Chapter - 1 ABSTRACT. The pharmaceutical industry in India had a very humble beginning & has now come a

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1 Chapter - 1 ABSTRACT 1.1 INTRODUCTION Indian Pharmaceutical Industry The pharmaceutical industry in India had a very humble beginning & has now come a long way. The turnover of the pharmaceutical industry was just Rs.8 crore p.a. in 1946 and now, it is pegged at Rs. 1,19,000 crore p.a. (including retail & exports). Figure 1: Indian Pharmaceutical Industry in 1946 & now Source: Daara B Patel, Indian pharmaceutical industry overview: Challenges & Opportunities 2nd June 2011, Goa.

2 The turnover of Indian pharmaceutical industry in 1946 is merely Rs.8Crore, while in 2012, it has grown exponentially to Rs.119,000Crore. This growth has been due to various factors like increase in populations, increase in the number of doctors & medical stores, improvement in healthcare, infrastructure, increased governmental spending on healthcare & overall increased health awareness among Indians The healthcare infrastructure of India The Indian healthcare sector is currently growing at around 18% per annum & it is poised to reach USD 295 billion (Rs.16,50,000 Crore) by HEALTHCARE INFRASTRUCTURE Population 1.21 billion Doctors 6,93,000 (0.57%) Nurses 9,46,000 (0.78%) Hospitals 18,500 Hospital Beds 9,16,545 (0.75%) Primary Health Centers/ Community Health Centers 1,66,000 Medical Colleges 250 Chemists (Pharmacies) 5,65,500 Medical Sales Representatives 4,67,000 Total Healthcare Market U.S. $ 38 billion

3 Government Healthcare Budget U.S. $ 7 billion (1% of GDP) Per 1000 Population Table 1: Healthcare infrastructure in India Source: IDMA 49th Annual Publication 2011, India Census 2011 The Indian population has grown consistently over the last 6 decades & currently is about 1.21 billion (Census 2011). However the number of doctors in India are still very low & so is the number of nurses & hospital beds as compared to the developed countries; for example, while India has 0.57 doctors per thousand of its population, Germany has 3.7 doctors, Switzerland has 4.1, UK has 2.8 & USA has 2.4 doctors per thousand of its population. Drug & Dosage Pack India Price in Price in Price in Price in (Rs.) Pakistan Indonesia USA UK (Rs.) (Rs.) (Rs.) (Rs.) Adefovir 10 mg tab 10's N.A Alendronate Sodium 10 mg 10's N. A Alprazolam 0.5 mg 10's Atenolol 50 mg NA Atorvastatin 10 mg tabs 10 s Cetirizine 10 mg 10's

4 Ciprofloxacin 500 mg Ciprofloxacin 0.3% eye drops 10's Diclofenac 50 mg 10's Imatinib Mesylate 100 mg caps 10's Lansoprazole 30mg 10's HCl 8 mg inj 5 ml N.A Pioglitazone 15 mg tabs 10's 8.00 N.A Ranitidine 150 mg 10's Salmeterol 25 mcg + Fluticasone 50 mcg inhaler 120 doses N.A Tamsulosin 0.4 mg caps 10's N.A Note: 1. Retail prices in India & wholesale prices in other countries considered. 2. Conversion rate of exchange considered: 1 USD = Rs , 1 GBP = Rs Pak Rs. = Rs. 0.73, 1 Indonesian Rp = Rs and 1 Bht = Rs as on Table 2: Comparison of Indian V/s international prices of some pharmaceutical products

5 Source: Indian Drug Manufacturers' Association Bulletin, 30th October 2005, 36(40): The prices of drugs in India are one of the lowest in the world & are even much lesser than the prices in some of the poorer nations. The Indian Pharmaceutical industry has around 11,500 manufacturing units, with 65,000 formulations, thus making medicines price sensitive in this competitive market. The retail Indian pharmaceutical industry is currently valued at around Rs. 65,000 crore p.a. and growing at 12% p.a. 1.2 LITERATURE REVIEW Role of MNCs in Pharmaceutical Industry Ajith Mahadevan (2011) says that Pharmaceutical MNCs have had rapid growth within the domestic market, mostly due to a weak intellectual property setting, where the Indian pharmaceutical market had years of slow growth until the 1990 s. Over the past few years they needed amplified investments within the domestic market, but currently they are set to capture a considerable share of the domestic market. Compared with twenty-eight percent in 2009, evidently by 2017 pharmaceutical MNCs are projected to capture a thirty-five percent market share of the market. To take advantage of the growing potential of the country's pharmaceutical market through the years, pharmaceutical MNCs have implemented India-focused strategies.

6 Figure 2: Pharmaceutical industry today and projections for 2015 & Source: India Pharma 2015: Unlocking the potential of Indian pharmaceutical market, McKinsey & Co., IMS World review: analyst projection. Analysis of the Indian pharmaceutical business with stress on opportunities in 2005, Hemant N. Joshi. A per the McKinsey report, the Indian pharmaceutical market will touch USD twenty billion by 2015 & will be among the top ten pharmaceutical markets in the world Role of Indian companies in pharmaceutical industry Indian pharmaceutical companies have grown tremendously over the last 4 decades & currently are in consolidation phase. Among the top 10 pharmaceutical companies, currently 7 are Indian pharmaceutical companies and only 3 are MNCs. By 2020 the Indian pharmaceutical industry is likely to multiply by 4 times Doctor s prescription behavior: Weihul et al (2007) say that Besides the modification of economic interests among Doctors, patients & hospitals, prescription behavior is the key fundamental link,

7 affecting a variety of medical relations, such as - medical resources, utilization of management on medical services and the control of medical costs. Eric De Laat et al (2009) says that Doctors prescription behavior can be strongly influenced by the promotional activities of the pharmaceutical companies. Dr. R K Srivastava (2005) in his article - Changing scenario in the pharmaceutical sector - says that influencing the prescription behavior of Doctors are the emergence of hospitals & nursing homes that have led to the rise of new hospital/nursing home consumer market segments and has also increased the value of hospital-attached retail chemists. Several factors besides advertising, price & promotion by pharmaceutical companies, controls a doctor s prescription behavior Impact of global (MNC) brands: Aaker, David A et al (2009) say brand builders all over assume they require global brands. However world brand leadership, not international brands, ought to be the priority. Even if most international brands aren't completely identical from one country to another. Eva Moberecker & Adamantios Diamantopoulos (2011) talks about complementing prior research specifically centering on behavioral implications of negative affects (especially consumer animosity), as a result of how a positive affect plays a key role in forming consumer behavior.

8 George Balabanis & Adamantios Diamantopoulos (2010) say that the importance of ensuring that consumers are aware of a brand's true country of origin must be stressed upon and robust brands are not resistant to misclassification STATEMENT OF THE PROBLEM To study the Doctors prescription behavior pattern To study impact of pricing and country of origin (COO) on Doctors prescription behavior How promotional strategies of MNC V/s Indian pharmaceutical companies influence the Doctor Role of MR & their training and its impact on effectiveness in the Doctors clinic 1.4. CONCLUSION Chapter 1 gives a short description on how doctors perceive MNCs & Indian pharmaceutical companies & its effect on prescription pattern. This is outlined with the help of tables and figures. The literature review further explains this with the help of journals along with the discussion on the statement of the problem.

9 2.1. INTRODUCTION India is the second highest in terms of population in the world (after China), but is 14 th in terms of value in pharmaceuticals sales. However by 2015, India is likely to jump 4 positions to reach the 10 th position. Figure 3: Position of India in the world pharmaceutical market as in Source: IMS World review: analyst projection & India Pharma 2015: Unlocking the potential of Indian pharmaceutical market, McKinsey & Co. In 2005, India was ranked 14 th in the world pharmaceutical market based on value sales.

10 Figure 4: Projected position of India in the world pharmaceutical market as in Source: IMS World review: analyst projection & & India Pharma 2015: Unlocking the potential of Indian pharmaceutical market, McKinsey & Co. The ranking of India among the top 14 countries will improve by 2015 due to the faster growth of the Indian pharmaceutical industry. The top 10 pharmaceutical companies in India (as per their retail sales) are mentioned below. 1. Abbott 2. Sun Pharma 3. Cipla 4. Zydus Cadila 5. GSK Pharma 6. Ranbaxy 7. Mankind 8. Alkem 9. Pfizer 10. Lupin

11 Table 3: Top 10 pharmaceutical companies in India by retail sales Source: AIOCD AWACS, June Among the top 10 pharmaceutical companies, 3 are MNCs & 7 are Indian pharmaceutical companies Indian and MNC players in the pharmaceutical industry Today, in India the pharmaceutical industry is one of the fastest growing industries. This industry was governed by product patent law till 1970 and MNCs ruled the Indian pharmaceutical market then. When the process patent came into effect ( ), the domestic pharmaceutical industry grew rapidly and multinational companies stagnated. The pharmaceutical industry today is valued at over Rs. 1,17,000 crore per annum (domestic sales & exports). Growing at a rate of over twelve percent per year, India is one of the fastest growing pharmaceutical markets worldwide. During the 1970s (product patent regime) 75% market share of pharmaceutical industry was held by MNCs. However with Indian pharmaceutical players gaining strength, this market share came down to about 25% by With the product patent regime from 2005, MNCs have renewed their interest in the Indian market, due to good growth in Indian pharmaceutical market and also due to poor growth in world's largest pharmaceutical markets like USA(+4%), Europe(+2-3%) etc. It is likely that by 2020, MNCs will again capture a market share of more than 50% in the domestic market (owing to launch of new products & mergers & acquisitions.)

12 Rapid growth in per capita income, availability of information about new therapies is creating more awareness & better availability of drugs is resulting in increased consumption of drugs. Besides the increasing population, increasing government spending on healthcare, higher expenditure on lifestyle and increasing penetration of health insurance will further the Indian pharmaceutical market Doctor profile and their prescription behavior Factors responsible for doctors prescribing a pharmaceutical product are Quality Safety Side effect profile Price Service & information provided by the company Availability of the product at the chemist level

13 2.1.3 Global brands V/s Indian brands Most of the products prescribed by Doctors today are original research molecules of European or American pharmaceutical companies (though most of these products have now lost their patent protection). Indian companies have ventured into basic research [New Chemical Entity (NCE)] only recently & are yet to come up with any remarkable drug discovery. Since Doctors are well educated and well informed they are aware of this and therefore generally prefer MNC products over Indian pharmaceutical products. However now that Indian pharmaceutical companies too have invested heavily in R & D9 & are exporting products to developed markets, Doctors have developed confidence in Indian companies. But even now, global brands continue to have better acceptance among Indian Doctors Figures & Facts about the Indian Pharmaceutical Industry The title of being one of the largest pharmaceutical industries in the world belongs to India. By its sales volume it ranks fourth worldwide. The Indian Pharmaceutical Industry is estimated to be worth Rs.1,19,000 crore. The industry grows at a rate of twelve percent annually.

14 The Indian Pharmaceutical Industry caters to approximately seventy percent of the domestic demand for bulk drugs. Almost twenty percent to twenty-four percent of world-wide generic drugs are produced by India s pharmaceutical industry. The title of being one of the biggest producers of (API) the active pharmaceutical ingredients in the international arena, belongs to India s pharmaceutical industry. India s pharmaceutical industry possesses the technology and capacity relating to complex drug manufacturing. Approximately forty percent of the total pharmaceutical produce is exported Fifty-five percent of the total exports are made up of formulations and fortyfive percent is made up of bulk drugs. 2.2 PREVIOUS REVIEW OF LITERATURE To update, educate and provide samples of their drugs their companies produce, pharmaceutical companies employ medical representatives to visit healthcare practitioners & doctors in clinics and hospitals. Medical representatives confidently present the drugs with assurance and the ability to answer questions on their indications, side effects, dosage and more as they are specialists on these medicines. It s necessary to ask - with the knowledge that pharmaceutical firms play active roles

15 in marketing their products - the proportion of influence that these firms exert on healthcare practitioners prescribing habits. To conduct the review of literature for this study, journals & books, etc. were used. Gönül et al. (2001) says that the probability of the medicine being prescribed (other things being equal), appeared to be increased due to exposure to personal selling related to a medicine (visits from sales representatives and samples). It also showed that Doctors who saw a high proportion of Health Maintenance Organization or Medicare patients were less influenced by promotion and samples or excessive detailing failed to additionally increase sales. Dr Rajan et al (2005) says that a name isn't all what it takes to get into the mind of a busy doctor. Each product, old or new, needs in depth marketing. Any busy advisor can vouch that if a specific company s medical representative (MR) fails to show up for over a month, he suspects the supply of the merchandise of that manufacturer. Therefore, it is absolutely necessary for the manufacturer to ensure that MRs make regular calls to physicians. Dande & Srivastav (2013) say that the regularity of a medical representative s visit to the doctors plays an important role in influencing prescription behavior of doctors. 2.3 GAP ANALYSIS Dr. R K Srivastava (2005) says that factors which influence Doctors prescription pattern are

16 Image of the brand Brand efficacy Brand innovation Side effect profile Price & other factors Brand personality is what differentiates a brand. Doctor s prescription behavior may be influenced by CRESS model C - Competent R - Ruggedness E - Excitement S - Sincerity S - Sophistication This needs to be studied further The gaps existing are in the form of:

17 Qualitative Doctor specific research Current data is available for other customer and product categories but no specific data is available on pharmaceutical products Effect of various indigenous factors affecting prescription behavior of Indian Doctors.

18 3.1 OBJECTIVES To study the Indian doctors prescription behavior pattern based on whether the product is manufactured &/or marketed by an Indian or a MNC pharmaceutical company. To study impact of pricing and country of origin (COO) on Doctors prescription behavior. How promotional strategies of MNC V/s Indian pharmaceutical companies influence the Doctor. Role of MR & their training and its impact on effectiveness in the Doctors clinic. 3.2 HYPOTHESIS Indian Doctors perceive Indian & MNC products differently when they prescribe. Indian Doctors get influenced by global nature of the brand (availability under the same brand name across the world) while prescribing Image of the company does not influence the Doctors but the product range of the company affects prescription behaviour of the Doctor

19 3.3 METHODOLOGY Target Population: Doctors General practitioners & consultants Research design: Descriptive Research By checking doctor prescription pattern at the chemist level. Questionnaires By seeking answers to queries through questionnaires whereby doctors and medical representatives were asked to reply to questions (copy of the questionnaires is enclosed in the annexure). Interviews Some of the doctors and medical representatives were also interviewed personally for their views. Sampling Technique: Convenience Sampling Sample Size: 300 Medical Doctors from Mumbai and Pune as per details given in the table below No. of Doctors Selected in Mumbai No. of Doctors Selected in Pune

20 Table 4: No. of doctors selected for filling up questionnaires in Mumbai and Pune 50 Medical Representatives Contact method: sampling units have been personally taken by the researcher with the help of conducting a survey of one-to-one interaction research. Research Area : The location considered by researcher is Mumbai & Pune. Analysis of Data For data analysis - SPSS method will be used. Primary data will be collected on source which has not been subjected to processing or any other manipulation. Secondary data will involve the data that has been already collected by and readily available from other sources. 3.4 Research instruments: Method of data analysis:

21 The data is going to be collected primarily based upon the type and target section, with the suitable statistical methods and inferences. The response set of 1 variable data is going to be compared with another set of variables for making certain of the detailed analysis of data. After the respondents have filled in the questionnaires, the data will be entered into the software and analyzed by SPSS software that will be used for analyzing the data accurately.

22 IMPORTANT RESULTS & DISCUSSION 4.1 RESULTS According to the sample survey results and analysis, it s found that: The most important factor is considered to be the quality of the product when a doctor prescribes a particular brand. Regular visits by the medical representative are the next most important influence. Price of the product and scientific data provided by the company are not considered a major reason for prescribing a brand by most doctors. According to doctors, the company s image and reputation is a very important factor while deciding upon a brand they prescribe. Around 60% of doctors perceive products marketed by MNCs to be superior to products marketed by Indian pharmaceutical companies. Doctors don t have any specific preference between Indian and MNC brands while prescribing a product in chronic or acute cases. There is no major preference while prescribing an MNC product just because it is available under the same brand name across the globe. Majority of the doctors would prefer to prescribe a MNC brand over the Indian one if both the products have everything same including the price.

23 Indian doctors do not feel that quality of MNC products is very superior as compared to the Indian products. Doctors do not considerer MNC brands to have better availability at retail counters as compared to Indian brands. Even though many Indian pharmaceutical companies today export their formulation to developed countries (including USA), doctors still do not consider them MNCs. Medical representatives strongly feel that doctors prefer to prescribe MNC brands over Indian brands. Like doctors, medical representatives to feel that quality is the most important consideration for the doctor while prescribing the product, followed by visits of a medical representative & price. Most of the Medical representatives feel that doctors feel the MNC products are of better quality than Indian ones. Medical representatives feel that MNCs provide better scientific inputs on their products to doctors. Majority of the medical representatives that price is a very important factor that influences a doctor s decision to prescribe a particular product.

24 4.1.1 DISCUSSION Indian pharmaceutical Marketeers must focus on improving the product knowledge and communication skills of Medical Representatives to gain competitive advantage leading to more aid in influencing a physicians prescription behavior. It is necessary for physicians to be updated regularly on the new MNC & Indian drugs; hence the companies need to have medical exhibitions at least once in 3 months. Gifts are a factor which has failed to influence the Physicians in prescribing the drugs. So the company must focus on trying to find a solution for it. The companies should focus more on the factors which influence the prescribing behavior of the Physicians, so that it may improve the Indian pharmaceutical company s performance level. The Pharmaceutical Companies should provide samples of their drugs on a regular basis to Physicians to make them aware about their products and also develop a good relationship with the physicians which will increase the company s profits. The companies which are not in the top 5 rank of the physician s mindshare should try to improve in the areas where they are lagging behind.

25 5.1 CONCLUSION The title of being one of the most competitive industries belongs to the Indian pharmaceutical industry. With over 10,000 companies vying for the doctors attention, it is a very difficult choice a doctor has to make from amongst the several brand options available for prescriptions. On an interesting note, seventy percent of the market share is controlled by the top 250 companies. The Indian pharmaceutical industry has evolved in a major way since independence. Until 1970, majority of the drugs were imported from abroad. It was in 1970 that the Indian parliament passed the patent act to develop the domestic pharmaceutical industry to produce pharmaceuticals for the Indian people. Product patent for pharmaceuticals was abolished by this act. This gave a big boost to domestic pharmaceutical players and many Indian pharmaceutical companies developed strongly over the next two decades. Many companies used reverse engineering techniques and brought in the latest research molecules of multinational companies to India at a fraction of the cost. This led to a huge jump in sales of Indian pharmaceutical products and many multinational pharmaceutical companies either left India or slowed down their Indian operations. However in 1995, India became a signatory to the international patent law (TRIPS) and on the 1 st of January, 2005, India became a country which followed the product patent act. This has again led to many MNCs coming back to India & MNCs which were dormant have now become active. Numerous Indian pharmaceutical companies

26 today, have become multinational corporations with global operations, due to their robust state of the art manufacturing and research & development (R&D) capabilities. Medical representatives too feel the same way and the general perception of medical representatives is that doctors generally prefer MNC brands over the Indian ones. 5.2 LIMITATIONS OF THE STUDY The small sample size of 245 doctors and 45 medical representatives is small, considering that there are over 6 lakh doctors and around 3 lakh medical representatives in India. The scope of the project was limited only to Pune and Mumbai. This study is based on the factors affecting a doctor s prescription based on the current market situation. This may change with time, technology, development, etc. The present study highlights the factors that influence the doctor s prescription pattern based on the country of origin of the product. Today a medical representative gets not more than 2-3 minutes on an average for detailing his product range to the doctor. In such a short time he has to communicate his story. A doctor today meets around 10 medical representatives (average) per day. It is very important therefore to understand in detail why a doctor prescribes a particular brand. This study was carried out among doctors and medical representatives to understand how doctors perceive MNC v/s

27 Indian pharmaceutical companies and how this impacts a doctor s decision to prescribe a particular brand. The results of this study show that the quality of a product, the company s image, frequency of a visit of a medical representative are the critical issues for the doctor while deciding to prescribe a product. However, doctors prefer prescribing a multinational company s brand if all the other factors remain the same.