Insights of Pharmaceutical Industry

The project titled, “Insights of Pharmaceutical Industry and Factors Leading To Prescription Generation” was mainly to analyze the pharmaceutical industry. For this the data was collected from various journals and magazines. In the other part of the study, various doctors were interviewed to study the factors affecting the prescription generation process. The research was generally conducted to know what are the factors, which motivate a doctor to prescribe a drug. Also simultaneously, it was tried to know the ranking of various promotional tools by the doctors.

2. INTRODUCTION OF THE TOPIC A healthy nation is a wealthy nation. The pharmaceutical industry has played an unparalleled role in improving various health indicators like life expectancy, infant mortality, etc in the country. The growth of modern medicine has controlled several diseases and eradicated few others. Medicine translates into direct significant games in the well being of the people, thus contributing to economic growth by way of improving the quality of human capital. Disease Profile:- Disease of the underprivileged is still rampant in India.

Though considerable development has taken place in the regard to health in India, the rural population has benefited comparatively less. As a result many diseases such as malnutrition, tuberculosis, gastro-enteritis, worm infections, preventative blindness and other diseases of the underprivileged are still rampant in India. Major problems in future years are likely to be safe drinking water, sanitary measures, malnutrition, water borne and viral diseases. In urban areas incidence of stress related disease is increasing. Percentage of various Diseases:- |Disease |Percentage | |Infection/infestation |31 | |Nutrients.

|13 | |Skin |6 | |Muscular |9 | |CNS |6 | |Cardio-vascular |7 | |Respiratory |10 | |Alimentary |11 | |Others |7 | [pic] TRENDS:- ? Focus on development of herbal or ayurvedic basis drugs particularly for the export market. ? Restructuring of operations by outsourcing, reduction of labor force and disinvestment of bulk drug plants. ? Setting up of 100 percent subsidiaries for introducing newly patented drugs. ? Indian companies functioning as R&D or production base for MNCs. ? A new drug price control in 1995. ? MNCs increasing their shares in their Indian subsidies.

? Government adopting GATT guidelines for product patents, mega mergers of international giants. ? Approval by the government for setting up an independent pricing authority, the National Pharma Pricing Authority. ? Coping with the changes and being able to take advantage of the shakeup will determine which companies will survive and prosper and which is eliminated. Structure:- Drugs can be classifieds as:- a) Bulk Drugs:-The active ingredient for making formulation. b) Formulations: – The final form in which the drugs are sold i. e. syrups, injections, tablets and capsules.

Classification of drugs can be also done based on usage into antibiotic, anti-bacterial, vitamins, cough preparations, cardiac, and anti-inflammatory, Bulk drugs account for 16% of the total industry turnover, but 60% of exports. Stiff competition and low margins characterize this segment. Formulations constitute 84% of the industry turnover. Formulation can be classifieds in to branded and generic. Generics account for nearly 12% of the total formulation sales and are primarily sold to Government hospitals or exported. The pharmaceutical industry is structured as follows:- a) Organized sector comprising of MNCs, Indian companies, PSUs.

b) Unorganized/small-scale sector. Research:- Pharmaceutical industry is driven by a global need to conquer disease. Medicines are developed to treat new disease or improve upon the existing treatment. An in-depth understanding of human physiology and disease mechanism is a pre requisite to pharma R&D. To facilitate research, companies usually concentrate on select therapeutic areas such as anti-ulcer, anti-cancer etc. Major diseases for which new drugs are continuously being researched globally are AIDS, Alzheimer’s disease, arthritis (rheumatism), cancer, depression, diabetes, heart disease, osteoporosis etc.

PHARMACEUTICAL INDUSTRY STRUCTURAL ANALYSIS:- [pic]The essence of formulating competitive strategy is, relating a company to its environment. Though the relevant environment is very broad, encompassing social as well as economic forces, the key aspect of the company’s strategy environment is the industry in which it competes. Brief analysis of the structure of pharmaceutical industry which has strong influence in defining the competitive rules of games as well as the strategy potentially available to the company are given.

The Porter’s strategy model is used as an analytical framework. The five structural elements of the industry‘s strategy environment are:- ? Threat of potential entrants ? Competition within the industry ? Supplier bargaining power ? Buyer bargaining power ? Substitute products 1. Threat of Potential:- The entry to an industry mainly depends on key economics factors like its profitability, returns, etc. If they are high then there is bound to be competition. The factors affecting these in the pharmaceutical industry in India are briefly described below. a. Scale of economies:-

Much more significant in affecting economics are capacity utilization, rates and size of a batch of a particular grade to be produced i. e. process efficiencies are more valuable. Significant Scale economics like hospitals and large dealers units of multi business firm are able to reap economics by sharing certain activities. b. Capital costs:- High capital requirement due to modularity of equipment and necessity of maintaining FDA rules and regulations and Goods Manufacturing Practices (GMP) and necessity of auxiliary facilities like quality control and pollution control, all these make it essential to have a large capital outlay.

Resources required are roughly to the tune of 15 to 20 crores. Capital is also required for customer credit, inventories, etc. c. Technology:- The technological change can shift bargaining power relationship between an industry and its buyers. The role of technical change in differentiation and switching cost is instrumental in determining its buying power. Most commonly recognized effect of technology in the industry structure is its impact by substitutes. Technological changes create entirely new products or product uses that substitute for others.

Technological battle over relative effectiveness/price between industry producing close substitutes is at the heart of the substitution process e. g. Ayurvedic Medicines, Unani Medicines. Technological changes can shift the bargaining power relationship between an industry and its suppliers. It can eliminate the need to purchase from a powerful supplier group e. g. Bulk drug manufacture.

For pharmaceutical industry the technological change plays an important role shaping the pattern of product differentiation. d. Product differentiation:- A firm differentiation itself from its competitors by being unique in its product effectiveness. The differentiation allows the firm to command a premium price, to sell more of its product.

Product differentiation means that established firms have brand identification, customer loyalties stem from past advertising, customer service or simply being first in the industry. This differentiation creates a barrier to entry by forcing new entrants to spend heavily to overcome the above factors. Product differentiation is perhaps the most important entry barrier in healthcare products and OTC drugs. Effective packing ability, which makes it easier to show and use of medicines, and transport supply of consignment, is very much valid in pharmaceutical industry for product differentiation.

In this industry, doctors are the man persons influencing the buyers. Doctors acts as filters between the industry and the customers. Multinational companies have exploited this doctor’s perception value by claiming its product as a safe choice. The values that influence the doctors are:- 1) Reputation or image of the firm. 2) Cumulative advertising. 3) Appearance, packing and label of the product. 4) Timely availability of the product. 5) Price. e. Switching costs:- A barrier to entry is created by the presence of switching costs.

In pharma industry, switching cost is mainly the cost and time in testing or qualifying the effectiveness of new drugs takes lot of time and cost. f. Access to distribution channel:- A barrier to entry is created for new entrants as the need to secure distribution for its product. The new firms must persuade the distribution channels like retailers and stockiest to accept their product.

Sometimes new entrants have to give more credit facilities. The channel of distribution in pharmaceutical industry is very powerful and hence reputation and image of the company is very important. g. Experience:- Many companies mainly take advantage of nearly being in the line for many years.

In the industry, experience is an important advantage in marketing system. Experience can tower the cost in marketing and distribution. h. Government Policies:- Government restriction on process, pollution control and Food & Drugs Administration Regulation (FDA) can increase capital cost for new entrants.

Standards for product testing pharma product can impose substantial lead times, which not only raise the capital cost of new entrants but also give established firms in advance, the notice impending entry and even sometimes the full knowledge of the new competition.

With this information, the established firms may formulate retaliatory strategies. 2. Intensity of Rivalry among Existing Competitors:- Rivalry among existing competitors in the pharmaceutical industry is mainly convincing the doctors about the effectiveness of the drug and distribution and marketing tactics. Price is not a very sensitive factor but plays a nominal part in the main purchase decision-makers influencing the buyers the main selling effort is to convince the doctors and stockiest.

There are not many competitors has their product targeted for one particular aspect or type e.g. Cough syrups, drugs for heart disease, liver, lungs, etc. A good growth in the industry has made competition very subdued and non-visible and firms are able to improve their result lust by keeping up with industry. Another point is differentiation by Effective creates insulation from competitors.

The rate of new product introduction has been quite good in the last so many years. In short we can say that the entry barriers are high but the exit barriers are very low and the industry’s profitability and returns being fairly good it will be a high risk investment for any new entrant.

Government policies price control policies add to this economic barrier. 3. Bargaining Powers of Buyers:- The majority of the buyers are influenced by doctor’s advice the product sale will depend on doctor’s strategy perception of the company consumer and his symptoms. Hence, doctor’s strategy above the firm reputation and image also place an important part in the sale of the product. The chain of distribution is powerful in the industry and they pose a potential threat. The dealers and stockiest and retailers are in a position to demand bargaining concession depending upon the reputation and the image of the company and their products.

Multinational has exploited the product has a safe choice and hence they are able to neutralize the threat posed by the distribution system. 4. Bargaining Powers of Suppliers:- The pharmaceutical product is manufactured from different chemicals and there are many suppliers of the major input of the industry. A supplier of the major input pharmaceutical industry is an important customer. Hence supplier’s strategy bargaining power is limited. The supplier group does not pose much credible threat of forward integration. 6. Pressure from substitutes:-

If we look at the pharmaceutical industry as a part of business in medicine, the major substitute available to the customer, will be Ayurvedic, Homeopathy, Unani, etc. these are not the major threat to the pharmaceutical industry presently. But they can be threat for the future. There are basically 2 types of research:- 1. Basis research:- It deals with discovery or invention of a new medicinally effective chemical. Basic research is both time and cost intensive. Hundreds of molecules need to be analyzed to determine possible effectiveness.

Following such laboratory testing, actual clinical trials are then carried out to determine the drug’s efficacy on patients. The process thus requires around 12-15 years and costs US$350-400mn per new chemical entity. 2. Process research:- It is basically Reverse engineering of a molecule through slight process modification. Process R&D is far easier and costs are negligible compared to basis research. INDIA TO AMONG TOP 10 PHARMA MARKETS BY 2020 India is likely to be in the league of top 10 pharma market by 2020. Indian market is expected to be double to early $10 billion by 2010 from the existing $5 billion.

And, the global pharmaceutical market will more than double to $1. 3 trillion by 2020. The pharma industry will not be in strong position to capitalise on opportunities unless research and productivity improves. The pharma industry globally is investing twice as much in R&D as it was a decade ago to produce two-fifths of the new medicines. Pharma’s traditionally strategy of placing big bets on a few small molecules, marketing them heavily in to primary care with the aspiration of achieving blockbuster sales, will no longer suffice.

It must focus on development of medicines that prevent, treat or cure. Preventive healthcare represents a huge opportunity for both health care providers and pharma industry. Any company that wants to serve the Indian market successfully will, therefore, have to device strategies that are tailored to individual needs. Industry spends a higher amount of 25-30% of its turnover on sales and marketing, and only 15% on R&D. Over the next decade, industry must shift its investment focus more toward research and less on sales and marketing.

Recognizing the cost effectiveness of prevention among healthy populations rather than sick populations, pharma will enter into health management, with wellness programmes, compliance monitoring, vaccinations and other value-added services. There are 245 pure vaccines and 11 combination vaccines in clinical development and market would be worth up to $42 billion by 2015. 1. RESEARCH OBJECTIVES:- • To get an insight of the Pharmaceutical industry. • To find out which factor motivates doctors to prescribe particular brand of drug. • To rank the different sales promotional tools in the descending order of preference given by the doctor.

3. SCOPE OF THE STUDY The result of this research will help marketing manager to decide the marketing mix based on the feedback given by 100 doctors on important parameters that influence prescription generation and thus improve the sales of the company. With the help of this research the promotional budget could also be used effectively. The scope of the study is extended only to the doctors of THANE city 4. RESEARCH METHODOLOGY Research can be defined as systematized efforts to gain knowledge. A research is carried out by different methodologies, which have their own pros and cons.

Research methodology is a way to solve research problem along with the logic behind them. First of all it is necessary to create research design. RESEARCH DESIGN: Basically there are three of approaches • Exploratory • Descriptive • Experimental I have used descriptive research. Descriptive research includes surveys and fact finding enquire of all kinds. Research Instrument: Survey Method SAMPLING: We can say that sampling is the collection of information about an entire population through examining a part of it. This is the best way for getting information which going to help me to determine the factors influencing prescription generation.

TYPES OF SAMPLING: 1) Probability Sampling 2) Non- Probability Sampling I have used non probability sampling. Under this I have chosen convenience sampling. METHOD OF DATA COLLECTION: 1. Primary Research: – This basically includes the market research i. e. visits to doctors. The methodology was through survey. The tools used were questionnaire and through personal interview of the doctors. The research that was carried out was basically in THANE only. The target group for the research was doctors. 100 doctors 2. Secondary Research: This was basically the desk research i. e. data collected from various magazines and books.

This data was collected to get an insight of the Pharmaceutical industry. Also the Porter’s Five Forces Model was done to analyze the structure of the industry. 1. Primary data sources:- ? Doctors a) General practitioners b) Specialists. ? VARIABLES SELECTED:- I. Price II. Quality III. Reputation of the company IV. Basic research by the company V. Gifts VI. Samples VII. Personality of the MR VIII. Presentation by MR IX. Clinical papers X. Regularity of the MR XI. Leave be hinders. ? METHODOLOGY:-Survey, personal interviews ? TOOLS USED: – Questionnaires. ? SAMPLE SIZE:- 100 ? AREA COVERED: – THANE ? QUESTIONNAIRE DEVELOPEMENT:-

Questionnaire was developed to get information on the different sales promotional tools adopted by different companies. TYPE: – Structured consisting has open-ended questions. PRESENTATION OF RESULTS ? GIFTS:- This is a powerful tool, which are frequently used by many industry customers. Care should be taken in choosing the right type of gifts. There are different types of gifts that could be presented to a doctor can be for a doctor or for the clinic. According to the survey results, it can be easily seen that gifts to a certain extent influences a medical practitioner to prescribe that company’s brand. ? SAMPLES:-

Purpose of giving samples is to conduct trial, and see the results. These samples are delivered to the doctors to introduce a new product. Sampling is the most effective way to introduce a new product. In the medical field even the company having good reputation and its products are known to the doctor, he would not prescribe its product unless he tries the samples on patients and sees its effects. Only if the results are satisfactory as compared to what the MR claimed in the detailing doctor will prescribe on a continuous basis. ? PERSONALITY OF THE MR:- MR is the only link between the doctors and the company.

Whenever the MR goes to meet doctors, the company should take care that everything has been done so that the MR has the best possible approach. personality classified as follow:- a) Extrovert b) Authoritarian c) Affiliator d) Thinker Personality of the MR can be developed over a period of time by giving him proper training in the areas like: a) Communication skills b) Salesmanship c) Behavioral science ? PRESENTATION OF THE MR:-This depends upon two factors:- A. External factors: – This means external appearance. Physical appearance creates a first impression. Hence MR should be: i. Well dressed.

ii. Clean shaved iii. Should wear a tie iv. Should wear polished shoes. B. Internal factors:- i. Product knowledge ii. Communication skills iii. Salesmanship iv. Presence of mind v. Handling Questions. MR should have good knowledge of his product, competitors product, anatomy, and pharmacology. Hence, PSR should be given good training about: 1) Marketing strategies 2) Product 3) Communication skills 4) Human relation 5) Psychology ? TYPES OF DETAILING USED:- There are two types of detailing:- a) Fixed detailing b) Open dialogue a) Fixed Detailing: – In the fixed detailing MR products only.

The company gives detailing story, MR has to only memorize it and reproduce it. b. ) Open Dialogue: – In open dialogue MR can use his own worlds. This is very flexible type of detailing. This is very live also. Open dialogue is possible only if:- a. Personal rapport between MR & doctor is very good. b. Knowledge & Communication skill of the MR is excellent c. Doctor is an extrovert d. MR is very experienced ? QUALITY:- There are many ways of checking the quality of the product. But the doctor assesses the quality of a product by:- 1) Name of the company. 2) Claims made by the PSR. 3) Trial conducted on the patients.

Since medicine deals with life & death of the patient, no doctor will compromise on quality. ? REPUTATION:- This was previously a very big factor, when the multinationals like Glaxo, Pfizer, etc. had a huge clout with the doctors. But now with a number of Indian companies like Ranbaxy, Lupin etc are coming up in the pharmaceutical industry, reputation earned by the multinational is nearly nullified. And all the top companies are nearly at par in the eyes of the doctor. Still there are some doctors they prescribe the products of multinational companies only. Reputation is earned over period of time.

It can not be created overnight. Following factors influence the Reputation:- 1. Turnover 2. Share –price 3. Product range 4. Investment in R&D 5. Employer –Employee relationship 6. Regular visits by MR This is very important point in maintaining the relation between the doctors and the companies MR. Doctors do not like the MRs visiting them once in 3 months or 6 months. Regularly shows that this particular MR is very sincere & honest with his job and the company is also very concerned. ? PRICE:- Price is very important factor in the pharmaceutical industry. The Government with the help of acts like DPCO controls prices.

Company cannot fix the price on its own. General practitioners are more prices conscious. They do not want to put burden on the patient. General practitioners generally expect 3 things from any products:- I. Efficacy II. Safety III. Economy Consultants are not that price sensitive. They would not mind prescribing costly products. Patients too, wouldn’t mind buying expensive medicines, If prescribed by a specialist. ? ORIGINAL RESEARCH PRODUCT:- Doctors give a lot of weight age to original products. They like to prescribe products, which are researched by the company and launched first in the market.

? LEAVE BEHINDERS:- Purpose of leave behinders is to serve as a reminder for a particular product after MR has come out of the clinic till his next visit to the doctor. But since 5-10 MR meet the same doctor in a day, there is no space on the doctors table to keep all of them. ? CLINICAL PAPERS:- In the world of medicines, development takes place very fast. Almost every day there is discovery of new medicines. Clinical paper is the supportive document. It is the proof of what MR tells the doctor about his product. And only those companies that market only their own research products can give these papers.

Clinical paper is nothing but trial conducted by doctors. General practitioners are least interested in clinical papers. They do not have the time and desire also. ? DETAILING AIDS USED:- I. Flip chart II. Pamphlets ? Flip charts are used for detailing all the products. ? Pamphlets have an advantage of being a leave behinder. They have high utility value as reminders. This is useful especially when new product is to launched. DATA ANALYSIS AND DATA INTERPRETATION 1. Importance of Price:- PriceNIOKIVI No. of Respondent6 285412 [pic] 2. Importance of Quality:- PriceNIOKIVI No. of Respondent15 274711 [pic].

3. Reputation of Company:- Reputation of the CompanyNAI NI OK I VI No. of Respondents 17 22 32 22 7 [pic] 4. Presentation of MR:- Presentation of MR NAI NI OK I VI No. ofRespondents 6 7 37 3 41 [pic] 5. Regularity of MR:- Regularity of MR NAI NI OK I VI No. ofRespondents 6 7 37 41 9 [pic] 6. Personality of MR:- Personality of MR NAI NI OK I VI No. ofRespondents 2 11 43 37 7 [pic] 7. Samples:- Samples NAI NI OK I VI No. ofRespondents 11 11 39 33 6 [pic] 8. Clinical Papers:- Clinical Papers NAI NI OK I VI No. ofRespondents 13 27 37 17 6 [pic] 9. Importance of Gifts:- Gifts NAI NI OK I VI No.

ofRespondents 17 23 37 19 4 [pic] 10. Original Research by the Company:- Original Research NAI NI OK I VI No. of Respondents 22 27 21 27 3 [pic] 11. Leave Behinders:- Leave Behinders NAI NI OK I VI No. of Respondents 20 27 33 17 3 [pic] 12. Detailing Aids:- Detailing Aids Fixed DetailingOpen Dialogue No. of Respondents 57 43 [pic] 13. Visits by MR:- Visits by MR Fortnightly Once a Month Once in 2 Month No. of Respondents 21 27 52 [pic] FINDINGS The main findings of the survey, which affects the prescription generation process, were Price of the drug, Quality of the drug, Presentation, Personality and regularity of the MR etc.

Other factors are also important and play an important role in prescription process. SUGGESTIONS Special activities that can be conducted by the companies can be in the following ways:- A) Conducting camps B) Arranging Video Meetings C) Forming Elite Club of Doctors A. CONDUCTING CAMPS:- Company can organize camps say ophthalmic camps with the help of team of MRs. The company has to put up a stall outside the O. P. D. keeping all the ophthalmic at the stall.

Then one PSR will meet the doctors conducting OPD and informs them about the free samples i. e.eye drops to his patients and reminds him about those brands. This activity offers following benefits:- ? Company’s image builds up in the doctors as well as the patient’s mind. ? Company’s brand name comes on the doctor’s pen.

B. ARRANGING VIDEO MEETINGS:- MR should invite 40-50 doctors from his territory to a good hotel on a suitable day and time for slide show or video meeting. People from product department of the company should be present at the time of video meeting. They can handle the doctor’s queries in a better way. Such activity brings the company and doctors closer.

At the end of the meeting company should offer dinner or cocktail. C. FORMING ELITE CLUB OF DOCTORS:- This is one of the ways to build up warm relationship with doctors. MR has to select top 10 doctors from his territory. Then he has to collect personal details of the doctor. ? Company offers special service to these doctors. ? Calling up such doctors on their birthdays. ? Giving some gifts to their children on their birthdays. The company gives all these elite doctors a grand party. All these things are done in addition to the professional service given to them. CONCLUSION & RECOMMENDATIONS.

Since MR is the most important factors in developing relationship with doctors. The company should give intensive classroom training as well as field training to MRs, which will help MRs to develop his personality. Training should cover areas such as: 1. Product knowledge. 2. Public speaking. 3. Selling techniques. 4. Presentation skills. MR will act as efficient middleman between company & doctors. Company should also conduct crash or short term training programs at regular interval. Physical appearance is also equally important. Company should give special allowance for this purpose to the MR.

In addition to sending MR to meet doctor regularly company should also conduct:- 1. Small get-togethers. 2. Video meeting. 3. Medical camps. 4. Arranging picnic for doctors. 5. Taking them to factory/lab. Company should form Elite-club of some of the top, leading doctors who prescribes their products or who can prescribe their products. Company should do some special activities for them: 1. Invite doctors for lunch/dinner. 2. Meeting them on their birthday. 3. Giving scholarships to their children for their performance in the field of education/sports. 4. Sponsoring their vacation trip. APPENDICES.

Q. 2 what type of detailing aids do you prefer? i. Flip chart? ii. Pamphlets? Q. 3 what type of detailing do you prefer? i. Fixed Detailing? ii. Open Dialogue? Q. 4 how often Would you like to be visited by the MR? i. Weekly? ii. Once Fortnightly? iii. Once a month? Q. 5 Any suggestion from your mind ________________________________________________________________ ———————– Industry Competitors Rivalry Among Existing Firms Bargaining Power Of Buyers Threats of Substitutes Bargaining Power Of Suppliers Threat of New Entrants.

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