basis of case lots. Each case lot weighed approximately 12-15 kg and on each case lot, it paid $ .19 - $ .32 to C&FA. As result, SandozTM reduced the cost of operations by 1.2 percent of its total turn over, an enormous figure when calculated in rupee terms. It is often true that effective distribution along with right pricing differentiates a success from a failure in market place. In India, most companies market a vast portfolio of products (that others are also selling) and pricing decisions are delegated. In a market with many brands meeting the same need, even the rare marketer who begins by formulating a program based on inputs from the doctors and patients often ends up glossing over question of profit while setting the price. In the old days production volume were often kept fixed (either by the 31

company or the licensing authority). In this state costs were easy to measure and simple cost plus pricing used to work. Also marketers had to live under the rules of Drug Price Control Order (DPCO), the government price fixing instrument for essential drugs. Since liberalization began in 1991 the DPCO has been loosing its grip and the prices of many formulations, allowing market forces to play the regulator. Other aspects of liberalization have made companies hungry for growth. In such a dynamic state of existence where growth is both desirable and achievable, pricing is less simple. Lack of strategic thinking leads to chaotic pricing. Every body agrees that intelligent pricing can be used as a critical edge for any product. Yet in the pharmaceutical industry, trends suggest that enough thought is not being given to such serious decisions. A single player marketing thoughtless decision can have repercussions on the entire market. Many marketing managers don't understand the impact of their own decision on the market. As a result, they think of themselves as either price takers or makers. There is rarely a marketer who wants to upset the apple cart--strategically--by becoming a price breaker. This can be suitably illustrated with the example of GlaxoTM: GlaxorTM, When it launched CeterzineTM an anti-allergic, played price maker. It set a price it thought fit, then came a crowd of followers, and they were price takers. So there was a market where GlaxoTM, UCBTM and UnichemTM were all selling at $ .06 per tablet. Then came SOLTM. It decided to reset the scale and change the markets dynamics So it played price breaker, selling its CeterzineTM brand at $.023 per tablet. In 18 months it was selling higher volume then GlaxoTM i.e., the price maker brand. GlaxoTM did not react and continued with the same price. Today Lupin and Core are selling below SOL's price. So the price breaker managed to start a price war, but GlaxoTM has won back the brand leadership.

DRUG PROMOTION METHOD

The commercial needs of countless, fiercely competing pharmaceutical companies has led them to depend on the tried and tested 3Cs: convince if possible, confuse if necessary, and corrupt if nothing else works. Health professionals in developing countries work in overstretched and under resourced sectors on low pay and in difficult conditions. In such conditions the promotions from the drug companies are inviting. Disparities in health spending between the worlds

32

richest countries and the worlds poorest countries are such that a relatively cheap promotion in a developing country will generate much more interest there than it would in a developed country. The aim of drug promotion is to persuade people to buy more drugs and/or to pay higher prices. This is done by increasing the perceived value of the drug via one or more of several approaches including: Increasing the perceived frequency and/or severity of the indications. Widening the indications to include more people. Increasing the perceived likelihood and magnitude of benefits. Decreasing the perceived likelihood and magnitude of harms. Increasing the use of the drug for longer durations.

The World Health Organization defines drug promotion as including: all informational and persuasive activities by manufacturers and distributors, the effect of which is to induce the prescription, supply, purchase and/or use of medicinal drugs. The main aim of promotion is not to inform but to persuade. Consumer goods advertisements rarely convey much information about the features of the product. Instead the emphasis of much advertising is on associating consumption of the product with positive feeling. Regardless of where they are operating, most drug companies try to identify where people are on the following behaviour change stages and then deploy sophisticated marketing techniques to motivate them to move one or more stages towards repeat use:

Each move requires motivation and decision making so drug companies study how to understand human motivations and decision-making. Public relations techniques bypass peoples defences by giving the impression that the message is coming from a trustworthy source. Table 4.3: Doctor-directed promotion methods

33

ISSUES RELATING TO PROMOTION: The ethical promotion of prescription medicines is vital to the pharmaceutical industry's mission of helping patients by discovering, developing and marketing new medicines. Ethical promotion helps to ensure that healthcare professionals have access to information they need, that patients have access to the medicines they need and that medicines are prescribed and used in a manner that provides the maximum healthcare benefit to patients. It is understood that national laws and regulations usually dictate the format and content of the product information communicated on labelling, packaging, leaflets, data sheets and in all promotional material. Promotion should not be inconsistent with locally approved product information. Promotional information should be clear, legible, accurate, balanced, fair, objective and sufficiently complete to enable the recipient to form his or her own opinion of the therapeutic value of the pharmaceutical product concerned. Promotional information should be based on an up-to-date evaluation of all relevant evidence and reflect that evidence clearly. It should not mislead by distortion, exaggeration, undue emphasis, omission or in any other way. Every effort should be made to avoid ambiguity. Absolute or all-embracing claims should be used with caution

34

and only with adequate qualification and substantiation. Descriptions such as 'safe' and 'no side effects' should generally be avoided and should always be adequately qualified. Promotion should be capable of substantiation either by reference to the approved labeling or by scientific evidence. Such evidence should be made available on request to healthcare professionals. Companies should deal objectively with requests for information made in good faith and should provide data which are appropriate to the source of the inquiry. All printed promotional materials must be legible and include: the name of the product (normally the brand name); the active ingredients, using approved names where they exist; the name and address of the pharmaceutical company or its agent responsible for marketing the product; date of production of the advertisement; and abbreviated prescribing information which should include an approved indication or indications for use together with the dosage and method of use, and a succinct statement of the contraindications, precautions and side effects. The same requirements shall apply to electronic promotional materials as applied to printed materials. Specifically, in the case of pharmaceutical product related websites: The identity of the pharmaceutical company and of the intended audience should be readily apparent; The content should be appropriate for the intended audience; The presentation (content, links, etc.) Should be appropriate and apparent to the intended audience; and India-specific information should comply with drugs & magic remedies act.

ETHICS IN PHARMACEUTICAL PRODUCTS PROMOTION

35

Recently the Organization of Pharmaceutical Producers of India (OPPI), which is a premier organization of pharmaceutical manufacturers in India, has revised its model code on standards of promotion activity to medical practitioners. This model code aims to restrict pharmaceutical companies from providing freebies to medical practitioners so as to reduce influence on prescribing drugs of a particular company. This is based on the International Federation of Pharmaceutical Manufacturers Associations (IFPMA) code which is considered as a model code. Section 2.2 of General Principles of OPPI code states that No financial benefit or benefit-in-kind (including grants, scholarships, subsidies, support, consulting contracts or educational or practice-related items) may be provided or offered to a healthcare professional in exchange for prescribing, recommending, purchasing, supplying or administering products or for a commitment to continue to do so. This clearly states the refined position of OPPI code which is based on a noble intention of having a rationale for prescribing a product of a particular company by the medical professional without any influence so as to benefit the patient. It gives more freedom to medical professionals to choose the treatment option for patients on a case by case basis if they are not influenced by pharmaceutical companies. But it is a well-known fact that there are many companies trying to influence the prescribing habit of doctors with their kind gesture towards the practitioner, which ultimately tempts other companies also to lure the medical practitioners by providing freebies, apart from scientific information including literature, brochure and other scientific inputs. The condition of the Indian pharma industry is also pathetic with more than 20,000 manufacturing units that sell more than 70,000 brands. It is virtually impossible for any medical practitioner or even a common man to remember the whopping number of brand names. Every company or manufacturer wants to survive in this cut-throat competition and thus direct their efforts towards these unhealthy practices. Though the OPPI code has tried to amend some of these unethical practices in tune with IFPMA code, which is welcomed by trade associations, some lacunae exist. What about companies that are not members of OPPI? What if companies continue to promote their product in an unscientific way? Is there any mechanism by which unscientific promotion by companies is restricted? Besides, the companies that are not members of OPPI may not follow the code and can circumvent the provisions, still continue to influence the medical practitioners. The Drugs and Magic Remedies (Objectionable Advertisements) Act in India states only the conditions for which a drug

36

cannot be directly advertised. At present there are no provisions to monitor how companies, that are not members of OPPI, adhere to standard practices. While the new code by OPPI may not be music to the ears of medical practitioners since many of them would be devoid of the favours accorded to them by certain pharmaceutical companies. At the same time it is required that the prescription generated at the hands of the practitioner takes care of the patients clinical condition and, more importantly, the economic status of the patient. Let the medical practitioner be an unbiased or an impartial judge of what is required and for which patient. What is needed is a concrete, directed and focused effort by all players of the pharmaceutical industry and other stakeholders as well, in order to regulate the promotional activities of pharmaceutical companies to medical practitioners. As OPPI has modelled its code on the IFPMA code, all trade associations of pharmaceutical industry, government, NGOs and common men should join hands together to curtail the practice of influencing medical practitioners. Governments can frame and enact laws and legislations that would take care of marketing practices and create a monitoring authority that would monitor the promotional activities of pharmaceutical companies in India.

PROBLEMS AND PROSPECTS OF SALES PROMOTION IN PHARMACEUTICAL INDUSTRY

Marketing communications strategy will set out exactly how to promote an organization, initiative, product or service across a whole range of different media from advertising campaigns to search engine optimization. It should set clear objectives so that you can measure success and crucially, it should provide the best solution within the available budget. It is part of the marketing mix, which includes all the means by which a company communicates directly with present & potential customers. It is the process of presenting an integrated set of stimuli to a target with the intent of evoking a desired set of responses within the target market & setting a channel to receive, interpret & act upon messages & identifying new communication opportunities. Marketing communication is a systematic relationship between a business and its market. There are twelve different communication tools available to the marketer: personal selling, advertising, sales promotion, direct marketing, public relation, sponsorship, exhibitions, merchandising, the internet, word of mouth and corporate identity. These communication tools constitute the marketing communication mix. Each

37

element of these communication mix should integrate with other tools of communication mix so that a unified message is consistently reinforced. Sales promotion comprises various marketing techniques which are often used tactically to provide added value to an offering with the aim of accelerating sales and gathering market in that particular segment. In pharmaceutical marketing communication the main objective is to make an impression and more important is to make an impression long lasting. In the current rat race several national and multinational pharma companies have gained remarkably for their exceptional communication strategies for sales promotion.While many pharmaceutical companies have successfully deployed a plethora of strategies to target the various customer types, recent business and customer trends are creating new challenges and opportunities for increasing profitability. In the pharmaceutical and healthcare industries, a complex web of decision-makers determines the nature of the transaction (prescription) for which direct customer (doctor) of pharma industry is responsible . Essentially, the end-user (patient) consumes a product and pays the cost .

The pharmaceutical industry is the world's largest industry due to worldwide revenues of approximately US$2.8 trillion. Pharma industry has seen major changes in the recent years that place new demands on payers, providers and manufacturers. Customers now demand the same choice and convenience from pharma industry that they find in other segment. Indian Pharmaceutical Industry is poised for high consistent growth over the next few years, driven by a multitude of factors. Top Indian Companies like Ranbaxy, Dr.Reddy's , CIPLA and Dabur have already established their presence. Indian companies have only recently entered the area. The Indian pharmaceutical industry came into existence in 1901, when Bengal Chemical & Pharmaceutical Company started its maiden operation in Calcutta. The next few decades saw the pharmaceutical industry moving through several phases, largely in accordance with government policies. Commencing with repackaging and preparation of formulations from imported bulk drugs, the Indian industry has moved on to become a net foreign exchange earner, and has been able to underline its presence in the global pharmaceutical arena as one of the top 35 drug producers worldwide. Currently, there are more than 2,400 registered pharmaceutical producers in India. There are 24,000 licensed pharmaceutical companies. Of the 465 bulk drugs used in India, approximately 425 are manufactured here. India has more drug-manufacturing facilities that have been approved by the U.S. 38

Food and Drug Administration than any country other than the US. Indian generics companies supply 84% of the AIDS drugs that Doctors without Borders uses to treat 60,000 patients in more than 30 countries. There can be several challenges for pharma marketing with global channels opening up from all directions it has become an art of its own kind. Some of the important aspects can be as the followings Increased competition and unethical practices adopted by some of the pharma companies. Low level understanding of customer knowledge (Doctors, Retailers, Wholesalers). Dissimilar customer perception. Quality of medical representatives. Recruitment process of medical representatives. High training and re-training costs of sales personnel. Busy doctors giving less time for sales calls. Poor territory knowledge in terms of business value at the level of medical representatives. Valuing of prescription from each doctor in the list of each sales person. Unknown value of revenue from each retailer in the territory.

l). Sales forecasting from field sales level to actual level. Absence of analysis on the amount of time invested on profitable and not-so-profitable customers and lack of time-share planning towards developing customer base for future and un-tapped markets. The pharmaceutical distribution channel is indirect with usually three channel members i.e. depot/C&F, stockiest and chemist. Pharmaceutical companies appoint one company depot or C&F agent usually in each state and authorized stockist(s) in each district across the country. Company depot/C&F sends stocks to authorized stockists according to the requirement. Retail chemists buy medicines on daily or weekly basis from authorized stockiest as per demand. Patients visit chemists for buying medicines 39

either prescribed by a doctor or advertised in the media. Here patient is end customer and doctor is direct customer for any pharmaceutical company. But for the doctor, customer (patient) is more important so he wants an effective supply chain management from prescribed company. And for pharmaceutical companies their customer that is doctor is more important that's why they emphasize more on supply chain management. Ultimately end customer is benefited out of this. For marketing different pharmaceutical products companies require more and more skilled field force to develop good rapport with their direct customer (doctor). Moreover field force should have good product knowledge and USP of their products over other so as to convince doctors and PULL the demand for their products i.e. from Doctor to Retailer to Stockist to CFA to company. In this system, doctors are the core customers and the major thrust is given to build and retain these customer because they are pulling the demand for products hence companies also give main emphasis in building and retaining these customers. All efforts are being put for generating secondary sales i.e. from stockist to retailer. Now-a-days the companies are a Ensuring of auto demand with limited availability and maximum liquidation of the products is the main characteristic of this approach. For retaining and developing customers, the companies normally provide gifts like sponsorship for various conferences like RSSDI, FOGSI, APICON, UPCON etc. For example Dabur having PASS (Professional Academic and Scientific Services) activities for promoting its chronic therapy range. The relationship between clinicians and representatives has always been good and pharmaceutical companies have provided, and still provide, the major economical support for customers' continuous medical education. Something needs to be done to find a solution to this problem that takes into account the needs of both pharmaceutical companies and their representatives on one side and physicians on the other, for a better professional interaction. Some times they were also mixed with CSR activity sponsorship like free health camps, diabetic camps etc. Of late the pharma companies also ventured into the rural areas and along with doctors they are also approaching the RMP doctors to bridge the gap between the product and their ultimate customers the patients. Over the last couple of years, pharma marketing professionals are slowly changing their strategies. This drift is driven by market forces. Patients' understandings of the disease and disease management have also seen a positive shift. Today, a doctor is subject to a 40

lot of questioning and reasoning by the patients both about the disease and disease management. Hence, we see some of the products in the ''direct-to-consumer'' mode of sale wherever the regulatory requirements permit. For Indian companies marketing differentiation coupled with aggressive selling is the key. Even today more than 50 per cent of Indian pharma market is rural and the ''GATT Effect'' will not be immediate in rural India. To know the doctor's mind and also to occupy a place there with a brand; the brand manager must be in the market with the doctors and understand the specific needs of the doctors and design promotion. Aggressive sales push at the doctor and retailer level and consistent repeat visits can drive a brand ahead. An old saying is that ''Doctors have a very strong memory and hence forget what they do not want to remember.'' The challenge to a marketing man today is to ensure that his brand falls in the category of ''Want to remember'' with as many doctors as possible. This is an extremely difficult task, needing a lot of innovative approach. This is precisely the real task of a sales personnel in pharmaceutical marketing .Slowly and steadily the industry is growing to beat all the possible hurdles away. Hopefully success is not far away.

PROMOTIONAL STRATEGIES OF PHARMA COMPANIES IN INDIA

The key determinants of success of any Pharmaceutical industry, besides the cost and availability of capital are brand building. In the pharmaceutical business in India, most companies work on monthly, bimonthly or quarterly promotional cycles; and promotional resources are carefully allocated to ensure that the company achieves maximum sales. Most organisations bring out strategy guides, which provide details on inputs, information on competition, approaches to detailing and sometimes a chart on incentives. Strategies are much more than plans to achieve goals. They differ from operating procedures because they are drawn from changing market situations and are thus live and dynamic. The term market refers to all actual and potential buyers of a product or service, who possess purchasing power, authority and willingness to purchase. The global pharmaceutical market is currently estimated to be over US$ 400 bn and is projected to grow at about 5 per cent per annum over the next few years. Due to the rapid growth of the pharmaceutical industry, marketing has also become an important

41

determinant of the survival and growth of various pharmaceutical companies, amidst the increasing competition faced by them. The marketing strategies that are employed by pharmaceutical firms can be broadly classified into two types as follows:

Promotional strategies Defense strategies

Promotional strategies
Co-marketing: While co-marketing is a new concept all over the world, it started in a nascent form even before the 1970s in India. Co-marketing strategy enables organisations to focus more on market reach, penetration and brand share. The ultimate objective of such approaches is to develop brand image and brand equity. Unichem promoted saffola oil (of Bombay Oil Mills) to cardiologists as a part of their promotional strategy. Later on, as the advantages become apparent, companies like Johnson & Johnson and Wipro used this strategy to promote their baby care products to doctors. Brand image marketing: Pharmaceutical companies identify and build their strength by calibrated strategy to ensure that doctors and customers see them in favourable light. Research reveals that there is a direct relationship between a brands awareness level, its image and its market share. Thus companies now a days are adapting this strategy of improving the brand image, which in turn improves their sales and profitability. Seven steps to a better brand image: Most of the pharmaceutical companies are concentrating on this strategy to nurture the image of the company and in turn market their products successfully. The type of image, a company wants to brandish, can be furnished with the following seven steps.

Play host: In this, a small group of doctors is invited and briefed whenever a new brand is introduced. Earlier, unique has used this strategy to a good effect for Metrogyl remains a market leader even in the wake of new molecule.

42

Respect doctors schedules and get to the point straightway. Also make the presentation brief and memorable.

Be factual: Factual and realistic information is effective. Case studies, clinical trials, promotional trials, cure rate of drugs and side effects all need to be collected and documented properly to create a favourable perception.

Maintain respect: A conversation followed by a thank you note is usually adequate. Medical representatives and managers need to be trained accordingly to create a favourable impression.

Be brief and subtle: Initially to create perceptions and awareness about a company, information should be given in encapsulated form so that the customer is not burdened with more information.

Identify your uniqueness: The overall strategy may include an advertising or a public relations agency handling everything.

Develop field staff to maintain quality standards

Involvement marketing
It started in a very small way in India, by way of brand promotion Abdec Drops, Healthy Baby contests, Ferradols Milkshakes (provided at hospital gatherings) and Parke Davis giving away monograms to final year MBBS students at specific disease symposia in medical college in the 1960s. Lupin, Kopran and Cadila started launching almost every product with the involvement of the target groups. From 1980s, involvement of the general medical fraternity in the product development has become almost a standard industry practice. Wockhardt advertised its tonic (Winofit) and anti-obesity drug (Flabolin) without the brand name in a local press and told patients to ask their general practitioners and family physicians what the anti-obesity drug was all about. Lupin involved chest specialists in the working of the company. From 1990 onwards, companies like Torrent, Glaxo and Cipla started targeting individual through direct marketing.

43

Extra-value strategy: Some of the brightest marketers keep rises low but necessarily the lowest and find ways to offer value-extras that the lowest price competitors cant match. Dr Reddys Laboratories started this trend and today every company is extra cautious about pricing any new product. Medico-marketing: The purpose of medico-marketing is to promote corporate products and services with the help of medical representatives and by other direct response marketing methods. The Continuous Medical Education (CME) model has been successfully used in medico-marketing. Successful medico-marketing requires careful planning and organisation of management. Examples of medico-marketing strategy used to promote pharmaceutical products are: Win Medicare celebrated a medico-marketing event for its new product Hepa-Merz, a hepatoencephalopathy-related product. The medical concept was fully developed with creative communication as a key platform. An innovative hypothesis, liberation of ammonia to treat hepatoencephalopathy, was discussed among the gathering of specialists at different regional centres. All of them were convinced of its efficacy. The Upjohris medical-marketing consultants programme for the launch of new products was exceptionally successful. The company took A-class medical practitioners as marketing consultants in a few specific geographic areas and worked through them for a period of two years, including the supervision of pre-launch and post-launch tracking.

The right media mix strategy

The right media mix, utilised by the company, can promote its products considerably. The various promotional media used are: Medical magazines and Journals (Physicians Digest, Lancet, Headache, Drug Today, CIMS, MIMS, IDR etc) Conferences, Seminars and Symposia Promotional trials

44

Newspaper advertising Free-standing supplements Conference videos Video messages

Marketing strategy based on innovative distribution: In 2005, the marketing strategy of the pharmaceutical company Sandoz included change in method of giving discounts to carrying & forwarding agents (C&FAs) through a simple innovation. Instead of paying direct percentage on sales to C&FAs, it started paying on the basis of case lots. Each case lot weighed approximately 12-15 kg and on each case lot, Rs 8-10 was paid to the C&FA. Table 4.4: Major alliances between Indian & International companies: S.No Indian Company International Partner Objective Place of Operation 1 Cipla Novopharm Marketing International 2 Dr. Reddys Biomed Marketing International 3 Lupin Labs Fujisawa, Merck, Marketing & International Global Corp. Manufacturing 4 Ranbaxy Elililly, Aventis, Marketing, Supply International Glaxo of Both bulk drugs & in India 5 SmithKline Beecham Knoll, Glaxo Marketing India 6 Panacea Biotec Chiron Marketing India As a result, the company not only improved the sales of its products, but also managed to reduce the cost of operations by 1.2 per cent of its total turnover. Public relations consultancies (PRCs)- an important part of marketing strategies: Most of the pharmaceutical companies in India and abroad are nowadays hiring the services of PRCs as part of their marketing strategies. Public relations cover a broad spectrum of activities from internal communication to external publicity and also financial reporting. The major task of PRCs is to build a one-to-one, positive, effective, motivating and self-assuring relationship with the consumer through mass or individual media. It encompasses brochures, industry booklets, mailings, catalogues, corporate communication devices and websites. All of these have their importance as marketing tools.

45

Example: The services of PRCs had been utilised by Cipla as apart of its marketing strategies for the launch of new products, when its major communication medium i.e. medical representatives turned uncooperative. The company conducted meetings for not more than 10 customers at a time and ensured that thousands such meetings took place at different locations in the country. This helped Cipla in building one-to-one relationship with its customers. Contract Sales Organisations (CSOs)- A strategic Marketing Tool: Pharmaceutical companies are using the services of CSOs as strategic weapon for increasing the geographical coverage of their products, as well as to have competitive edge at key moments. Advantages of CSOs are: Minimised fixed overheads Managed resources at the launch of new product Increased sales force whenever need arises. For eg. when a brand is under threat from the competitor Provide creative, short-term brand resources Help in providing market development initiatives Allow companies to economically reach physicians they would not ordinarily be able to call on, providing additional sales coverage tailored to a specific need Entering into alliances, acquisitions, mergers & joint ventures with MNCs to market and sell their products: The reach of marketing and distribution network is an important determinant of success in the pharmaceutical industry. Hence, as an important marketing strategy, companies are strengthening their marketing and distribution network and thus improving their reach and efficacy. A way to do this is to enter into alliances and joint ventures with other companies. Nicholas Piramal is the prime example of a company that has entered into a number of alliances with MNCs to market its product.

Clinico-promotional study
46

A clinico-promotional study is usually done by pharmaceutical companies which need to take decisions concerning their own products and how they are to be sold. The only way to properly execute an economic clinico-promotional study is thorough understanding of a drugs properties, the disease for which it has been approved, and the marketing issues involved. Every marketer needs the help of results from an economic clinico-promotional study when he has to substantiate the claims of his brands, and demonstrate how the product is differentiated in a crowded pharmaceutical market. Eg. A company conducted clinico-promotional study for Syu, a nutritional protein product, among adolescents at different orphanages and established the weight and height benefits to a highly convincing degree. This became a platform for its promotion.

47

Direct-to-Consumer (DTC) marketing strategy

This is recent approach which has been used by various pharmaceutical companies mainly abroad (USA and UK). USA has pioneered DTC advertising. The reason DTC has become an area of interest over the last few years, is that it is a way of influencing people who actually use the medicine. DTC essentially means a campaign or communication programme intended for and targeted to consumers. In relation to pharmaceutical products, the consumers may be patient or family members, caregivers or the general public. Initially, doctors were worried about the patients failing to understand the drug related information and impairment of doctor /patient relationship, but DTC did not lead to any such apprehensions and is now a mainstay of product promotion in the US. Internet has totally rejuvenated direct marketing and DTC as a promotional medium. Resources like Euro RSCG s Media Turfs online tracking can help track individual doctors online, which is immensely useful for pharma companies to deliver targeted communication to them.

Defense Strategies
Besides promotional strategies, a number of defense strategies have also been used by various pharmaceutical companies to market, promote & extend the life cycle of their products.

These are:
New Indications or Uses of the Product: In US, a new indication can extend a products protected life as the market exclusivity period is extended by three years for each new indication. Often, companies more important indications during the launch of the product & less important indications are introduced when product is at decline stage in its life cycle. Eg. Lovenox, a product for curing thrombosis was launched with one indication in orthopedic surgery by Aventis. Currently, it has eight indications. By revealing more & more indications of the same drug, the company has more than doubled its original peak sales for this drug.

48

Reformulation
A similar strategy to gaining new indications is to produce a new formulation on an existing marketed drug. This line extension will often be associated with a more convenient dosing form or a longer lasting formulation. This strategy is most commonly used where old technology is an immediate-release formulation requiring multiple daily doses is replaced by a new technology once daily formulation of the drug. Pfizer defended its hypertensive drug - Procardia for a number of years with this strategy. Switching strategy This strategy relies on moving patients from an older drug (whose patent is about to run out) on to the newer version (which has patent protection). The theory is that by the times generics of the original drug hit the market after its patent has expired, patients have already been switched to newer drug and are unlikely to switch back to the older, now generic drug. Pfizer successfully used this strategy to switch patients on to Procardia XR from its original drug Procardia near the time, when Procardias patent was about to expire.

Paying generic companies off

A dubious strategy of paying generic makers to delay them from entering the market has also been used. E.g., Hoechst Marion Roussel (now part of Aventis) paid Andrx US$ 10 million per quarter not to launch its generic version of Cardizem. As a consequence of the mounting evidence of counterfeiting in Asia, companies in India and abroad are hiring services of institutes such as Pharmaceutical Security Institute. Counterfeit medicine is a product that is deliberately mislabeled with respect to identity and/or source. Such medicines can affect the companys image. Therefore, companies are hiring the services of various agencies to check this grey marketing. It can thus be concluded that the key determinants of success of any Pharmaceutical industry, besides the cost and availability of capital are brand building (or brand

49

Strength) and marketing strategies adopted by them as these have a profound impact on growth and market share of all pharmaceutical companies.

GLOBAL TRENDS IN PHARMA PROMOTIONS & MARKETING

Fig. 4.4: Pharmas Current Model As the Verispan promotional audit data show, pharmaceutical companies spend a disproportionate amount of their promotional budgets on face-to-face detailing. The $11.2 billion does not even include the cost of samples! In contrast, the amount spent on ePromotion is minuscule. For every 100 sales rep visits to physician offices, only 56 actually see the physician and of these 27 merely drop off samples without talking to the physician. Schecter claims that when reps actually get to talk to physicians, the call only lasts 4.6 minutes on average.

Fig. 4.5: Reduction in U.S. Primary care promotional spending

50

Given these statistics, Schechter said Merck is on course to significantly reduce its promotional spend by 2010 and estimates it will cut its field force spending by 9% in 2007 (see figure at left; which shows that the field force bar is lower in 2007 than in 2005.). According to PharmExec.com, however, "Merck spokeswoman Amy Rose wasn't having any of it [talk about a 9% reduction in detailing]." "This is not a headcount reduction," said Rose. "Our new model calls for an increased use of technology [and metrics], and it is much more customer-focused." If the recent iPhone craze proves anything, customer focus means including more technology-based channels in the marketing mix. While pharma is focused on face-toface selling, physicians like other consumers are changing their media habits as illustrated in this Google chart.

Fig. 4.6: Media consumption habits have changed Consumers are spending more and more time online and less and less time reading, listening to the radio, or watching TV. Media spending by all advertisers not just pharma needs to shift to new channels that consumers are using and, according to Google, this shift is overdue.

51

Fig. 4.7: Consumers are spending

Engaging Customers on Their Terms

Schecter and other pharma business leaders are shifting and fully intend to leverage innovation and technology. This shift will add a new dimension to pharmaceutical advertising:

Engagement.
Reach and Frequency are the traditional factors used to measure marketing effectiveness and ROI. Reach is how many "eyeballs" see your promotional message and frequency is how often they see it. Technology adds another dimension to the analysis: Engagement, which also encompasses depth. Certainly, pharmaceutical products demand communications that offer engagement and depth much more so that packaged goods for example. Several advertising associations are working to develop a new metric to measure engagement. This sounds exactly what Merck's Schechter had in mind when he talked about embracing new ways to engage physicians. The most effective way of engaging physicians and consumers using innovative technology is through Web 2.0 social networking tools. The pharmaceutical industry so far has a poor track record when it comes to using these tools effectively. And, like any powerful tool, when used improperly, Web 2.0 tools can be "risky." Back in 2006, Pharma Marketing News hosted a reader survey to predict future trends in the pharmaceutical marketing mix. The survey asked readers for their opinions regarding the impact and risk of several physician marketing channels. They were also asked how they saw the mix shifting in the next few years.

52

When evaluating impact, respondents were asked to think of reach, credibility, and content richness as important factors -- the greater these attributes, the greater will be the impact. Risk factors, on the other hand, include potential to cause customer dissatisfaction or push back, increased regulation, negative publicity, etc. If marketers should avoid the channel, then risk would be high. The results of the survey can be plotted in graphical form:

Fig. 4.8: Physician Marketing Channels Let's focus on traditional face-to-face promotion (rep) and eDetailing or epromotion. While face-to-face promotion has a very high impact potential it is also risky and is becoming even more risky, according to survey respondents. [Risky because of increasing physician push back, denying reps access to physicians, and state laws attempting to limit access to physicians by sales reps. This is what the downward red arrow is showing. In fact, the tip of the arrow is where this channel may be at today! eDetailing or ePromotion also has high impact. At the time this survey was run, eDetailing was thought to be as risky as face-to-face selling, but now it has the potential at least of being LESS risky and MORE impactful than traditional sales reps. Hopefully, Merck's rejiggering of its marketing mix towards new technology will become the standard by which other pharmaceutical companies evaluate their own marketing plans. Or maybe, Merck has a unique product mix for which technology is better suited to promote. In that case, we may not see other pharma companies follow Merck.

53

EVIDENCE OF ETHICAL FAILURES

Doctors are the main targets for the promotional activities of drug companies in developing countries. With the power to prescribe and a high status in society their opinion of a drug very often determines its sales success. It is therefore not surprising that the majority of marketing spend by industry leaders goes towards direct-to-doctor (DTD) promotion. These marketing practices are common to most contexts whether in developing countries or developed. However some issues are of particular concern to developing countries where health budgets are smaller and resources have to stretch much further. For instance in developing countries the lack of government funding for professional development activities for health professionals can make drug company sponsored meetings more valuable. Lack of resources for surgeries and even personal medical resources can also make offers from drug companies more inviting. The sheer volume of promotion as well as the types of cases we have come across in our research raises serious concerns about whether drug companies are able to regulate their promotion activities effectively, while ensuring high standards of consumer protection.

Gifts
Among the promotional tactics employed by pharmaceutical companies is the practice of giving gifts to doctors. In developing countries, these range from small items such as gifts, pens and notebooks to expensive foreign holidays, televisions, air conditioners and even jewellery. However what stands out in the developing country context is the practice of giving lavish personal gifts that have no pretence at medical value. A Kashmiri newspaper reported a doctor as saying Medical representatives of pharmaceutical companies whose products may or may not be efficacious without any qualms offer cash, refrigerators, colour televisions, laptops, PCs, mobile phones, ovens, phone bills, cars, tuition fee of their children, and lots more. Similarly, one Indian doctor noted, The newer multinational and major players in the market have started to hire marketing professionals and take their brand promotion very seriously and many try to build a personal rapport with the doctor by remembering special occasions like their birthdays and anniversaries and besides the regular festivals. The companies have started to spend more and more in keeping the doctors and their 54

employees happy rather than their customers. 'Gifting' of air conditioners, washing machines, microwaves, cameras, televisions, and expensive crystals is a normal accepted norm nowadays. So are frequent pampering in form of CMEs [Continuing Medical Education meetings] and lectures in star hotels followed by lavish dinners and cocktails. Such practices not only contravene the national industry code on ethical promotion, but also are often nontransparent. These gifts may be hidden in official company reports of spending under budget lines for seminars and events. As a result, establishing an accurate picture of the actual costs associated with gifts to doctors can be difficult for health watchdogs and consumer groups who are concerned about the influence of drug companies on health professionals.

BUT DOES THIS GIFT GIVING MATTER?

A sales representative in India reported: Since there is no documentation of these gifts, the doctors can switch over from one product to another when perks of one company exceed that of another. The doctors neglect other aspects of the drug like its efficacy, suitability for the patient, the cost etc. With so many multinational companies competing in India, the money spent over these activities is increasing day by day. Our research brought to the fore three key areas where the interaction between pharmaceutical companies and health professionals suggests an unhealthy relationship, with significant conflicts of interest. First, health professionals belief about gifts shows recognition of the fact that gifts do have an impact on prescribing behaviour. This can promote irrational drug use by consumers that is not based on reliable data on real needs, safety, efficacy and price of the drug, but rather on the marketing tactics of individual companies. Second, examples of the way in which the gift relationship between companies and doctors is cultivated reveals a disregard for ethical practice. Finally, examples of how prescribing behaviour is affected by gifts suggest that such practices negatively affect consumer health and safety and may increase unnecessary spending on healthcare.

55

HEALTH PROFESSIONALS BELIEFS ABOUT GIFTS

As a marketing strategy, in cultivating a gift relationship with doctors, drug companies are in effect creating a relationship of reciprocity where, upon receiving a gift, doctors may feel obligated to respond. Whether they are conscious of it or not is not relevant. Existing literature suggests that doctors hold a range of views about gifts. In general doctors readily accept gifts that are smaller and socially more acceptable. There is a sense of unique invulnerability, that only other doctors are influenced by gifts. This theory of unique vulnerability suggests that doctors are more willing to say that other doctors are influenced more than they are themselves, but this hypothesis warrants additional research.

Fig. 4.9: Hypothesis warrants additional research Key findings showed a high level of interaction between the pharmaceutical industry and the medical profession. Although the latter recognize the influence of these interactions on prescriptions and the elevation of the cost of the final product, they find it appropriate to receive benefits. 86% receive medical samples frequently. 39% receive desk gifts. 19% receive invitations to congresses. 12% receive free lunches.

56

Half of the doctors believe that receiving benefits from the pharmaceutical industry has an influence on medical prescription, but only 27% accept this as influential in their own prescriptions. Doctors may be unaware of the fact that drug companies influence their prescribing behaviour. Although many have suggested that doctors should distance themselves from drug companies, it is easier said than done.

Sales representatives
According to their career profile, pharmaceutical sales representatives spend most of their business time on the road, talking with pharmacists, hospital personnel, physicians, patient advocacy groups, and even retirement homes, increasing the visibility of their companys products and the volume of their sales. One to one visits from sales representatives are proven to be the most effective way to promote drugs to doctors because they can identify the behaviour change stage and the main motivators and decision-making styles of the person they are selling to and adapt their approach accordingly. The main influencing techniques used by drug sales representatives try to focus on doctors tendencies to trust experts, trust their peers and trust likable (friendly and/or attractive) people, to be consistent with their commitments and to act on reciprocal obligations when given gifts. Visits from sales representatives are often coordinated with other methods such as providing gifts, free samples or running advertising campaigns. A study published in June 2007, revealed that medical sales representatives noted that there were often inconsistencies between what they had been told to tell the doctor during promotional visits and what was detailed in the literature. Also, doctors noted that they received literature only if they repeatedly requested it. These social responsibility failures pose significant threats in the context of a country like India, which is a poorly regulated environment and is further complicated by a significant uneducated consumer base and a highly privatised health system. Personal comments by sales representatives and health professionals alike from many parts of the developing world are suggestive of an ethically questionable relationship fostered by drug companies.

57

Brand education
It is clear that companies face a conflict of interest in providing an accurate picture of negative impacts of their product. This presents a problem for doctors everywhere, but particularly in developing countries, who rely heavily on the drug information provided by the company and in many cases cannot access independently verified data. However, doctors can also be complicit in the problem when they choose to endorse a companys marketing campaign or assume the role of a seemingly independent key opinion leader to shape a positive perception of the drug among health professionals. In some cases the pharmaceutical industry manages to coopt academia and unduly influence what health researchers reveal about their findings, as the non-profit organisation Doctors for Research Integrity asserts. One significant result is that medical journal articles on new drugs may be ghost written and influenced by drug companies public relations (PR) firm. Despite obvious failures in their promotions vetting and compliance systems for company codes, the industry continues to insist on a model of pure self-regulation. What is needed is a rigorous system of oversight and continuous consultation among key stakeholders including consumer advocates, the drug industry, government agencies, and health professionals.

CAN SELF-REGULATION WORK?

"All advertising is inherently unethical. That's how you sell things" said a New York attorney. Selling drugs is like selling any other commodity. Pharmaceutical companies choose to spend more on medical drug promotion rather than on research and development because drug promotion is what earns them money. There have been numerous studies which have incontrovertibly stated that drug promotion influences prescribing practices, a fact that is not acceptable to many doctors. If drug promotion were not so successful, would the companies spend billions marketing their ware? The World Health Organization (WHO), in an attempt to support and encourage the improvement of health care through the rational use of drugs and to curb unethical marketing practices, came out with a landmark "Ethical criteria for medicinal drug promotion" in 1988 and has recommended their implementation to its member countries. This document defines drug promotion as "all the information and persuasive

58

activities by manufacturers and distributors in order to induce the prescription, supply, purchase and/or use of medicinal drugs". It also suggests what can be considered appropriate hospitality and gifts. There is evidence that drug utilization problems are increasingly encountered in many developing countries due to the unethical marketing practices of the pharmaceutical industry. Unfortunately the guidelines drawn up by the WHO, are flouted in practice with impunity since there are no effective legislative measures to support them. The International Federation of Pharmaceutical Manufacturer's Association which had first suggested a self regulatory code of pharmaceutical marketing practices in 1981, adopted the revised version in 1994. There seems to be obvious double standards in adoption of the code. While in the developed countries, these firms often publish reasonably ethical advertisements which are published in medical journals, the very same companies promote the same drug for different indications in developing countries. The information is also insufficient, sometimes contains unproven scientific claims and is published by many medical journals from these countries. In an attempt to get a grip on the situation the International Committee of Medical Journal Editors suggested that editors must take full responsibility for what appears in their journals. Many journals appointed committees to examine advertising material before publication. Yet this was beyond journals in many developing countries who were eager to grab the money that advertising (ethical or unethical) brought in. Even though it has been proven time and time again that drug advertising in India is unethical, nothing much is being done to curb it. The annual conferences of the various national bodies of medical specialities are a glaring example of how deep the rot has spread. Today no medical conference is organised without getting financial support from the pharmaceutical industry. In return for the lavish financial assistance, companies are allowed to select speakers, choose the topics for discussion, advertise their brand image and so on, a situation akin to the indoctrination done in terrorist camps. If this situation is allowed to continue we shall have a nation full of doctors who rely on the drug companies to dictate what they should prescribe. Unfortunately, though India had a head-start in this direction with the constitution of the Drug Enquiry Committee in 1930 under the chairmanship of Sir R.N. Chopra which scrutinized the pamphlets of drugs which made spurious claims, we have not made a

59

dent in this direction. The Drugs and Magic Remedies Act which came into force in 1955 and was amended in 1961, 1967 and in 1992 have not been enforced due to the apathy and general disinterest of the health care fraternity and the industry refuses to be cowed down by legislative enforcements. Hamdard Dawakhana was asked to recall 40 drugs. But they chose to file a writ in Supreme Court in 1959 on the grounds that their right to free speech and right to carry on trade and business were violated. The Supreme Court however, dismissed the petition. The drug industry fast learnt to take advantage of the loopholes in the law and continued with unethical marketing practices. The problem became so serious that S. Narayen, Commissioner, FDA Maharashtra, in the foreword to a book on the Drugs and Magic Remedies act by S.W.Deshpande in 1994, admitted that 'economic liberalization seems to give the impression that manufacturers have the right to sell and the market place is what must decide the rules of the game. In the dizzy of activity, various ploys are used to sell the product. Some of these not only mislead the consumer but can also be harmful'. The internet is perhaps one of the greatest boons to the medical establishment. Doctors are able to check the validity of information given to them by drug companies and therefore it is now being reported that drug companies are hesitant to tell outright lies as before. But the industry relies on the fact that doctors are busy people who would not find the time to counter check information they have received. The ever innovative marketing executives have come up with yet another brilliant ace in the form of directto-consumer (DTC) advertising. This is the advertising of branded drugs through popular media. In India we are already exposed to television advertisements for inhalers in bronchial asthma, insulin for diabetes mellitus. This is a scaled down, modified version of DTC advertising. If DTC is approved, then drug companies will dictate what doctors prescribe through their patients. A small silver lining is perhaps the efforts of a few medical colleges where undergraduate students and interns are taught to critically analyze drug promotional material and are sensitized to the "tricks of the trade" of the pharmaceutical companies. The "one on one" interview with the medical representative is perhaps the most powerful tool of drug promotion which is followed worldwide. Interns are now being taught to "take control" of these interviews and use them to get reliable information. Videos have been made with the assistance of the WHO and are being used to train interns on some aspects of dealing with medical representatives. It is too early to judge 60

what impact these interventions will have, but it must be kept in mind that tiny drops of water make a mighty ocean. These efforts, though isolated and small at present, will nevertheless reach a critical mass which shall be self propagating one day. It is hoped that in future we shall have a new generation of doctors who demand that all drug promotion be ethical. Unless this demand comes from the medical establishment who refuse to take lavish gifts, eat lunches and dinners sponsored by drug companies, and attend CME programmes paid for by the companies we can never expect drug companies to self regulate. Consumers trust doctors to act in the best interests of their patients. However, most consumers are largely unaware of the influence of the pharmaceutical industrys marketing on the very health professionals they rely on. Between 1995 and 2005, the percentage of total spending on sales and marketing was by far the biggest corporate expense for the pharmaceutical industry. The excesses of drug marketing are well recognized by industry insiders. A survey conducted by PricewaterhouseCoopers showed 94% of industry stakeholders said that pharmaceutical companies spent too much money on advertising.

Weak regulatory capacity Even in India, a fast emerging economy with a pharmaceutical industry of its own and a relatively strong civil society, there is inadequate oversight of the drug industry.

61

According to a 2003 memorandum of the All India Drug Control Officers Confederation, in order to be effective, the number of drug inspectors needed to more than quadruple from 700 to 3000.

Results in risks to consumer safety

Campaigners for the rational use of drugs say that regulatory authorities in India are slow to protect consumers from drugs that have been banned, withdrawn, or marketed under restrictions in North America, Europe, and many other Asian countries. For example, Rofecoxib, the internationally recalled antiarthritis drug sold by Merck & Co. as Vioxx, Ceoxx and Ceeoxx, was among some of the controversial drugs available in the domestic market in 2009.The drug was officially banned in India, in October 2004, a month after the official Merck recall. Dr C.J. Shishoo, a trustee at the Consumer Education and Research Centre, a CI member and consumer action group based in Ahmedabad, observes that at least half a dozen drugs with dubious safety profiles are still being marketed in India as there were no adverse reports available with the regulator. This is supported by a senior official from the central drug regulatory department in India who was reported as saying, Currently our mechanism is grossly inadequate to tackle the issues related to pharmacovigilance as there are no public interaction systems wherein the doctors or patients can share their experiences with the regulator directly. Since the department is also facing severe people crunch, it is not able to dedicate special cells or people with the task of collecting patient responses. Hence, whenever there is a recall of a drug abroad, we do not have any relevant data to take follow-up actions. This makes the department always dependent on the drug alerts of the US Food and Drug Administration or European regulators to initiate an action here. Despite the obvious role aggressive marketing played in magnifying the harmful impact of drugs like VIOXX12, many governments assert that they favour a co regulatory approach (i.e. industry code compliance and legislation) to ensure ethical drug promotion. In practice though, most governments relegate drug marketing to selfregulation by the industry itself. Legislation in many countries is outdated and does not necessarily cover consumer protection concerns for modern drug promotion methods via disease awareness campaigns, patient groups or the internet.

62

Weak codes of conduct

Moreover, many industry-based systems for monitoring drug promotion mainly rely on complaints mechanisms. These mechanisms are largely inadequate because too many violations are missed. This conclusion has been supported by a review of research in a 2009 report by the World Health Organization (WHO) and Health Action International (HAI). In addition, the sanctions meted out by industry bodies are often negligible and do not serve as a deterrent for irresponsible behaviour by the companies or their employees. If there are no sanctions, or only small fines are imposed when a violation is discovered, then the deterrent effect is minimal. It may be more cost effective from the companys point of view, given the large investment it has already made on advertising, to pay the fine for an extended period of time rather than withdraw the advertisement.

THE IMPACT OF IRRESPONSIBLE MARKETING

Developing countries face multiple health challenges as a result of widespread poverty and under-funded public health systems, and it would be unfair to place them all at the door of the pharmaceutical industry. However the question to be asked of pharmaceutical companies is whether, in this context, their marketing practices help or hinder efforts to improve health and on at least three counts the answer appears to be no.

In 2009, the Indian National Commission on Macroeconomics and Health labelled 10 out of 25 top selling brands of medicines in the country as being either irrational or non-essential or hazardous. Those brands are listed in the table below and include a number of market leaders. These issues are important in developed and developing countries but are particularly pressing in developing countries where each dollar that is misused is a dollar that cant easily be replaced. 63

Pushing the wrong pills

Finally there is the question of whether the pharmaceutical industry is simply too market driven. Operating in a competitive market and with falling revenues there is immense pressure on companies to deliver the next block buster drug. The inevitable pressure on companies is to focus on the wealthiest markets and the most marketable conditions. This has led to a concentration on me too drugs that tap into lucrative markets but add little additional medical value and even disease mongering or the medicalisation of conditions that had previously been seen as lifestyle issues and only in extreme cases a cause for medical intervention. By promoting drugs that are not needed, pharmaceutical companies could detract from efforts to improve the overall public health of consumers in developing countries. It is true that many other factors such as poor training and a lack of regulatory infrastructure are also at the root of these problems. However as global leaders, with financial clout to affect change, drug companies and particularly the market leaders have social responsibilities in ensuring their marketing activities do not lead to negative outcomes for patients and consumers of their products.

GlaxoSmithKline
What they say: We are aware of the sensitivity and concerns regarding the marketing of medicines and we are absolutely committed to high ethical standards. We have developed marketing codes and policies and provide training to guide sales representatives, to ensure that they behave ethically and comply with the law. What they do: Following communications on our research questionnaire, a member of staff at GSKs Corporate Responsibility team said: I have forwarded your details to someone else at GSK and if they are interested in participating, they will contact you directly. We received no response or further acknowledgement to our queries from GSK.

64

Sanofi-Aventis
What they say: In its promotional practices, Sanofi-Aventis adheres to both national and international codes governing the profession. The Group has also developed responsible marketing guidelines that cover promotional materials, congresses and seminars, pharmaceutical sales calls and post-marketing studies. Continuous training for medical sales representatives (who number 35,000 worldwide) is designed to ensure the quality of their presentations during promotional visits. What they do: Unlike most of their counterparts in the industry, this company did not allow us to speak directly to senior CSR managers. After being forced to engage with the company through the only means available an on-line query form we received no response from the company on their marketing practices in emerging markets.

STRENGTHS AND WEAKNESSES OF INDIAS PHARMACEUTICAL INDUSTRY:

Indias comparative advantages lie in its cost competitiveness, its reverse engineering experience, its large pool of less expensive English-speaking scientific and engineering workers, and its well-developed chemical industry infrastructure. Indias pharmaceutical companies can also operate at much lower profit margins that their Western counterparts. Today, India produces some of the cheapest drugs in the world, especially because labor costs are 50 to 55 percent cheaper than in the West. Industry experts indicate that infrastructure costs are 40 percent lower and fixed cost are estimated to be 12 percent to 20 percent less that in the United States and Western Europe. Consequently, India can produce bulk drugs that cost 60 percent less that in the West and can open a production plant in India 40 percent cheaper than in developed countries. Because of this, India has become a hub for pharmaceutical research and development and clinical trials for many leading foreign pharmaceutical companies.

Table 4.5: Strengths and weaknesses of Indias pharmaceutical industry

65

The challenge facing pharmaceutical marketers in the next decade will be to demonstrate value of product through promotional innovation, combined with the required emphasis on efficiency and safety of their product. To do so, they should turn to pharmacoeconomics--an evolving field that examines the issues in the context of the market's health care system. Health care system, of what is understood of the term, differs from country to country, place to place and city to city. Lay persons in India tend to examine only single patient cost. But from a social perspective one may want to know what sort of treatment option minimizes overall costs. In the future the degree of fragmentation is likely to decline significantly wide product portfolio and distribution strength could become a key competitive advantage among the larger players. Smaller players focused on research and development will probably be approached for alliance by larger companies. Domestic companies with International research and development or marketing ties are likely to succeed. In long term as companies established major presence in other parts of wider health care pharmaceuticals chain, there is likely to e an emergence of a new set of competitors -- the integrated health care firms -- that will have significantly greater power than pure pharmaceutical companies.

66

CHAPTER 5 METHODOLOGY & PROCEDURE OF WORK

67

METHODOLOGY & PROCEDURE OF WORK

A Research Methodology defines the purpose of the research, how it proceeds, how to measure progress and what constitute success with respect to the objectives determined for carrying out the research study. The appropriate research design formulated is detailed below. Exploratory research: this kind of research has the primary objective of development of insights into the problem. It studies the main area where the problem lies and also tries to evaluate some appropriate courses of action. The research methodology for the present study has been adopted to reflect these realties and help reach the logical conclusion in an objective and scientific manner. The present study contemplated an exploratory research

Research Design
The research design is the basic framework, which provides guidelines for the rest of the research process. The present research can be said to be exploratory. The research design determines the direction of the study throughout and the procedures to be followed. It determines the data collection method, sampling method, the fieldwork and so on.

Nature of Data
Primary Data:
Primary data is basically fresh data collected directly from the target respondents; it could be collected through Questionnaire Surveys, Interviews, Focus Group Discussions Etc.

Secondary Data:

Secondary data that is already available and published. It could be internal and external source of data. Internal source: which originates from the specific field or area where research is carried out e.g. publish broachers, official reports etc.

External Source: This originates outside the field of study like books, periodicals, journals, newspapers and the Internet.

68

Data Collection
Primary data: Primary data was selected from the sample by a selfadministrated questionnaire in presence of the interviewer.

SAMPLE SIZE:
Sample size Sample area Sample Unit : : : 100 New Delhi Officials of many pharmaceutical companies, medical Practioneers, medical representatives in New Delhi SECONDARY DATA: Articles, Reports, Journals, Magazines, Newspapers and Internet Secondary data was collected through

Sampling Technique
Random sampling technique is generally employed to extract the fruitful results. This includes the overall design, the sampling procedure, the data collection methods, the field methods and the analysis procedures

Sampling Procedure Actually Employed:

The process employed to select the sample was simple random sampling. Simple random sampling refers to that sampling technique in which each and every unit of the population has an equal and same opportunity of being on the sample. In simple random sampling, which item gets selected is just a matter of chance.

Analytical Tools:
Simple statistical tools have been used in the present study to analyze and interpret the data collected from the field. The study has used percentiles method and the data are presented in the form of tables and diagrams.

69

CHAPTER 6 ANALYSIS OF DATA

70

DATA ANALYSIS
1. For how many years you are practicing as a medical practicener (Doctor)? Less than one year --------------------------------- From one to five years ---------------------------- Five to Ten years ---------------------------------- More than Ten years ------------------------------ Can not remember --------------------------------40% 35% 30% 25% 20% 15% 10% 5% 0%
Less than five years Five to ten years Ten to Twenty years More than twenty years Can not remember 17% 32% 36% 12% 3%

17 per cent 32 per cent 36 per cent 12 per cent 03 per cent

Less than five years Five to ten years Ten to Twenty years More than twenty years Can not remember

Fig 6.1: Practicing as a medical practicener

Interpretation:
At the initial stage of the research, an attempt was made to understand the profile of the doctors in terms of their experience in the industry. Great care was taken to ensure that the sample is adequate and representative of the universe. 2. Do you agree that Indias pharmaceutical industry is one of the fastest growing segments of the Indian economy?

71

 Agree ------------------------------------- Strongly Agree -------------------------- Disagree --------------------------------- Strongly Disagree ---------------------- Do not know/ Can not say ------------45% 40% 35% 30% 25% 20% 15% 10% 5% 0%
Agree Strongly Agree Disagree Strongly Disagree Do not know/ Can not say 43% 37% 9% 4% 7%

43 per cent 37 per cent 09 per cent 04 per cent 07 per cent

Agree Strongly Agree Disagree Strongly Disagree Do not know/ Can not say

Fig 6.2: The fastest growing segments of the Indian economy

Interpretation:
Indias pharmaceutical industry is one of the fastest growing segments of the Indian economy and this is also one of the vital industrial segments which are directly related to the health of the nation.

72

3.

Do you agree that the marketing strategy of the pharmaceutical industry should be different from the marketing strategy in non-pharmaceutical segments? Agree ----------------------------------- Strongly Agree ------------------------ Disagree ------------------------------- Strongly Disagree ------------------- Do not know/ Can not say ---------50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0%
Agree Strongly Agree Disagree Strongly Disagree Do not know/ Can not say 50% 32% 10% 4% 4%

50 per cent 32 per cent 10 per cent 04 per cent 04 per cent

Agree Strongly Agree Disagree Strongly Disagree Do not know/ Can not say

Fig 6.3: Pharmaceutical segments

Interpretation:
The structure and the dynamics of the pharmaceutical industry are different from that of other industrial domains. This is what necessitates the pharmaceutical sector to formulate a unique marketing strategy to suit their industry requirements and that appears to be different, in practice and normative sphere, from other industries.

73

4.

Do you agree that institutional selling is quite prevalent when it comes to pharmaceutical market in India? Agree ------------------------------------ Strongly Agree ------------------------ Disagree ------------------------------- Strongly Disagree -------------------- Do not know/ Can not say -----------45% 40% 35% 30% 25% 20% 15% 10% 5% 0% Agree Strongly Agree Disagree Strongly Disagree Do not know/ Can not say 44% 30% 10% 6% 10% Agree Strongly Agree Disagree Strongly Disagree Do not know/ Can not say

44 per cent 30 per cent 10 per cent 06 per cent 10 per cent

Fig 6.4: Pharmaceutical market in India

Interpretation:
In general, business in pharmaceutical market is conducted in two major ways, that is, either by institutional selling or through trade business. The respondents were of the opinion that institutional selling is quite prevalent in the Indian pharmaceutical industry.

74

5. Do you agree that the pharmaceutical companies need to use innovative and better promotional measures for selling their products? Agree ------------------------------------- Strongly Agree -------------------------- Disagree --------------------------------- Strongly Disagree ---------------------- Do not know/ Can not say ------------60% 50% 40% 30% 20% 10% 0% Agree Strongly Agree Disagree Strongly Disagree Do not know/ Can not say 60% 37% 1% 0% 2% Agree Strongly Agree Disagree Strongly Disagree Do not know/ Can not say

60 per cent 37 per cent 01 per cent 00 per cent 02 per cent

Fig 6.5: Innovative and better promotional measures for selling their products

Interpretation:
Even though it appears to be a serious industry on which the health of the nation rests, a deeper understanding of the industry will make it clear that business practices and sales promotion measures are a common thing and gradually becoming more aggressive and competitive among the pharmaceutical companies in India.

75

6.

Does the Pharmaceutical companies offer gifts to the doctors to influence their prescriptions in favour of their company medicines? Yes ------------------------------------------- No -------------------------------------------- Do not know/ Can not say ----------------100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Yes No Do not know/ Can not say 95% 1% 4% Yes No Do not know/ Can not say

95 per cent 01 per cent 04 per cent

Fig 6.6: Prescriptions in favour of their company medicines

Interpretation:
Pharmaceutical marketing experts are aware that well timed advertising directed to doctors tends to boost sales of the brand that spent the marketing dollars. In the case of marketing directly to health professionals, the question is whether promotion is (as most drug companies claim) primarily information on how the drug works or is intended to persuade doctors to prescribe the drug more frequently. The practice of offering gifts to the doctors to influence their prescriptions is a common strategy among the pharmaceutical companies.

76

7.

Out of the following which one is more correct when it comes to the promotional strategy of pharmaceutical companies in the view of the doctors? They aim to inform about the product ---------------- They aim to persuade to purchase -------------------- Other motives ------------------------------------------- Do not know/ Can not say ----------------------------60% 50% 40% 30% 20% 10% 0% They aim to inform about the product They aim to persuade to purchase Other motives Do not know/ Can not say 22% Do not know/ Can not say They aim to inform about the product They aim to persuade to purchase Other motives

22 per cent 60 per cent 03 per cent 15 per cent

60%

3% 15%

Fig 6.7: Promotional strategy of pharmaceutical companies

Interpretation:
The promotional strategy of the pharmaceutical companies is more oriented towards persuading the doctors to prescribe their products and the patients to purchase their products than simply to display information on the quality and availability of the product. This is one criterion which makes the marketing strategy of the pharmaceutical companies different from that of others.

77

8.

Do you agree that unethical standards exist in the promotion of pharmaceutical products in India? Agree ------------------------------------ Strongly Agree ------------------------ Disagree ------------------------------- Strongly Disagree -------------------- Do not know/ Can not say -----------60% 50% 40% 30% 20% 10% 0% Agree Strongly Agree Disagree Strongly Disagree Do not know/ Can not say 52% 20% 20% 3% 5% Agree Strongly Agree Disagree Strongly Disagree Do not know/ Can not say

52 per cent 20 per cent 20 per cent 03 per cent 05 per cent

Fig 6.8: Promotion of pharmaceutical products in India

Interpretation:
Adherence to ethical standards while pursuing the promotional strategy for selling their products is a concern in the pharmaceutical industry. It is an accepted fact that the promotional measures does contain unethical practices. It is for the government, the industry and the consumers to put a comprehensive effort to ensure that the practices of unethical standards are withdrawn from the health industry.

78

9.

Your recommendation to the industry and government regarding the promotional strategy of the pharmaceutical companies? You can choose more than one option. Implement, improve and monitor legislation ----------------- 74 per cent Measures to improve the transparency of drug companies marketing activities ---------------------------------------------- 86 per cent Stop the practice of gifts to doctors ----------------------------- 67 per cent Ensure codes of conduct on drug promotion ------------------- 70 per cent Other measures ----------------------------------------------------- 12 per cent Do not know/ Can not say ---------------------------------------- 01 per cent

90% 80% 70% 60% 50% 40% 30% 20% 10% 0%

Implement, improve and monitor legislation M easures to improve the transparency of drug companies marketing activities Stop the practice of gifts to doctors Ensure codes of conduct on drug promotion Other measures

Do not know/ Can not say

Fig 6.9: The industry and government regarding

Interpretation:
Whilst the pharmaceutical industry clearly has an important role to play in tackling the health challenges their involvement in the promotion of medicines presents a serious conflict of interest. It is equally important that health professionals have access to independent and up to date advice on medicines so that they can make informed judgments about the most appropriate medication for patients.

79

10.

Do you think that the entry of Multinationals is a Major Challenge to the domestic Players in the Pharmaceutical Market and are they ready to face the Challenges of the Foreign Players? Yes ---------------------------------------------- No ----------------------------------------------- Do not know/ Can not say--------------------36 per cent 54 per cent 10 per cent

60% 50% 40% 30% yes 20% 10% 0% yes no cant say 36% 54% 10% no cant say

Fig 6.10: The Challenges of the Foreign Players

80

11.

What type of Marketing Strategy would you prefer to expand your Market size?

45% 40% 35% 30% 25% 20% 15% 10% 5% 0% B2B B2C Both 23% 32% 45% Fig 6.11: Market size B2B-------------------------------------------------------------- 23 PER CENT B2C -------------------------------------------------------------32 per cent Both -------------------------------------------------------------45 percent B2B B2C Both

81

12.

What type of Marketing Strategy does you as More Profitable?

50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% B2B B2C Both 24% 47% 31% Fig 6.12: More Profitable B2B------------------------------------------------------------- B2C ------------------------------------------------------------ Both ------------------------------------------------------------24 per cent 47 per cent 31 percent B2B B2C Both

82

13.

What do you think is the Major challenge from the Marketing point of view for the Pharmaceutical Industry in India? Fragmentation of the market --------------------------- Market risk due to lack of price control mechanism MNCs ----------------------------------------------------- Others -----------------------------------------------------40% 35% 30% 25% 20% 15% 10% 5% 0% fragmentation of the market risk due to price control mechanism MNC's Others 38% 22%

38 per cent 22 per cent 23 per cent 17 per cent

fragmentation of the market risk due to price control mechanism MNC's Others

23% 17%

Fig 6.13: Major challenge from the Marketing

83

14. What innovative distribution channel do you suggest to better market your products?

Better consumer supply chain---------------------------------------------34 per cent Emotional Branding ------------------------------------------------------- 42 per cent Alliance with other corporate leaders for promotion of the product-12 per cent Greater media participation and power branding-----------------------10 per cent Others ------------------------------------------------------------------------ 02 per cent
45% 40% 35% 30% 25% 20% 15% 10% 5% 0% better supply chain emotional branding corporate alliances greater media participation others 34% 42% 12% 10% 2% better supply chain emotional branding corporate alliances greater media participation others

Fig 6.14: Suggest to better market your products

84

15.

Are you aware that the pharmaceutical companies in India are shifting their focus from conventional method of marketing to non-conventional method of marketing?

Yes -------------------------------------------- 86 percent No --------------------------------------------- 05 percent Do not know/ Can not say------------------09 per cent

90% 80% 70% 60% 50% 40% 30% 20% 10% 0% yes no cant say 86% 5% 9% yes no cant say

Fig 6.15: The pharmaceutical companies in India are shifting their focus from conventional method of marketing

85

16.

Do you think that market ethics/ medical Ethics are a major factor in the new distribution channel of marketing?

Yes ----------------------------------------------------- 57 per cent No ----------------------------------------------------- 28 per cent Do not know/ Can not say -------------------------- 15 per cent

60% 50% 40% 30% yes 20% 10% 0% yes no cant say 57% 28% 15% Fig 6.16: Distribution channel of marketing no cant say

86

17.

Do You Think That These Non-Conventional Marketing Methods Are Effective Methods Of Pharma Marketing In The Present Age?

Yes -----------------------------------------------77 percent No ------------------------------------------------12 percent Do not know/ Can not say--------------------11 per cent

60% 50% 40% 30% 20% 10% 0% yes no cant say 36% 54% 10% yes no cant say

Fig 6.17: Pharma Marketing in the Present Age

87

18.

Do you believe that technology utilization and innovative distribution channels will help in marketing of Pharma products in India?

Yes----------------------------------------- No------------------------------------------ Do not know/ Can not say---------------

75 per cent 07 percent 18 per cent

80% 70% 60% 50% 40% 30% 20% 10% 0% yes no cant say 75% 7% 18% yes no cant say

Fig 6.18: Distribution channels will help in marketing of Pharma products in India

88

19.

Major weakness of the pharmaceutical industrys marketing strategy.

Branding -------------------------------- Publicity -------------------------------- R&D ------------------------------------ Do not know / can not say ------------

07 per cent 09 percent 77 percent 07 per cent

80% 70% 60% 50% 40% 30% 20% 10% 0% branding publicity R&D cant say 7% 9% 77% 7% Fig 6.19: Major weakness of the pharmaceutical industrys branding publicity R&D cant say

89

20.

Do you follow branding of products as a marketing strategy?

Yes ----------------------------------------------------------------------- 74 percent No ------------------------------------------------------------------------ 05 percent Do not know/ Can not say -------------------------------------------- 21 percent

80% 70% 60% 50% 40% 30% 20% 10% 0% yes no cant say 74% 5% 21% Fig 6.20: Products as a marketing strategy yes no cant say

90

21.

Do you have a dealer network? Do you sell directly or through dealers? As regards their marketing strategy, it could be derived from their responses that they have a large dealer network. A customer may also contact their branch office in his/her area to get the names and addresses. They can also supply sections directly. For smaller lots, the traders/ dealers may be contacted.

91

22.

Do you think that foreign direct investment (FDI) should be allowed in the pharmaceutical sector in India?

Yes------------------------------------------------ No------------------------------------------------- Do not know/ Cannot say-----------------------

21 percent 43 percent 36 percent

45% 40% 35% 30% 25% 20% 15% 10% 5% 0% yes no cant say 21% 43% 36% Fig 6.20: Pharmaceutical sector in India yes no cant say

92

CHAPTER 7 FINDINGS, INFERENCES & RECOMMENDATIONS

93

FINDINGS, INFERENCES & RECOMMENDATIONS

India's pharmaceutical market currently stands ninth in the world market for pharmaceuticals with a 1.5% share. The market was valued at more than $3 billion last year (1998). At its annual growth rate of 15% (almost double the world's 6% annual growth rate), this market is expected to reach $6 billion by 2001 and should more than double to $13.3 billion in 2006. India's official OTC market currently stands at over $130 million, and the industry's heart disease sector is expected to grow from $90 million now to more than $350 million in 2009. Current demand in the Indian pharmaceutical sector stands at about $4 to $5 billion, and is forecast to increase at an annual rate of 15 - 20% in the future. Nevertheless, average per capita expenditure on pharmaceuticals in India is only $3 -- compared to $412 in Japan, $222 in Germany and $191 in the US. This is due in part to the prevalence of alternative healing methods in India, such as ayurvedic medicine and homeopathy, but also because prices for drugs have been kept artificially low by the Indian government. In fact, India's pharmaceutical industry is one of the most highly regulated industries in the country. Price controls have a strong effect on profitability in the industry, and weak patent protection poses a long-term threat to investment in India's drug market. Foreign firms also find it difficult to operate in India due to arbitrary Bureau of Industrial Cost and Pricing (BICP) pricing changes, arbitrary local FDA decisions, high import duties (about 42%) and complex import procedures. However, while the pharmaceutical sectors in India will most likely stay regulated in the short term, there are plans for reform. The sheer size and growth of India's domestic pharmaceutical industry is making it increasingly difficult for the government to regulate prices for every single firm, and pressure from the World Trade Organization is also speeding up discussions within the national government to improve patent protection. As a result, foreign pharmaceutical firms can expect improved market opportunities in India's enormous drug market over next several years. The Indian pharmaceutical industry is highly fragmented -- there are now more than 20,000 domestic manufacturers of end-use pharmaceuticals, particularly because of the industry's low capital requirement and the lack of product patents. Only about 300 of these are in the organized sector. This structure causes intense competition, especially in the bulk drug markets, with profitability falling as demand expands. 94

For value purposes, drugs in India are generally classified into two categories -- bulk drugs and formulations. Due to India's low overhead costs, bulk drugs comprise the largest sector in the country's pharmaceutical market. Indias bulk drug sector also makes up about 6% of the international bulk drug market. Drug intermediates are used as raw materials for the production of bulk drugs, which are either sold directly or retained by companies for the production of formulations. Formulations can be subdivided into generic drugs and branded or "ethical" drugs, the latter of which are made under process patent and sold under a separate brand name. Expected short-term growth for the two types of drugs has been 20% for bulk drugs and 15% for formulations. The import of finished pharmaceuticals is almost negligible, and confined to very specific types like anti-cancer drugs. In 1994, the import of drugs, pharmaceuticals and intermediates was estimated at $450 million, and included the following: antibiotics, penicillin and its salts, erythromycin and its preparations, vitamins and provitamins, vaccines (polio, human and veterinary), preparations containing insulin, caustic and other hormones, and tetracycline and its preparations. Essential drugs comprised of antibiotics, antibacterial, anti-TB, anti-parasitic, and cardiovascular constitute a major portion of turnover of the industry. Indian companies dominate this class of drugs with a market share of 71%. Multinational companies are reluctant to enter these markets as most of them are under government price controls. Pharmaceutical Industry is one of the most intense knowledge driven industry, which is continuously in a state of dynamic transition. Indian pharmaceutical industry is climbing up the value chain from bringing a pure reverse engineering industry focus on domestic market. The industry is moving towards basic research driven expert oriented global presence and providing wide range of value added quality product and services. The pharmacy formulation market varies radically from the consumer market in many ways. The rules governing the pharmacy market are different except a few over-thecounter (OTC) drugs. Pharma companies are not allowed to publicly market their products. Marketing has to be restricted to promotional campaigns, advertisement only in medicinal magazines, journals etc., through medical representatives. It is not a mean of mass communication, which is usually applicable to consumer products. In the

95

process of pharmaceutical marketing, market segmentation, targeting and brand differentiation is considered to be challenging compared to the consumer marketing. Unlike any other businesses, marketing mix and its operatives for Pharma industry are very peculiar. The pharmaceutical industry is one of the few which cater to unique situations. Here the decision maker is the prescriber i.e. doctor while actual user of the product is a patient. Patient purchases product only because of doctors advice and hence product should satisfy the conditions of physician. Even if all other parameters are correct, the product might still fail because of improper promotion. Personal selling is the major promotional method in pharma marketing. Brand management, particularly promotion is a very difficult task in every Industry / Business. It is particularly difficult in those businesses where the competition is intense, market is crowded with variety of similar looking products and especially, when the end user cannot make choices of his/her own, but has to use the product on some experts recommendations. Pharmaceutical is such one of the most intense knowledge driven industry, which is continuously in a state of dynamic transition. Pharmacy can be defined as Complex matrix of process, operations and organization, involved in the discovery development and manufacture of drug and medication. The pharmaceutical industry is the lifeline industry, which plays a very important role in building strong human capital of country and very essential for economic growth and development. Indian pharmaceutical industry is climbing up the value chain from bringing a pure reverse engineering industry focus on domestic market. The industry is moving towards basic research driven expert oriented global presence and providing wide range of value added quality product and services. Considering the complexities in marketing process in pharmaceutical business, while launching a new formulation in the existing markets or launching new formulations in the new markets, product differentiation is necessary for proper brand promotion. Since, for the prescription products, the end-customer, i.e. patient or his/her relatives are unable to take any decision and the product is necessarily recommended by the expert, i.e. physician or doctor, it is imperative that this brand promotion efforts to be aimed at primarily towards the physician or doctor and secondarily to the drug retailer as he plays an important role in dispensing the prescribed brand. While launching the new formulation, there can be dilemma in the mind of the filed manager on diverting

96

existing field force for the promotion of the field force, perhaps at the cost of old and established products. However, it is most necessary to do so as it can only help product differentiation, brand promotion and stabilization of the new product in the market. Nevertheless, one question remains and that is whether, the research findings are universally true or they are geography specific. One can get the answer only when such studies are conducted at multiple places simultaneously. The results of such studies can be generalized to arrive at possible answer. Companies realize it is often not enough to spend like your competitor. In fact, you have to outspend the competition, especially in areas such as market research and patient education, to make significant impact on your position in the market

97

CHAPTER 8 CONCLUSION

98

CONCLUSIONS
Implement, improve and monitor legislation in line with the WHO Resolution on the Rational Use of Medicines and the WHO Ethical Criteria for Medicinal Drug Promotion. Support the provision of independent information on drugs for consumers and health professionals. Implement and enforce a ban on gifts to doctors. Enforce strict sanctions that will deter poor corporate practice in drug promotion. Take measures to improve the transparency of drug companies marketing activities and seriously address the conflict of interest encountered in drug companies funding of medical education. Ensuring high standards in the promotion of medicines is important to consumers health and helps to save money for health providers and patients. Without proper controls consumers can be subject to misleading or inaccurate claims and the promotion of expensive branded medicines that have no greater medical value than cheaper nonbranded products. Whilst the pharmaceutical industry clearly has an important role to play in tackling the health challenges their involvement in the promotion of medicines presents a serious conflict of interest. It is equally important that health professionals have access to independent and up to date advice on medicines so that they can make informed judgements about the most appropriate medication for patients. Governments must make continued medical education (CME) a priority and alleviate the need for doctors to rely on industrydominated information provision mechanisms. Improved regulation of drug promotion will generate a number of benefits for various stakeholders. Consumers will have a better chance of getting the most appropriate drug for their condition. Regulations that lead to improved drug use can lower direct costs (e.g. subsidy costs and import costs) which should be welcomed by governments and tax payers. Finally, socially responsible drug companies will also benefit if regulation

99

helps to create a level playing field and prevent unscrupulous companies from manipulating the market through irresponsible marketing. The pharmaceutical industry Key recommendations at the company level: Stop the practice of gifts to doctors Implement rigorous policies on vetting of drug promotion materials and adherence to existing codes of conduct Provide transparent and verifiable information on the precise nature of relationships and associated funding for all stakeholder groups, including health professionals, pharmacists, students, journalists, clinical research organizations and patient groups.

At an industry-wide level:
Ensure codes of conduct on drug promotion extend to interactions with health professionals AND consumers. Invest in innovative partnerships with government and civil society organisations so that corporate funding of disease awareness campaigns, and CME may be channelled via blind trusts in line with specific health priorities of consumers at a community or national level. According to IFPMA, promotional activities must be consistent with high ethical standards and information should be designed to help health care providers improve services to patients. Information must be provided with objectivity, truthfulness and in good taste and must conform to all relevant laws and regulations. Claims for therapeutic indications and conditions of use must be based on valid scientific evidence and include clear statements with respect to side effects, contraindications, and precautions. It also stresses that high standards of ethical behaviour shall apply equally to marketing of pharmaceutical products in all countries, regardless of the level of development of their economic and health care systems. Fundamental and systemic changes are required to ensure that the promotion activities of companies respect consumer rights to safe and reliable products and to independently verifiable information about the safety and efficacy of those products. 100

CHAPTER 9 SUMMARY OF THE PROJECT REPORT

101

SUMMARY OF THE PROJECT REPORT

The import of finished pharmaceuticals is almost negligible, and confined to very specific types like anti-cancer drugs. In 1994, the import of drugs, pharmaceuticals and intermediates was estimated at $450 million, and included the following: antibiotics, penicillin and its salts, erythromycin and its preparations, vitamins and provitamins, vaccines (polio, human and veterinary), preparations containing insulin, caustic and other hormones, and tetracycline and its preparations. For value purposes, drugs in India are generally classified into two categories -- bulk drugs and formulations. Due to India's low overhead costs, bulk drugs comprise the largest sector in the country's pharmaceutical market. Indias bulk drug sector also makes up about 6% of the international bulk drug market. Drug intermediates are used as raw materials for the production of bulk drugs, which are either sold directly or retained by companies for the production of formulations. Formulations can be subdivided into generic drugs and branded or "ethical" drugs, the latter of which are made under process patent and sold under a separate brand name. Expected short-term growth for the two types of drugs has been 20% for bulk drugs and 15% for formulations. Pharmaceutical Industry is one of the most intense knowledge driven industry, which is continuously in a state of dynamic transition. Indian pharmaceutical industry is climbing up the value chain from bringing a pure reverse engineering industry focus on domestic market. The industry is moving towards basic research driven expert oriented global presence and providing wide range of value added quality product and services. The pharmacy formulation market varies radically from the consumer market in many ways. The rules governing the pharmacy market are different except a few over-the-counter (OTC) drugs. Pharma companies are not allowed to publicly market their products. Marketing has to be restricted to promotional campaigns, advertisement only in medicinal magazines, journals etc., through medical representatives. It is not a mean of mass communication, which is usually applicable to consumer products. In the process of pharmaceutical marketing, market segmentation, targeting and brand differentiation is considered to be challenging compared to the consumer marketing. Fundamental and systemic changes are required to ensure that the promotion activities of companies respect consumer rights to safe and reliable products and to independently verifiable information about the safety and efficacy of those products. 102

CHAPTER 10 ANNEXURES

103

ANNEXURE-1
QUESTIONNAIRE
1. For how many years you are practicing as a medical practicener (Doctor)?

Less than one year --------------------------------- From one to five years ---------------------------- Five to Ten years ---------------------------------- More than Ten years ------------------------------ Can not remember --------------------------------2. Do you agree that Indias pharmaceutical industry is one of the fastest growing segments of the Indian economy?

Agree ------------------------------------- Strongly Agree -------------------------- Disagree --------------------------------- Strongly Disagree ---------------------- Do not know/ Can not say ------------3. Do you agree that the marketing strategy of the pharmaceutical industry should be different from the marketing strategy in other industrial segments?

Agree ----------------------------------- Strongly Agree ------------------------ Disagree ------------------------------- Strongly Disagree ------------------- Do not know/ Can not say ---------4. Do you agree that institutional selling is quite prevalent when it comes to pharmaceutical market in India?

Agree ----------------------------------- Strongly Agree ------------------------104

 Disagree ------------------------------- Strongly Disagree -------------------- Do not know/ Can not say -----------5. Do you agree that the pharmaceutical companies resort to promotional measures for selling their products?

Agree ------------------------------------- Strongly Agree -------------------------- Disagree --------------------------------- Strongly Disagree ---------------------- Do not know/ Can not say ------------6. Does the Pharmaceutical companies offer gifts to the doctors to influence their prescriptions in favour of their company medicines?

Yes ------------------------------------------- No -------------------------------------------- Do not know/ Can not say ----------------7. Out of the following which one is more correct when it comes promotional strategy of pharmaceutical companies?

They aim to inform about the product -------------- They aim to persuade to purchase ------------------- Other motives ------------------------------------------ Do not know/ Can not say ----------------------------8. Do you agree that unethical standards exist in the promotion of pharmaceutical products in India?

Agree ----------------------------------- Strongly Agree -------------------------

105

 Disagree ------------------------------- Strongly Disagree -------------------- Do not know/ Can not say -----------9. Your recommendation to the industry and government regarding the promotional strategy of the pharmaceutical companies? You can choose more than one option.

Implement, improve and monitor legislation ---------------- Measures to improve the transparency of drug companies marketing activities
------------------------------------------------

Stop the practice of gifts to doctors ---------------------------- Ensure codes of conduct on drug promotion ------------------ Other measures ---------------------------------------------------- Do not know/ Can not say ---------------------------------------10. Do you think that the entry of Multinationals is a major challenge to the domestic players in the pharmaceutical market and are they ready to face the challenges of the foreign players? Yes ------------------------------------------------ No ------------------------------------------------- Do not know/ Can not say----------------------11. What type of marketing strategy would you prefer to expand your market size? B2B-------------------------------------------------------------- B2C -------------------------------------------------------------- Both --------------------------------------------------------------12. What type of marketing strategy do you as more profitable? B2B--------------------------------------------------------------- B2C -------------------------------------------------------------- Both ---------------------------------------------------------------

106

13. What do you think is the major challenge from the marketing point of view for the pharmaceutical industry in India? products? Better consumer supply chain-------------------------------- Emotional Branding ------------------------------------------- Alliance with other corporate leaders for promotion of the product- 12 per cent Greater media participation and power branding---------- Others -----------------------------------------------------------15. Are you aware that the pharmaceutical companies in India are shifting their focus from Conventional method of marketing to non-conventional method of marketing? Yes ---------------------------------------------- No ----------------------------------------------- Do not know/ Can not say--------------------16. Do you think that market ethics/ medical ehics is a major factor in the new distribution channel of marketing? Yes ---------------------------------------------------- No ---------------------------------------------------- Do not know/ Can not say -------------------------17. Do you think that these non-conventional marketing methods are effective methods of pharma marketing in the present age? Fragmentation of the market ----------------------------Market risk due to lack of price control mechanism-MNCs ------------------------------------------------------Others -------------------------------------------------------

14. What innovative distribution channel do you suggest to better market your

Yes --------------------------------------------- No ---------------------------------------------- Do not know/ Can not say--------------------

107

18. Do you believe that technology utilization and innovative distribution channels will help in marketing of pharma products in India? Yes------------------------------------ No------------------------------------- Do not know/ Can not say----------

19. Major Weakness of the pharmaceutical industrys marketing strategy. Branding ----------------------------- Publicity ----------------------------- R&D --------------------------------- Do not know / Can not say -------20. Do you follow branding of products as a Marketing strategy? Yes ---------------------------------- No ----------------------------------- Do not know/ Can not say -------21. Do you have a dealer network? Do you sell directly or through dealers? 22. Do you think that Foreign Direct Investment (FDI ) should be allowed in the pharmaceutical sector in India? Yes---------------------------------------------- No----------------------------------------------- Do not know/ Cannot say---------------------

************Thank you ***********

108

ANNEXURE - II
PROJECT PROPOSAL Student Details:
Name of the Learner Registration No. Program Name : HIMANSHU MOHNIA : 200620703 : PGDBA Specialization (Marketing Management)

TITLE OF PROJECT:
"Sales Management Strategies in the Pharmaceutical Industry"

PROBLEMS DEFINITION
Pharmaceutical sales is a challenging business. The sales force is scattered around the country and the globe. The representatives are on the road up to 80% of the time, meeting with doctors, pharmacists, scientists and hospitals administrators. Physicians are demanding more from pharmaceutical companies and their sales force. Doctors want to see sales representatives only as frequently as in necessary to obtain objective, medical information for treating their patients. So to protect market share, pharmaceutical companies have to rely on sales force and innovative promotional strategies.

REASEARCH OBJECTIVES
The objectives of this research is to understand how pharmaceutical company launch their product in the market and what promotional strategies they use to sell their products; what is the role played by sales representatives of the company in increasing revenues and protecting market share. It is a very challenging job because their target is not the general public but doctors, physicians and hospitals. Through this research we will also learn what the functions of sales representatives are and what skills they require to perform their job efficiently.

SCOPE
The scope of this Project is to understand and describe the various stages that are associated with drugs in pharmacy i.e. discovery, development, action, safety,

109

formulation, use, quality control, packaging, storage, marketing etc. Pharmacy is one of the foremost amongst future economy drivers. It is committed to deliver high quality drugs and formulation at an affordable price for the general public, so that majority of people can afford it.

Methodology
A Research Methodology defines the purpose of the research, how it proceeds, how to measure progress and what constitute success with respect to the objectives determined for carrying out the research study. The appropriate research design formulated is detailed below. Exploratory research: this kind of research has the primary objective of development of insights into the problem. It studies the main area where the problem lies and also tries to evaluate some appropriate courses of action. The research methodology for the present study has been adopted to reflect these realties and help reach the logical conclusion in an objective and scientific manner. The present study contemplated an exploratory research

Research Design
The research design is the basic framework, which provides guidelines for the rest of the research process. The present research can be said to be exploratory. The research design determines the direction of the study throughout and the procedures to be followed. It determines the data collection method, sampling method, the fieldwork and so on.

Nature of Data
Primary Data:
Primary data is basically fresh data collected directly from the target respondents; it could be collected through Questionnaire Surveys, Interviews, Focus Group Discussions Etc.

Secondary Data:

Secondary data that is already available and published. It could be internal and external source of data. Internal source: which originates from the specific field or area where research is carried out e.g. publish broachers, official reports etc.

110

External Source: This originates outside the field of study like books, periodicals, journals, newspapers and the Internet.

Data Collection
Primary data: Primary data was selected from the sample by a selfadministrated questionnaire in presence of the interviewer.

SAMPLE SIZE:
Sample size Sample area Sample Unit : : : 100 New Delhi Officials of many pharmaceutical companies, medical Practioneers, medical representatives in New Delhi SECONDARY DATA: Articles, Reports, Journals, Magazines, Newspapers and Internet Secondary data was collected through

Sampling Technique
Random sampling technique is generally employed to extract the fruitful results. This includes the overall design, the sampling procedure, the data collection methods, the field methods and the analysis procedures

Sampling Procedure Actually Employed:

The process employed to select the sample was simple random sampling. Simple random sampling refers to that sampling technique in which each and every unit of the population has an equal and same opportunity of being on the sample. In simple random sampling, which item gets selected is just a matter of chance.

111

Statistical Techniques to be tool used:

Simple statistical tools have been used in the present study to analyze and interpret the data collected from the field. The study has used percentiles method and the data are presented in the form of tables and diagrams.

LIMITATION OF THE STUDY

The pharmaceutical industry is one of the major, most successful also rapidly growing industries worldwide. It contributes significantly to the economies of many countries all around the world, both as a major employer and as an export earner. Marketing and sales of pharmaceutical products is very different from other products such as say groceries, cosmetics, food items, vehicles, etc. One, pharmaceutical products (apart from over the counter OTC drugs) can only be obtained from a chemist on a doctors prescription. Thus here the customer is the doctor, who is well versed in pharmacology. Two, medicines and drugs can only be prescribed by a doctor only when it is deemed necessary for the patients recovery from illness; that is, it is ethically wrong for a doctor to needlessly prescribe medicines. Under these medical and ethical constraints, how does the pharmaceutical company promote its products? This is the purpose and objective of the study.

Chapterization
1. 2. 3. 4. 5. 6. 7. 8. 9. Introduction Objectives and Scope Limitations Theoretical Perspective Methodology and Procedure of work Analysis of Data Findings, Inferences and Recommendations Conclusion Summary of the Project Report

112

Annexure
I) II) III) IV) Proposal References List of Figures, Charts, Diagrams List of Tables

Detailed information of Guide: Name Qualification Designation Special Field or Work Experience Any Other Important Information Company Name : : : : : : : 10 Years Not Applicable Zydus Neurosciences, Cadila Healthcare Ltd. Address of Corporate Office : MR. SUNIT MADAN MBA(HR), PGDBA(IR), LLB (Business Development Manager)

113

ANNEXURE - III
BIBLIOGRAPHY Books
Chaudhary, P. (1998), Rx Factor: Strategic Creativity in Pharmaceutical Marketing, New Delhi, India: Response Books. Mittal, D.K. (1994), Drug and Pharmaceutical Industry, New Delhi, India: Anmole Publication Pvt. Ltd. Ramaswamy, V.S. & Meerakumari, N.S. (1996), Marketing Management: An Indian Prospective, New Delhi, India: Macmillian India Ltd. Sakaria George (1997), "Reform: The Inside Story," Business Today (March 7-21), 7276. Smarta, R.B. (1998), "Getting friendly," Advertising and Marketing (February 1-15), 51- 54. Smarta, R.B. (1998) "Distribution as a strategic weapon" Advertising and Marketing (May 16-31), 30-32. Smarta, R.B. (1998) "The bigger objectives", Advertising and Marketing (March 1-15), 24-26. Smarta, R.B. (1998) "Sensible Pricing", Advertising and Marketing (January 1-15), 7476. _____(1988), "The Eastern Pharmacist: An Independent Organ of Pharmaceutical Industry", Trade & Profession (April), XXXI (364), 37-56. _____(1998), "The Next Level: Survey of Pharmaceutical Marketing", Advertising and Marketing (August 31), 72-78. _____(1998), "Wielding the Scalpel", The Strategist Quarterly (April-June), 16-19.

Internet website Links

www.governmentstatisticaldata.com www.historyofpharmaceuticalindustry.com www.otcpharmaceuticalproducts.com www.cipla.com www.bookrags.com/sciences/genetics/antibiotics-wrog.html www.bookrags.com/others/health/cephalosporines-woh.html www.indianfoline.com/phar/feat/thmo.html 114

ANNEXURE - IV LIST OF FIGURES, CHARTS, DIAGRAMS

Figure No. Fig. 4.1: Fig. 4.2: Fig. 4.3: Fig. 4.4: Fig. 4.5: Fig. 4.6: Fig. 4.7: Fig. 4.8: Fig. 4.9: Fig 6.1: Fig 6.2: Fig 6.3: Fig 6.4: Fig 6.5: Fig 6.6: Fig 6.7: Fig 6.8: Fig 6.9: Fig 6.10: Fig 6.11: Fig 6.12: Fig 6.13: Fig 6.14: Fig 6.15: Fig 6.16: Fig 6.17: Fig 6.18: Fig 6.19: Fig 6.20: Fig 6.20: Particular Market Share of Corporate Market Share of MNCs & Local Companies Drug requiring prescription Pharmas Current Model Reduction in U.S. Primary care promotional spending Media consumption habits have changed Consumers are spending Physician Marketing Channels Hypothesis warrants additional research Practicing as a medical practicener The fastest growing segments of the Indian economy Pharmaceutical segments Pharmaceutical market in India Innovative and better promotional measures for selling Prescriptions in favour of their company medicines Promotional strategy of pharmaceutical companies Promotion of pharmaceutical products in India The industry and government regarding The Challenges of the Foreign Players Market size More Profitable Major challenge from the Marketing Suggest to better market your products The pharmaceutical companies in India are shifting their focus from conventional method of marketing Distribution channel of marketing Pharma Marketing in the Present Age Major weakness of the pharmaceutical industrys Products as a marketing strategy Pharmaceutical sector in India 85 80 81 82 83 Distribution channels will help in marketing of Pharma products 78 79 65 66 67 68 69 70 71 72 73 74 75 76 77 Page No 17 17 22 43 43 44 45 46 49 64

115

ANNEXURE -V LIST OF TABLES

Table No. Table: 4.1: Table: 4.2: Table 4.3: Table 4.4: Table 4.5: Particular Indias Pharmaceutical Industry Indias top 10 pharmaceutical company sales ($million) Doctor-directed promotion methods Major alliances between Indian & International companies: Strengths & weaknesses of Indias pharmaceutical industry Page No 12 14 27 38 59

116