Pharmaceutical Company Business Strategies

Pharmaceutical Company Business Strategies

What’s the secret behind successes? For one, the company operates in niche formulations

(chronic) segments such as psychiatry, cardiovascular, gastroenterology and neurology.

While most of the top Indian companies have focused on antibiotics and anti–invectives

(acute),

The bases of marketing strategies can be best described in these two models in both

acute and chronic segments:

 

(i) Super Core Model involving the search for, and distribution of a small number of

drugs from Chronic Threapy Area that achieve substantial global sales. The success of

this model depends on achieving large returns from a small number of drugs in order to

pay for the high cost of the drug discovery and development process for a large number

of patients. Total revenues are highly dependent on sales from a small number of drugs.

This model incorporates highly specialized approach in the entire manner. Initially the

competition is seems more at entry level but since growth is stable and more in this area ;

every company is striving very hard to enter in this area. The major strategy in this model

involves right focus to highly specialized customer by well trained team.

 

(ii) Core Model in which a larger number of drugs from Acute Therapy Area are

Marketed to big diversified markets. The advantage of this model is that its success is not

dependant on sales of a small number of drugs. Here presenting a large number of

product and taking the advantage of opportunity cost is one of the important strategy.

Other strategy includes daily reminders to cross the perceptual filter and get the brand

name in to the sub-conscious state of mind .

 Marketing approaches of Super Core Model

 

In pharmaceutical market there has been a significant shift from Acute towards Chronic

Threapy area. Chronic segments are driving the growth of the market as leading

prescribers in these segments are specialists as opposed to general practioners.

 

The doctor's prescription has become just the starting point in determining what drug the

retailer dispenses. During last five years pharma companies have started identifying the

hidden potential of oncological market also. A number of drugs have been launched into

the oncological market by pharmaceutical companies, including new biological drugs and

drugs that can be used as a support for patients undergoing cytotoxic chemotherapy. As a

matter of fact, pharmaceutical companies are merging, and, through the merging process,

the portfolio of the new companies changes.

 

Medical representatives are rearranged throughout the new companies. Some of the sales

representatives are now afraid of losing their job, due to the changing scenario and the

possible lay offs. On the other hand, the new, bigger, pharmaceutical companies are

competing more and more with one another, and, in order to stress their products, might

adopt a more aggressive sales strategy. For example, sometimes in the same geographical

area there are eight to ten representatives for just one company, or different

representatives for the same drug in different settings. As a result of the new, aggressive

strategy, the aggressiveness of representatives has also been increasing, since the larger

stress exerted by their companies might affect their stay in the company. Therefore, they

tend to have more frequent visits to encourage doctors to prescribe drugs and thus

increase sales.

 

In this model medical representatives are the key actors for example in a small cardiology

unit almost 40 sales representatives interacting with doctors, and most of them are

coming for a visit on a regular once-a-month basis as this is the restriction put by doctors

of meeting only once in a month that to on a fix time only, in order to stress the

usefulness of their products and push clinicians towards the use of their drugs. This means

that, basically, there are at least two representatives every day in busy clinic asking for a

‘short’ meeting to support their product.

 

Pharmaceutical marketing is a specialized field where medical representatives form the

backbone of entire marketing effort. Pharmaceutical companies also appoint medical

representatives and assign them defined territories. Medical representatives meet doctors,

chemists and stockiest as per company norms. Medical representatives try to influence

prescription pattern of doctors in favor of their brands.

 

The pharmaceutical distribution channel is indirect with usually three channel

members i.e. depot/C&F, stockiest and chemist. Pharmaceutical companies appoint one

company depot or C&F agent usually in each state and authorized stockist(s) in each

district across the country. Company depot/C&F sends stocks to authorized stockists as

per the requirement. Retail chemists buy medicines on daily or weekly basis from

authorized stockiest as per demand. Patients visit chemists for buying medicines either

prescribed by a doctor or advertised in the media. Here patient is end customer and doctor

is direct customer for any pharmaceutical company. But for doctor customer (patient) is

more important so he wants an effective supply chain management from prescribed

company. And for pharmaceutical companies their customer that is doctor is more

important that’s why they emphasize more on supply chain management. Ultimately endcustomer is benefited out of this.

 

For marketing of these type of products companies require more and more skilled field

force to develop good rapport with their direct customer (doctor). Moreover field force

should have good product knowledge and USP of their products over other so as to

convince doctors and PULL the demand for their products i.e. from Doctor to Retailer to

Stockist to CFA to company.

 

In this system, doctors are the core customers and the major thrust is given to build and

retain these customer because they are pulling the demand for products hence companies

also give main emphasis in building and retaining these customers. All efforts are being

put for generating secondary sales i.e. from stockist to retailer. Ensuring of auto demand

with limited availability and maximum liquidation of the products is the main

characteristic of this approach.

For retaining and developing customers, the companies normally provide gifts like

sponsorship for various conferences like RSSDI, FOGSI, APICON, UPCON etc.

 

Also it is interesting to note that since this is a pull system demand is being pulled in to

the market so generally representatives calculate product orders i.e. primary sales from

their stockist on the basis of following formula:

 

                               SECONDARY SALES * 2 – OPENING STOCK= ORDER

 

Normally there are absolutely no chances of dumping of goods at stockist and retailer

level is yet reported also payment recovery of companies is also very good.

 

 

 Marketing approaches of Core Model

 

In present scenario companies are focusing more and more on the availability of products

so as to enjoy good image in their customer’s (doctors) chamber.

 

For marketing of these types of products companies require more and more field force

to remind their products on daily basis to their direct customer (doctor). Moreover field

force should have good knowledge of product schemes and offers. Also field force is

required to have a good rapport with retailers. Field force also required to ensure good

availability of their products to convince doctors and PUSH their products i.e. from to

Stockist to Retailer to Doctor.

 

It has been observed that sometimes there are more than fifteen or sixteen representatives

in a day are meeting with their customer and requesting for same type of products.

Although field force visits are important for an update on drugs and their use. The doctors

are, in general, sneaking away, trying to hide from sales representatives, since there are

too many and they are too pushy and there is too little time, and the representatives

probably have noticed that the reluctant doctors have always less time for short meetings

and less interest and tend to reduce the time of the visit.

 

The relationship between clinicians and representatives has always been good and

pharmaceutical companies have provided, and still provide, the major economical support

for customers' continuous medical education. Something needs to be done to find a

solution to this problem that takes into account the needs of both pharmaceutical

companies and their representatives on one side and physicians on the other, for a better

professional interaction.

 

In this system, doctors and retailers are the core customers and the major thrust is given

to build and retain these customers. Here retailers are also core customer as most of the

times they are substituting the products based on their own discretion.

 

For retaining and developing customers, the companies normally provide utility gifts to

remind the products on daily basis.

 

Also it is interesting to note that since this is a push system products are being pushed in

to the market so generally representatives place product orders from their stockist on the

basis of SKUs sold and schemes. In this pumping the goods in the market and ensuring

more and more primary sales i.e. from CFA to Stockist and availability of goods are

major strategies.

 

Normally the chances of dumping of goods at stockist and retailer level are reported also

payment recovery of companies is also not very good.

 

Here the role of supply chain managers can be to provide considerable value to their

companies by understanding the customers' delivery requirements. A very powerful tool

for understanding these requirements is account segmentation. A company can use

account segmentation to identify market segments Such as Acute & Chronic therapy

market. which is well positioned to serve and then organize its product range and even

SKU’s and service in a superior way.

 

Note: Above is based on research article presented during SMF held in IIT Kanpur’2008.”A review of marketing strategies work by different pharmaceutical companies”

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