Is rural India the new growth opportunity for the pharmaceutical industry?
Decent business prospects in largely un-tapped rural India are making the pharmaceutical companies to move into this uncharted frontier. Reaching out to about 65% of the population who do not have access to modern medicines, could prove to be the new ‘Eldorado’ for the industry. Some well organized but small preparatory steps are already being taken towards this direction, which ultimately could lead to taking a giant leap towards this new frontier.
Some companies have started charting in a new way in this much uncharted frontier:
Possibly as a testimony to this new business approach we can now see:
1. Novartis with its “Arygoya Parivar” initiative working out a tailor-made program for rural areas of seven selected states, to start with. They have developed special packs of essential medicines with special prices to reach out to the rural marketing population.
2. Novo Nordisk screening patients suffering from diabetes in the rural areas of Goa with mobile clinics.
3. Eli Lilly developing a program along with the Self-Employed Women’s Association in Ahmedabad to educate and encourage rural patients suffering from tuberculosis to go for treatment.
4. Ahmedabad based Cadila Pharma setting up a dedicated rural marketing arm called ‘Explora’, which has already clocked a reported annual turnover of Rs. 50 crore.
5. Vadodara based Alembic Chemicals creating a rural business unit called ‘Maxis’.
6. Piramal Healthcare launching a pilot project in Rajasthan to take its products to rural areas where there is no proper public health system.
These are just a few illustrations and not an exhaustive list. However, the question is whether the rural marketing initiatives will continue to remain an illusion to the pharmaceutical companies in India or will get translated into a decent strategic move?
Going by various published reports, it appears that fortune still exists at the bottom of the pyramid.
In 2007 the rural markets registered a growth of over 40% over the previous year. This scorching pace of rural market growth is expected to continue in the next decades.
Moreover, according to McKinsey Report, rural markets will contribute about 27% of the total consumption of India by 2020 and by 2015, rural India will account for over 24% of the domestic pharmaceutical market from its current level of 17%.
Rural market size:
The rural markets currently contribute about 17% of U.S$8.1 billion pharmaceutical market in India. As reported in ‘India Pharma 2015’ of McKinsey,” by 2015 rural pharma market size is expected to reach U.S$4.8 billion from U.S$1.2 billion in 2005.”
Key growth drivers, as McKinsey indicated in this report, will be as follows:
• Income growth: 40%
• Medical infrastructure: 20%
• Health insurance penetration: 15%
Rural markets are currently dominated by ailments related to various types of infections. This disease pattern is expected to change by the next decade to non-infectious chronic illness, like diabetes, cardiac diseases, cancer, hypertension etc.
The opportunities in the rural markets:
‘The Fortune at the Bottom of the Pyramid’, the famous observation of the management guru C.K. Prahalad is equally apt for the pharmaceutical industry of India, where the just 35% of the population has access to affordable modern medicines.
Further, 20 million middle class households living in about 6,00,000 villages, which is almost the same as the number of middle class households residing in urban India, is currently instrumental to significant increase towards healthcare spending in rural India.
Rural market entry strategy:
Instead of transplanting the urban marketing strategy into rural India, some companies like, Novartis, Novo Nordisk and Eli Lilly, as mentioned above, have taken the community-welfare route to make the rural population aware of particular disease segments like, tuberculosis, diabetes, waterborne diseases etc together with the treatments available for such ailments.
These value added marketing strategies offer benefits to both the patients and the company concerned. The local medical practitioners, in turn, are also benefitted as they get increasing number of patients in their clinics through such disease awareness community program by the pharmaceutical companies.
There are some key challenges, as well, for effective rural penetration by the Indian pharmaceutical industry, which are as follows:
• Inadequate basic healthcare infrastructure. Only 20% of total healthcare infrastructure of the country is in rural areas where over 70% population lives.
• Density of doctors per 10,000 populations in India is just 6. About seven lakh villages in India do not have doctors. As per AC Neilsen study, an average rural Indian has to travel about 6 km to visit a doctor. A Medical Representative will require travelling about 250 to 300 km every day just to meet about 10 doctors and 4 dealers.
• Villages are not well connected by proper all season roads.
• Lack of appropriate supply chain network and logistics support.
National Rural Health Mission (NRHM) – a key facilitator:
Be that as it may, greater focus of the new UPA Government on NRHM will help immensely to overcome many of these challenges in various different ways.
In the interim budget 2009, the Government has allocated U.S$ 2.35 billion for the NRHM. It is expected that this initiative, if implemented well, will help improving not only the healthcare infrastructure in rural India, but also supply of affordable medicines, in these long neglected areas.
With required infrastructural support and tailor made value added marketing strategies for rural India, simultaneously delivering both preventive and curative therapies under one umbrella, it may not be difficult for the Indian pharmaceutical companies to discover ‘The Fortune at the Bottom of the Pyramid’ – a win-win situation indeed for both the ‘haves’ and a vast majority of ‘have nots’ living in India.
By Tapan Ray
Disclaimer: The views/opinions expressed in this article are entirely my own, written in my individual and personal capacity. I do not represent any other person or organization for this opinion.