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Retail chains may push drug firms to revamp marketing

Retail chains may push drug firms to revamp marketing
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First Published: Wed, Dec 26 2007. 12 14 AM IST

Changing trend: G.V. Prasad, vice-chairman and chief executive officer of Dr Reddy’s, says the industry will see more competitive times ahead.
Changing trend: G.V. Prasad, vice-chairman and chief executive officer of Dr Reddy’s, says the industry will see more competitive times ahead.
Updated: Wed, Dec 26 2007. 12 14 AM IST
Mumbai: The advent of big pharmacy chains and active health insurance players in India’s drug market, which was valued at Rs35,000 crore in 2006-2007, is expected to force drug companies to substantially change their marketing and sales strategies.
Changing trend: G.V. Prasad, vice-chairman and chief executive officer of Dr Reddy’s, says the industry will see more competitive times ahead.
Though the new trend will make the market more competitive and cost-effective, industry analysts foresee a revival of small and medium companies as both these newly emerging forces would emphasize on quality medicine at a much affordable cost, especially in generic drugs.
“There will be new market dynamics evolving in the domestic drug market, with bigger companies phasing out low performing brands to specialize on critical therapeutic areas, and smaller companies offering generic drugs at much lower prices,” says R.D. Joshi, a consultant with Interlink Marketing Consultancy Pvt. Ltd.
The Indian drug wholesale and retail trade, which was largely controlled by the largest network of All India Organization of Chemists and Druggists until now, will now see competition coming from big retail chains such as Medicine Shoppe India Ltd, Apollo Pharmacy Ltd, Fortis, Carestream, Subhiksha, Dialforhealth India Ltd, among others.
Says G.V. Prasad, vice-chairman and chief executive of India’s second largest drug company Dr Reddy’s Laboratories Ltd: “There will be discontinuity in the ongoing trade practices with the emergence of big retail chains and insurance companies, and the industry is awaiting these changes to get adapted to a new sales and marketing system, which will be more competitive.”
Joshi predicts that ultimately, the customer is going to benefit. “The trade margin is going to be narrowed down, hence the bargaining with the supplier is going to be stiffer,” he says.
Big drug makers are likely to eliminate brands with limited sales, perhaps those with less than Rs1 crore a year, and create speciality brands, say some industry watchers.
Insurance firms are also likely to list preferred brands that will be covered under insurance. “Insurers will prefer cheaper drugs, so there are chances of regulatory compliant small and medium firms coming back to the fore,” says Joshi.
Drug maker Biocon Ltd, for instance, has already tied up with ICICI Prudential Insurance Ltd, which has recently launched the country’s first insurance programme designed especially for diabetics. Biocon will offer insulin at a subsidized rate to ICICI Prudential’s customers.
Health insurance accounts for about 12% of India’s general insurance industry but could grow rapidly because of companies being allowed to set rates.
Meanwhile, India’s pharma market, which ranked 15th in terms of annual sales, continues to be the fourth largest producer in terms of volume. The domestic market posted an annual growth of 9% over the last four years, with Rs25,295 crore coming from retail sales and Rs7,000 crore from hospitals in 2006.
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First Published: Wed, Dec 26 2007. 12 14 AM IST