Pharma and Life Sciences

Resilience of domestic pharma companies being put to test again?

04 Sep 2023

The National Medical Commission (NMC) had come out with regulations mandating doctors to prescribe drugs only by generic (non-proprietary) names instead of brand (proprietary) names. Even though the new regulation has been put on hold, domestic pharma companies should be prepared to work with this kind of reality in the future. While this may be construed as a new normal for operating in the domestic market, pharma companies have proved themselves to be resilient in facing such challenges. One of the examples that one is reminded of is the DPCO. Pharma companies have adopted the DPCO regime by re-aligning their product portfolios and working on their operating models to alter their cost structures along with other initiatives.

Influence over consumers: Doctors have a significant role in what patients buy by prescribing brands. If doctors were to prescribe by generic names, the pharmacists would have more influence on what customers buy. As such the role of Doctors is likely to decrease and that of pharmacies is likely to increase in what customers choose to buy. Pharmacies have many considerations like working capital, the complexity of management in terms of no SKUs they stock, etc. which may influence what they choose to stock and sell.
Role of quality in choice of drugs: Pharma companies deploy a large field force of medical representatives to convey to doctors why their brands are better, support them with clinical evidence and the doctors form a view on effectiveness from their patients' response to the prescribed drugs. Pharmacies would not have such an understanding of quality practices or the effectiveness of drugs, of pharma companies, which would negate the role of quality in the choice of drugs.
Pricing: The role of the Government in distribution is increasing through initiatives like Jan Aushadhi stores. While it is difficult to predict the market share of such channels, if the share of such channels were to increase it goes without saying that cost will play a significant role.

New ways of engaging the distribution channel: If the regulations on prescription were to come into play, then the sale of drugs is likely to shift from 'pull' to 'push'. Pharma companies need to develop newer ways of engaging the pharmacies and the distributors. They would adopt ways of other industries that lay more emphasis on managing the distribution channels. However, this is not entirely new to pharma companies, as many pharma companies have started using trade channels for some of the more genericized products.
Developing new ways of promoting quality: Currently, the sole assurance of quality for patients is through doctors. With the role of pharmacies likely to increase, pharma companies need to explore and develop new ways of promoting quality in terms of differentiated manufacturing standards, promoting umbrella brands instead of individual brands which can be communicated to a larger set of stakeholders.
Promoting a better definition of quality: The quality standards across all companies may not be uniform. Efforts are underway to improve and promote better compliance and standards in the domestic pharma industry. It is incumbent on pharma companies to promote better quality standards that can be adopted across the domestic pharma industry so that patients receive better quality products.
Re-optimizing the sales and marketing spend: A significant part of the marketing spend is on the field force that engages with doctors. This needs to be revisited to include initiatives like newer ways of engaging the distribution channel, newer ways of promoting quality, etc. so that ROI on marketing spending increases in the new normal.
Focusing on cost-competitiveness: It is quite clear that there will be pressure on pricing and cost competitiveness will be critical. Companies will have to re-look at the whole value chain to optimize costs and may even have to come up with newer operating models. Companies that will be able to manage their costs better will be in a better position to deal with the upcoming challenges.