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The Importance of Managing ‘Perception’ in Pharma

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Each one of us – individually or collectively in a society, community or even as a supporter of anyone or anything, view certain things in a certain way, and tend to believe only this is true. This process consequently leads to developing a ‘perception’, which the Oxford dictionary defines as: “The way in which something is regarded, understood, or interpreted.”

A ‘perception’ once formed, creates a long-lasting impact – helps form a strong opinion, often making people judgmental in their expressions. Based on ‘perception’, people also try to act and influence others, which are not always in a persuasive manner. On the contrary, the methods, are at times rather coercive, using fear as the key. The sources that help create ‘perceptions’ may not be genuine, often fake or doctored and picked-up from half-baked, unproven and unverified provenance.

Just as any other business, in pharma industry too, stakeholder ‘perception’ plays a critical role, especially in building or tarnishing reputation of the sector or individual companies. In this article, I shall discuss, the importance of managing perception – the right way – overcoming a key barrier, for sustainable business success.

‘Perception’ often stands between success and failure or winning and losing:

In today’s world ‘perception’ often stands between success and failure or winning and losing, more than ever before. Creating and maintaining a ‘positive perception’ is time consuming and a challenging task, for anything. Interestingly, a negative ‘perception’ may also be deliberately created for self-serving purposes, and that too in a much shorter time. Although, there is a high financial cost attached to it, such instances aren’t too few, either.

Umpteen number of instances can be cited, in this regard. However, to drive home the point, let me quote just two examples – the first one is of a negative ‘perception’ mostly created by the industry from within. The other one – again a negative perception that prevails outside the industry, but mostly created due to the acts pursued within the industry. Interestingly, both these adversely impact the pharma consumers too, and are tough to neutralize.

1. ‘Perception’ created by the industry insiders:

The general ‘perception’ that ‘branded generic drugs’ are superior to more affordable ‘non-branded generic medicines’, mostly in terms of overall quality, efficacy and safety. This negative ‘perception’ has been successfully created without enough credible scientific evidence, and irrespective of names, size and the operational scale of the manufacturers. It is worth noting, both need drug regulatory approval and all such approvals come only in the generic names – and not in any brand name. The brands for a generic drug molecule may be as many as, say sixty or hundred, or even more. So are the numbers of ‘non-branded generics.’

To enable the consumers availing benefits of this category of drugs in reducing out of pocket expenditure on medicines, both the State and the Central Governments in India are trying hard through various measures, such as ‘Jan Aushadhi Scheme’. But the negative perception towards ‘non-branded generics’ doesn’t seem to wane a bit, in the face of an ongoing campaign to maintain the status quo.

2. ‘Perception’ created outside, due to the acts of the industry:

Similarly, the general negative ‘perception’ leading to a declining reputation of the industry, prevails across the world – even in India. Again, the issues leading to such negative perception may, at times, be grossly exaggerated and generalized. But the fact remains, despite serious attempts by individual companies and their lobby groups to negate the same, it continues to exist. Nevertheless,continuing efforts by the industry in this direction, which are often quite expensive, are visible globally.

Let me illustrate this point quoting a recent media report on PhRMA – arguably the largest pharma trade body globally. As the pharmaceutical industry faces potential pricing reform and continued criticism from patient advocates, PhRMA reportedly spent US$ 15.5 million lobbying in the first half of this year, which is an 11.5 percent increase (US$ 1.6 million) compared with the same period last year. But, the negative ‘perception’ is too strongly entrenched to neutralize so quickly and effectively. It continues to exist.

That the money spent to alleviate the impact of negative ‘perception’ has not yielded results since long, is vindicated by the June 19, 2018 Business Insider report. Quoting the research and consulting firm Reputation Institute, it says, in 2018, the pharma giants saw a 3.7 percent decline in reputation score from last year. This was driven by a decline in the public perception of transparency, openness and authenticity of drug makers. In the midst of an overall descending trend, of the 22 pharma companies ranked, Sanofi features in the first and Pfizer takes the last positions.

Reported practices of drug makers also influence public ‘perception’: 

While explaining why Pfizer has been ranked 22 with a strong negative ‘perception’, the same Business Insider article reported as follows:

“Pfizer had the lowest reputation score among the pharmaceutical companies that the Reputation Institute looked at, based on the general public’s perception of the product, prices and public hospitality. It was reported in May that Pfizer used charity to mask a heart drug price hike. Pfizer also had a huge role in the drug shortage crisis, according to Fortune.”

Similarly, in a relative yardstick, better public ‘perception’ for Sanofi’s among the big pharma players were ascribed to the following reasons:

“Sanofi’s winning characteristics lies in its promotion of ethics and transparency, according to Reputation Institute. Sanofi has in the past year promised to limit price increases and disclose ‘transparency reports’ behind overall costs of its drugs.”

Destructive power of negative ‘perception’ on pharma industry:

An interesting survey, titled “Restoring trust in the pharmaceutical industry by translating expectations into actions” conducted by PricewaterhouseCoopers (PWC) Health Research Institute captures the realities of ‘perception’ on the pharma industry. Pharmaceutical industry executives, consumers, and stakeholders, such as doctors in physician groups, researchers in academia, former health policy makers, hospital executives, managed care organization executives, participated in this survey.

The paper highlighted that ‘perception’ driven peoples’ behavior is triggered by a myriad of reasons attributing to the recent loss of trust of key pharma stakeholders’, such as regulators, payers, physicians, and patients. The authors suggested, the industry should act to restore trust as the central tenet of all of its relationships.

Two major perceptions of pharma consumers and stakeholders were captured, as follows:

  • A high percentage of pharmaceuticals in the total healthcare costs, distorts the value–for–money argument used by the industry.
  • The process and the nature, extent and quantum of money spent on pharmaceutical sales and marketing lack transparency, especially with respect to drug risks and benefits.

Constructive power of positive ‘perception’ needs to be strengthened:

Likewise, the constructive power of positive ‘perception’ needs to be strengthened.

Let me illustrate this point with three examples out of many. The first two examples come from the pharma players in India, and the third one from a top non-pharma giant.

- To add public confidence to the corporate brand and strengthen its image among its stakeholders in India, Mankind Pharma appointed Amitabh Bachchan as the brand ambassador. The company wants to primarily emphasize the importance of good health and affordable treatment for all.

- To enhance public ‘perception’ and corporate reputation further, Abbott rolled out a corporatecampaign in India – ‘live life to the fullest.’ The advertisement communicates to the people in an interesting way that “At Abbott, we’re all about helping you live the best life you can through good health. We keep your heart healthy, nourish your body at every stage of life, help you see clearly, and bring you information and medicines to manage your health. Every day and around the world, we’re discovering new ways to make life better.”

Since,the public ‘perception’ of pharma keeps getting worse, let me illustrate the point of constructive power of ‘perception’ from the huge success of several companies from the tech industry. As featured in Tech Times on July 23, 2016, in the ‘perception strength’ of customers in the world on a yearly basis, Apple Inc ranked the world’s top company in 2016 followed by Microsoft.This survey conducted by FutureBrand asked 3,000 customers to rank the big enterprises by 18 different factors, such as trust, price premium, individuality and innovation.

As defined by the survey report, “future brands” are those with a high chance to grow in the future. One of the defining characteristics of such a brand is that it has a consistent balance between the customers’ perception of its purpose and its delivered experience, the article indicated.And that’s exactly what constructive power of ‘perception’ that needs to be strengthened.

…But a key barrier to remedial measures still exists in pharma:

Regardless of industry’s intensive advocacy and multimedia initiatives, a strong negative ‘perception’ on pharma business persists. One of the reasons could be that the nature of most of these overt and covert measures questions the stakeholders for their negative ‘perception’ – justifying the industry practices. This approach often boomerangs. Consequent responses keep getting stronger – leading to a no-win situation. This arises out of a discord between the two concerned entities on the merits of the views that lead to adverse ‘perception’.

The PWC research paper quoted above also substantiates this point. It brings to the fore that pharmaceutical executives and stakeholders hold strikingly different views on a number of issues related to the development of ‘perception’ affecting the reputation.

The article, titled ‘Reputation and Its Risks’, published in the February 2007 issue of Harvard Business Review (HBR) also emphasizes, a clear recognition that reputation is a matter of ‘perception’ of stakeholders, will help companies to effectively manage their reputation. It also says, if companies fail to be in sync with stakeholders’ changing beliefs and expectations, building reputation through effective ‘perception’ management, would appear a tough call.

Conclusion:

Public ‘perception’ plays a crucial role, not just in shaping government policies and regulations, but also in the long-term business success. More positive the ‘perceptions’ are, easier will it be for the company to smoothly sail through, in business – even while navigating through occasional headwinds. Thus, the ability in shaping up a positive ‘perception’ for any business, is fast emerging as an antidote even to any possibility of getting ultimately shipped out. This ability is not dependent just on presenting hard positive facts to all concerned, but a tad more.

Which is why, it is so critical to understand the root cause of the views or ‘perceptions’ of the stakeholders in the industry or an individual company. In case of pharma, when the ‘perception’ is so negative, it will be worthwhile to neutralize it first, rather than immediately trying to counter it with a fresh coat of yet one more fact-based narrative. As a ‘perception’ is not necessarily based on hard facts, such attempts may lead to a never-ending debate on which ‘perception’ is right – ‘your perception’ or ‘my perception’, rather than ‘what is right to do’?’

There lies, therefore, the criticality of effective management of ‘perception’ in pharma. The situation, I reckon, would be even more challenging in the days ahead, if the stakeholders and the pharma industry continue to hold strikingly different views on a number of crucial issues related to the development of such ‘perception’ – further denting its already dented reputation.

By: Tapan J. 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.

Managing Pharma Investors’ Expectations When The Chips Are Down

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Triggered by several critical factors, over a relatively short period of time, a downward spiral is visible with most Indian Pharma stocks, with a significant erosion in market capitalization of many large players in the country.

A set of important factors has been fueling this current downturn since around the last four years. These include, issues related to serious regulatory non-compliance with US-FDA and other foreign drug regulators, pricing pressure both in the domestic and the overseas markets, including the United States, delayed approval of several new generic drugs in the number-one pharma market of the world, for various reasons. Initial rollout period of GST expected to commence on July 1, 2017, may also prompt some major readjustments in the distribution setting of many pharma organizations. This has been further compounded with the wholesalers’ and retailers’ demand for compensation for any losses on input credit arising out of this critical reform.

As eroding market cap generally leads to commensurately lower market valuation of a company, it adversely impacts company’s many business growth related activities, which encompasses attracting low cost – high value investments, and M&A related activities, besides many others. Consequently, this negative swing has alarmed many investors, making them more demanding on company performance – uninterrupted, almost at any cost, as it were.

Not much headroom for necessary course correction:

Unrelenting expectations of this nature from the investors, inclusive of activist shareholders, to continue driving the business growth engine up the steep slope of ever increasing return on investment, is not expected to die down, anytime soon.

They may not be willing to leave enough headroom for the respective pharma management teams to realign their growth path with the changing and challenging needs of time, if it adversely impacts business even in the short-term. Nonetheless, if it is not allowed, the tailspin is likely to continue, as has been happening since, at least, the last couple of years, pushing the business at a dangerous level of sustainability.

Such demand of the investors and shareholders, irrespective of the gravity of the situation where their respective companies are in, may not be too uncommon, even in the global arena. However, many experts are now raising a key question in this area. In this article, I shall try to look at this issue, not just from the investors’ perspective, but also from what the concerned pharma players can and should do in this area, sooner the better.

A pertinent question needs to be addressed:

This important and relevant question is: what is the accountability of the investors, if their pressure for performance when the company is at a crossroad of this nature, causes a long-term irreparable damage to the business?

The very issue has been discussed immaculately in an article titled, “The Error at The Heart of Corporate Leadership”, published in the May-June 2017 issue of the Harvard Business Review.

The paper reiterates that attributing ownership of the corporation to its investors involves a challenging problem of accountability. This is because, ‘shareholders or private investors have no legal duty to protect or serve the companies whose shares they own and are shielded by the doctrine of limited liability from legal responsibility for those companies’ debts and misdeeds.’ Moreover, they are both physically and psychologically distant from the activities of the companies they invest in, and may generally buy and sell these shares without restrictions.

Nevertheless, such strong and ever increasing demands put the top pharma managers under increasing pressure to deliver faster and more predictable returns, regardless of the headwind that the business is facing. The issue becomes more complex when temporary-holders of large blocks of shares intervene to reconstitute a company’s board, change its management, or restructure its finances to drive up the share price, only to sell out and move on to another target, without ever having to answer for their intervention’s impact on the company or other parties, the article highlights.

Export business – the pain points:

“Pharma stocks take a beating on renewed US FDA scrutiny” – flashed the headline of a recent media report of June 12, 2017. As I see it, in the export business, especially in the top pharma market in the world, there appears to be a strong possibility of further worsening the business environment, especially for the Indian drug exporters.

Wave after wave of US-FDA import bans involving many India made drug formulations and Active Pharmaceutical Ingredients (API), since over last four years, have significantly affected the short-term export sales of the domestic pharma exporters. Alongside, these have seriously dented the image of the Indian pharma players, collectively, which encompasses the critical area of regulatory compliance – to offer well-documented safe and effective drugs, as required by the regulator, for the patients in the United States.

The situation gets messier with media headlines, such as, one from Bloomberg’s on January 24, 2017, conveying to the world community – “Document Shredding at Night Raises FDA Eyebrows During India Visit.”

Besides current drug pricing pressure, President Donald Trump’s election pledge for local manufacturing of products consumed in the United States, for more job creation in the country, sends another possible storm signal in this area. This is serious too, as Indian generic drug producers cater to around 40 percent of the total generic drug consumption in America.

Overcoming the odds in export business:

While taking corrective and effective measures for a sustainable long-term business performance, doing the same things more intensely that precipitated the current crisis, would be counterproductive.

Improving the situation, would also call for a strong preparedness for launching new generic products at a regular interval. However, in tandem, there is a crying need for the concerned pharma companies to take a pause, and conclude, a well-structured and expert-guided corporate introspection and brainstorming process, on priority. This will help them to arrive at a set of actionable strategic plans to effectively address each of the pain points, in a meticulous and time-bound manner.

Investors must necessarily be taken on board by opening appropriate communication channels, accordingly. This is to enable them to understand and accept the reasons for a short-term pain for a sustainable long-term gain. The tangible results of corrective measures should subsequently unfold to all concerned, with minor course corrections on-the-run, wherever necessary.

Domestic business – the pain points:

This is again another complex issue, which is often manifested through pressure on drug prices. The blame for such a situation, though originates from somewhere else, generally falls on the Government and the drug price regulator, for obvious reasons. It has a palpable boomerang effect, that is brought out by various research studies, and captured in consumers and the expert opinion, such as one that was published by the Washington Post on June 14, 2017 with the title, “The pharmaceutical industry puts profits above people.”

In the United States, where the drug pricing pressure is widely believed to have primarily originated from the escalating cost containment pressure of the Government and the key health care providers – triggered by a dangerous drug-pricing trend. Whereas in India, in addition to the latter that is related to non-schedule branded generic drugs, it is mostly related high out of pocket expenses on drugs, attempts to dodge various drug price regulations, and ignoring several ethical marketing practices related issues. The net outcome of all this is growing trust deficit on the pharma industry, in general.

Let me illustrate this point with a very contemporary example.  On May 18, 2017, Reuters reported, “India’s drug pricing regulator has demanded explanations from 65 domestic and global drug makers for selling new forms of essential diabetes and antibiotic drugs without its approval.” Interestingly, these companies reportedly include many big names, such as, Abbott Laboratories, Sanofi, Novartis and Indian firms such as Sun Pharmaceutical Industries and Lupin.

According to a circular of the National Pharmaceutical Pricing Authority (NPPA) of May 17, 2017, the above companies have allegedly launched formulations by altering an essential drug formulation with strength/dosage other than as specified in the Drug Price Control Order (DPCO) 2013 or combination with another drug not under price control, without even applying for price approval from NPPA as required. NPPA also doesn’t seem to be sure, whether such Fixed Dose Combinations (FDC) are rational or irrational and have the approval of the Central Drug Standard Control Organization (CDSCO).

If so, it’s indeed a sad development and a sorry state of affair, especially for those companies, which do some chest-thumping on ethics and compliance, often browbeating many Indian players, especially on USFDA related issues, besides pharma marketing practices.

As on date, Union Ministry of Health has banned several hundreds of such FDCs – on the ground of being irrational, launched without proper regulatory approval, lacking in therapeutic efficacy and safety profile, which may even cause harm to patients. March 11, 2016 notification of CDSCO banned 296 irrational FDCs.

However, many pharma players have succeeded in obtaining stay orders against almost all such regulatory bans from various High Courts. Nevertheless, the good news is, from July 2017, the Supreme Court is expected to hear all these cases, collectively. There could be another possible downturn in the market, if the Government wins the case.

Overcoming the odds in domestic business:

In these specific areas, there doesn’t seem to be any other option left to satisfy the long-term interest of the investors, other than addressing the ethics, values and compliance issues of the company on the ground, head on. It doesn’t really matter, what is displayed on the subject in their respective websites. Thus, in this area too, there is a crying need for a well-structured and expert-guided corporate introspection and brainstorming process to disrupt the status quo from its very root.

The above process would help the pharma players to arrive at a set of actionable strategic plans to effectively address the ethics and compliance issues in all the pain points – regulatory, marketing or financial, in a meticulous and time-bound manner. Alongside, all the stakeholders, including the investors, to be taken on board through customized content and the engagement platforms, to put the companies back into the long-term growth trajectory.

In conclusion:

Investors are very important, but if they aren’t an integral part of the corporate management team, should not try to overwhelm the business management process, especially for any short term financial gain. Attributing such authority to investors, involves a challenging problem of accountability for action, as they can get in or out of their investments at any time they choose to do so.

However, it’s also one of the key responsibilities of the management to listen to them, seriously. Take them on board by appropriately explaining to them in every critical situation, the broad strategic direction that the company would follow in pursuit of excellence. Thereafter, demonstrable outcome of all management action against the top operational goals, should be placed before them at a periodic interval, on an ongoing basis.

This process, if carried out with absolute transparency, integrity and seriousness, could help the Indian pharma players getting enough breathing space from the investors, for making the right operational interventions, before it’s too late.

Earlier this year, stepping down of former CEO of GSK – Andrew Witty, was reported to be due to pressure from investors for below par sales and profit in the past three years, besides a few other reasons. Another recent report of June 15, 2017 on “rebel investors looking to remake the board of Mylan” would possibly reinforce this point, further.

Outside the pharma industry, such a situation is not uncommon now, even in India. Besides, what happened recently in Tata Sons,  the June 14, 2017 media headline highlighting “Infosys flags ‘activist shareholder’ as risk factor”, vindicates the same point, yet again.

Thus, managing pharma investors’ expectations through a process of continuous engagement with them, effectively, especially when the chips are down, as it is today, is so critical for the long-term success and sustainability of pharma business.  Maintaining the status quo any further, would possibly make a high-flying pharma player to experience the strong gravitational pull, uncontrolled, with its its serious but avoidable consequences.

By: Tapan J. 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.

Pharma Marketing in India: 10 Chain Events to Catalyze a Paradigm Shift

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In the matured markets of the world pharmaceutical marketing is quite different in many respect as compared to India. Besides doctors, different sets of customer groups like, healthcare providers, patient advocacy groups, pharmacy benefit managers, clinical assessment authorities play various critical roles for use and consumption of branded or generic pharmaceutical products and related healthcare services.

Quite in contrast, even today, individual doctors have continued to remain almost the sole target customers for the pharmaceutical players in India. This is mainly because, by and large, they are the only decision makers for usage of medicines and other healthcare facilities for most of the patients in the country.

Heralding a new paradigm:

As indicated above, though the current pharmaceutical marketing strategies continue to revolve mostly around the doctors, a distinct change, albeit slowly though, is now anticipated within the pharmaceutical marketing space in India.

Gradual emergence of healthcare providers with medical insurance and other related products, patient advocacy groups and standard treatment guidelines, just to name a few, are expected to facilitate heralding a new paradigm in the strategy dynamics of the Indian Pharmaceuticals Market (IPM) in the coming years. These changes will not be incremental in any way, but disruptive and radical in nature, as they will fully evolve.

This process of transformation, mainly driven by Government policy reform measures like, ‘Universal Health Coverage (UHC)’, ‘Free distribution of medicines’, mandatory prescriptions in generic names, could make the current pharmaceutical business strategy models of majority of companies irrelevant and obsolete, in not too distant future.

It is worth noting that the Government will spend around Rs.14,000 Crores (US$ 2.60 billion, approximately) from the year 2014 to 2017 just on medicine purchases at highly negotiated/discounted prices for free distribution to all through Government hospitals and dispensaries.

10 Chain events envisaged: 


In the evolving scenario, following chain events, taking place almost in tandem, in my view, will gradually usher in a new pharmaceutical marketing paradigm in India:

1. In addition to ‘Universal Health Coverage’, there will be a rapid increase in the number of other healthcare providers with innovative, tailor-made and value added schemes for various strata of the society.

2. This will trigger emergence of very powerful groups of negotiators for adopting treatment guidelines, pharmaceutical products usage and other healthcare related services.

3. These groups will have the wherewithal to strongly and significantly influence the doctors in their prescription and other treatment choices.

4. A significant proportion of the products that the pharmaceutical companies will market, a tough price negotiation with the healthcare providers/ medical insurance companies will be inevitable.

5. Consequently, doctors will no longer be the sole decision makers for prescribing drugs and also the way they will treat the common diseases.

6. Pharmaco-economics or Health Technology Assessment (HTA) or outcome based pricing will gradually play an important role in pricing a healthcare products. Drug Price Control Order (DPCO 2013) has already signaled to this direction for a class of products.

7. An integrated approach towards disease prevention will emerge as equally important as treating diseases.

8. A shift from just product marketing to marketing a bundle of value added comprehensive disease management processes along with the product would be the order of the day.

9. More regulatory control measures on pharmaceutical sales and marketing are expected to be put in place by the Government to prevent alleged widespread sales and marketing malpractices in the country.

10. Over the counter (OTC) medicines, especially those originated from natural products to treat common and less serious illnesses, will carve out a sizable share of the market, as appropriate regulations would be put in place, adequately supported by AYUSH. This will be fueled by overall increase in general health awareness of the population.

Trapped in an ‘Archaic Strategy Cocoon’:

Over a long period of time, Indian pharmaceutical industry seems to have trapped itself in a difficult to explain ‘Archaic  Strategy Cocoon’. No holds bar sales promotion activities, with very little of marketing, continue to dominate the ball game of hitting the month-end numbers, even today.

It is high time to come out of this cocoon and confront the ‘writing on the wall’ upfront, if not try to hasten the process of the evolving changes, boldly and squarely. This will require a strategic long term vision to be implemented in an orderly way to effectively convert all these challenges into possible high growth business opportunities.

A differentiated composite value delivery system:

Moreover, in today’s post product patent regime in the country, product pipelines of the domestic Indian companies with new ‘copycat’ versions of patented products have almost dwindled into nothing, making price competition in the market place even more ‘cut throat’.

In such type of changing environment, all pharmaceutical companies will be under tremendous pressure to create and deliver additional, well differentiated and composite value offerings, beyond physical products, to attract more patients, doctors, healthcare providers and others, in and around related disease areas, for business excellence.

Thus, ability to create and effectively deliver well-differentiated composite value offerings, along with the physical products, will separate men from the boys in the high growth pharmaceutical market of India, in the long run.

This could also possibly create an ‘Alibaba Effect’ for the successful ones in search of pots of gold in the pharmaceutical space of India.

New leadership and managerial skill set requirements:

In the new environment, required skill sets for both the leaders and the managers of Indian pharmaceutical companies will be quite different from what they are today. This will not happen overnight though, but surely will unfold gradually.

New skills:

Leaders and managers with knowledge in just one functional area like, R&D, manufacturing, marketing, regulatory, finance are unlikely to be successful without a broad-based knowledge in the new paradigm. To really understand and handle new types and groups of customers, they will need to break the operational silos and be proficient in other key areas of business too.

These professionals will require ensuring:

• Multi-functional expertise by rotating right people across the key functional areas, as far as possible, even with a stretch.

• Ability to fathom and correctly interpret patients’ clinical benefits against cost incurred to achieve the targeted clinical outcomes, especially in areas of new products.

• Insight into the trend of thought pattern of healthcare providers and other customers or influencers groups.

• Speed in decision-making and delivery…more importantly ability to take ‘first time right’ decisions, which can make or mar an important initiative or a commercial deal.

IPM growing fast, can grow even faster: 

India is now one of fastest growing emerging pharmaceutical markets of the world with 3rd global ranking in the volume of production and 13th in value terms. Domestic turnover of the industry is over US$ 13.1 billion in 2012 (IMS) representing around 1 percent of the global pharmaceutical industry turnover of US$ 956 billion (IMS 2011).

Since 1970, Indian pharmaceutical Industry has rapidly evolved from almost a non-entity to meeting around 20 percent of the global requirements of high quality and low cost generic medicines.

Financial reforms in the health insurance sector and more public investments (2.5% of the GDP) in the healthcare space during the 12th Five Year Plan Period will have significant catalytic effect to further boost the growth of the industry.

Stringent regulations and guidelines of the Government in various areas of pharmaceutical business in India are expected to be in place soon. Ability to ensure system-based rigid organizational compliance to those changing business demands in a sustainable way. will determine the degree of success for the pharma players in India.

One such area, out of many others, is the professional interaction of the Medical Representatives with the doctors and other customer groups.

Require a ‘National Regulatory Standard’ for Medical Representatives in India:

Medical Representatives (MRs) currently form the bedrock of business success, especially for the pharmaceutical industry in India. The Job of MRs is a tough and high voltage one, laced with moments of both elation and frustration, while generating prescription demand for selected products in an assigned business territory.

Though educational qualifications, relevant product and disease knowledge, professional conduct and ethical standards vary widely among them, they are usually friendly, mostly wearing a smile even while working in an environment of long and flexible working hours.

There is a huge challenge in India to strike a right balance between the level and quality of sales pitch generated for a brand by the MRs, at times even without being armed with required scientific knowledge and following professional conduct/ ethical standards, while doing their job.

Straying from the right course:

A recent media report highlighted that ‘Indian subsidiary of a Swiss pharma major has run into trouble with some executives allegedly found to be inflating and presenting fabricated sales data for an anti-diabetic drug.’

The report also indicated that officials from mid-management ranks to sales representatives were allegedly involved in those unethical practices. The company has responded to this incidence by saying that the matter is still under investigation.

It is critical for the MRs not just to understand scientific details of the products, their mode of action in disease conditions, precautions and side effects, but also to have a thorough training on how to ‘walk the line’, in order to be fair to the job and be successful.

As MRs are not just salesmen, they must always be properly educated in their respective fields and given opportunities to constantly hone their knowledge and skills to remain competitive. The role of MRs is expected to remain important even in the changing scenario, though with additional specialized skill sets.

Unfortunately, India still does not have a ‘National Code of Conduct or Regulatory Standards’ applicable to the MRs.

Only the clause 4 of ‘The Magic Remedies (Objectionable Advertisement) Act, 1954’ deals with misleading advertisements. It is about time to formulate not only a ‘National Code on Pharmaceutical Marketing Practices’, but also a mandatory ‘Accreditation program’ and transparent qualifying criteria for the MRs for the entire pharmaceutical industry in India, just like many other countries of the world.

‘Central Drugs Standard Control Organization (CDSCO)’ of the Ministry of Health and Family Welfare of the Government of India in its website lists the “Laws Pertaining to Manufacture and Sale of Drugs in India”. However, it does not specify any regulation for the MRs nor does it recommend any standard of qualification and training for them, which is so critical for all concerned.

There are currently no comprehensive national standards for educational qualification, knowledge, ethics and professional conduct for the MRs. In the absence of all these, it is difficult to fathom, whether they are receiving right and uniform inputs to appropriately interact with the medical profession and others in a manner that will benefit the patients and at the same remain within the boundary of professional ethics and conduct.

Thus, a ‘National Regulatory Standard’ for MRs, I reckon, is absolutely necessary in India… sooner the better.

Global pharmaceutical players:

Facing a huge patent cliff, global pharmaceutical companies are now fast gaining expertise in the ball game of generic pharmaceuticals, especially in the developing markets of the world.

In the emerging markets like India, where branded generic business dominates, global pharmaceutical players seem to be increasingly finding it lucrative enough for a sustainable all round business growth.

However, to outpace competition, they too will need to capture the changing dynamics of the market and strategize accordingly without moaning much about the business environment in the country.

On the other hand, if majority of Indian pharmaceutical companies, who are not yet used to handling such changes, are caught unaware of this evolving scenario, the tsunami of changes, as they will come, could spell a commercial disaster, endangering even very survival of their business.

Managing transition:

During ensuing phase of transition in India, pharmaceutical companies would require to:

• Clearly identify, acquire and continuously hone the new skill sets to effectively manage the evolving challenge of change.

• Get engaged, having clarity in the strategic content and intent, with the existing public/private healthcare providers and health insurance companies like, Mediclaim, ICICI Lombard, large corporate hospital chains, retail chain chemists and others, proactively.

• Drive the change, instead of waiting for the change to take place.

• Ensure that appropriate balance is maintained between different types of marketing strategies with innovative ways and means.

Conclusion:

It may not be easy for the local Indian players to adapt to the new paradigm sooner and compete with the global players on equal footing, even in the branded generic space, with strategies not innovative enough and lacking required cutting edges.

In my view, those Indian Pharmaceutical companies, who are already global players in their own rights and relatively well versed with the nuances of this new ball game in other markets, will have a significant competitive edge over most other domestic players.

If it happens, the global-local companies will offer a tough competition to the local-global players, especially, in the branded generic space with greater cost efficiency.

So far as other domestic players are concerned, the fast changing environment could throw a new challenge to many, accelerating the consolidation process further within the Indian pharmaceutical industry.

As the new paradigm will herald, catalyzed by the above 10 chain events, there will be a metamorphosis in the way pharmaceutical marketing is practiced in India. A well-differentiated composite value delivery system would then, in all probability, be the name of the winning game.

By: Tapan J. 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.

 

Managing expectations of the emerging markets of the world, proactively, will differentiate winners from the rest, in the Global Pharmaceutical Industry.

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Change or Perish:In Mid 2007, PricewaterhouseCoopers (PwC) recommended to the research-based global pharmaceutical companies that for sustainable business performance they should move a part of their expenditure from marketing to research. They also recommended that the drug prices should be related to incremental efficacy that the products would provide. That global pharmaceutical business model is “economically unsustainable and operationally incapable of acting quickly enough to produce the types of innovative treatments demanded by global markets” as a challenge of change, was forecasted in 2007 by PwC in their ‘Pharma 2020: The vision’, report.Fast evolving scenario:

The global pharmaceutical industry scenario is fast evolving. More drugs are going off patent than what the innovator companies can replace with the new products. The research is undoubtedly failing to deliver.

At the same time, the business growth in the developed markets of the world has been declining over a period of time. The growth in the top two pharmaceutical markets of the world viz, USA and Japan has gone negative. IMS predicted in their recent ‘CEO Conclave’ in Mumbai that negative trends in these markets will continue even beyond 2013.

In the same conclave IMS predicted that ‘Pharmerging’ markets and Venezuela will drive the growth of the global pharmaceutical industry in the next five year period. Within ‘Pharmerging’ markets, China is expected to record highest CAGR growth of over 25%, followed by India and Turkey around 12-14% each. With such a scorching pace of growth China is expected to become third largest pharmaceutical market in the world in 2013 with India holding its 2008 ranking of no. 13. Venezuela is expected to register highest CAGR growth of around 40% during this period placing itself as the eleventh largest pharmaceutical market of the world, comfortably overtaking India.

Emerging markets will drive global growth:

IMS health reported that last year the global pharmaceutical market recorded a turnover of US$712 billion, which is an increase of US$178 billion over last five years. However, the growth rate has come down to 6.4% compared to 11.8% in 2001. Emerging markets like India, China, Russia, Turkey and South Korea have recorded a growth of 13%, 25.7%, 20.2%, 17.2% and 10.7%, respectively against just 3.8% growth of the US market.

Making up sales revenue of world’s top 10 products:

World’s 10 top selling prescription drugs, as reported by IMS, which will be difficult to replace in terms of single-product value turnover after they go off patent, are as follows:

- Lipitor, US$13.5 billion (Pfizer)

- Plavix, US$7.3 billion (Sanofi-Aventis)

- Nexium, US$7.2 billion (AstraZeneca)

- Seretide/Advair, US$7.1 billion (GlaxoSmithKline)

- Enbrel, US$5.3 billion (Amgen and Wyeth)

- Zyprexa, US$5 billion (Eli Lilly)

- Risperdal, US$4.9 billion (Johnson & Johnson)

- Seroquel, US$4.6 billion (AstraZeneca)

- Singulair, US$4.5 billion (Merck)

- Aranesp, US$4.4 billion (Amgen)

Focus on the emerging markets and other measures are expected to more than offset the loss of revenue and profit for these products.

Key business issues in the emerging markets:

Governments of many of these emerging markets expect some local benefits out of the evolving growth opportunities of the global pharmaceutical companies from their respective countries. Various reports indicate that there will be mainly the following two key issues in these markets:

• Local manufacturing of products
• Pricing

Local manufacturing:

Out of these emerging markets, Indonesia has clearly spelt out its intention by specifying that the pharmaceutical companies marketing their products in Indonesia will need to establish local manufacturing facilities. The new rule is directed towards local job creation.

The Health Minister of Indonesia has said, “If they want to get licenses (to sell their products) they have to invest here also, not just take advantage of the Indonesian market.” The Minister further added, “they can’t just operate like a retailer here, with an office that’s three meters by three, and make billions of rupiah. That’s not fair.” It has been reported that India and China may also come out with similar requirements for their respective countries.

U.S. Chamber of Commerce has registered a strong protest in this matter with the President of Indonesia and has urged a reversal of this decision. However, the country appears to have taken a firm stand in this matter. This is evident when in response to the report that some global pharmaceutical companies have threatened withdrawal of their business from Indonesia because of this reason, the Health Minister retorted, “If they want to go away, go ahead.”

Pricing:

Anticipating such moves in the emerging markets, GlaxoSmithKline (GSK) has already started reducing the prices of its products in the emerging markets.

The visionary CEO of GSK, Andrew witty strongly believes that such price reduction will enable more patients in the emerging markets to afford GSK products. Consequently the increased sales volume will not only be able to offset the price loss but will also create a substantial goodwill for the company in these markets.

Quoting Andrew Witty the ‘Wall Street Journal’ (WSJ) reported that in Philippines, GSK has reduced the price of 28 products by 30% to 50%. In other emerging markets in Asia including India, Malaysia and Thailand the company has reduced the prices of Cervarix, its cervical cancer vaccine, substantially.

Price reductions made by GSK in Philippines in March have started paying rich dividends to the company with 15% to 40% increase in sales revenue.

Conclusion:

To achieve the growth objectives in the emerging markets of the world, global pharmaceutical companies will need to find out a win-win solution. Andrew Witty of GSK has set examples in this area with various path breaking initiatives. Pricing and local manufacturing of products, in that order, are expected to be the key issues in the business model for emerging markets of the global pharmaceutical companies. Witty has responded to such expectations proactively and in an exemplary way. His vision is widely expected to be emulated by many others, as we move on, in the interest of all stakeholders.

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.