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Continued from Previous……
In the previous blog, we saw the gaps in regulatory structure which may encourage Fake/Spurious/Counterfeit drugs. In this post we shall see how industry gaps work.
Pakistan Pharma market is very unevenly divided; 95% business is shared by only top 50 companies. 5% market share is available for the rest 600 companies. We can say there is an Elite Club and a Commoners Club. There is no middle class here.
Elite companies operate in a different world. They have decently designed marketing campaigns, which may be seriously expensive. They sponsor conferences, sponsor customers to organize or attend conferences. They compete with the members of the same club. Their working, recognition, their problems are similar. Their concern is who gets more market share in %age points; who registers higher %age growth; and who brings new products faster. They are not involved in the business of fake/spurious drugs; actually, they may have to guard against counterfeiting of their brands.
Big Pharma has increased their reach extensively. For a long time, 80/20 principle was followed. It said that 20% customers gave 80% business. It had always stood the test of time. In the previous years, Big Pharms focused on top 20% and left the others partially or entirely alone. Then the desire to grow faster and bigger overcame. Team sizes were increased, new base stations were added. Remote areas where business potential was identified were particularly targeted. This led to another kind of competition, i.e. who has greater team spread to scavenge business from all corners. It has changed market dynamics in several ways. On a lighter note I may say that Pharma salespersons are now based everywhere except Siachen.
Big Pharma competition is fierce and intense. In the fight of giants, smaller players cannot participate. If they try to get in the arena, they may be crushed being wrong people at a wrong place at a wrong time.
Commoner companies have much to worry about. Their first worry is about survival. They have put up manufacturing units and have hired staff to run these units. There is a minimum level to which they must reach in order to keep floating. Of course, they also expect to earn and live happily.
Go back 20-30 years and the scenario was that Big Pharma worked in large and medium sized hospitals, they worked with consultants and worked in larger towns and cities. Smaller private hospitals, clinics, smaller towns and rural areas were available for smaller companies. They could operate in these markets and generate good amount of business. Both parties were fine in their areas of operation. Presently, Big Pharma is all over the place, not leaving any corner for the smaller companies. These companies cannot compete with Big Pharma in terms of quality and quantity of resources, and increasingly they are being shoved out of small corners. The very survival of smaller manufacturers is under threat.
Commoners Club companies have found following solutions for survival and growth. Different companies are doing things differently and there is no common approach adopted universally.
- They allocate more resources, hire more experienced professionals and try to do better within their own league. Results of such efforts are highly variable.
- They tie up with a marketing company and give products on minimal profit to them. The marketing company has the resources and know how to bring business. This model has following implications.
- Few marketing companies did a great job; some did an average job; and many simply failed to deliver. This added stress to already struggling businesses.
- Marketing companies are not recognized by DRAP legally although this business model has been around for many years. DRAP act does not provide for it. The result is that the marketing companies are not secure, and they cannot get Marketing Authorization (MA). The situation in many other countries is that Marketing Companies are a recognized entity and are eligible to get marketing authorization officially.
- In order to become MA holders, marketing companies are compelled to start a manufacturing unit of their own. This has and is leading to establishment of small manufacturing units. It eats up their working capital and leaves them with small, poorly running units.
- A manufacturing unit is a permanent liability. Even if it stands idle, it keeps incurring cost. When it is running, the costs are quite high which may or may not be adequately met by the business.
- Pakistan Pharmaceutical Manufacturers Association is the sole representative body of Local Pharma. It is an active body where elections for office bearers are held every year. PPMA has an observer seat in the Licensing Board and Drug Registration Board also. PPMA has certain issues also. One, all manufacturers are not members of PPMA on one or other pretext. It weakens the PPMA stance as the sole representative. Two, whatever PPMA agrees with the regulators is not universally accepted by the entire industry. Three, it is alleged that PPMA is dominated by certain groups and the power remains with few players only. Other members feel left out. Four, the industry needs are so diverse that PPMA may not be able to protect the interest of all members.
The Summary is that Pharma Industry in Pakistan is highly fragmented. Despite being a highly regulated industry right from the beginning, the manufacturing units have huge variations in design, operations, adherence to standards and so on.
This is an area with ample possibility of wrongdoing by isolated, desperate, unscrupulous manufacturers to get tempted and get involved in making quick money through wrong practices.