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Continued from Previous……
Strategy as a common driving force is the next topic in sequence. Pharma business is certainly not one unit; it is a lot of individual units each having their own business strategies. We therefore cannot talk about a single one or a set of strategies. I still believe that the Local Pharma Industry under PPMA should show some form of unified strategy, like their multinational counterparts do under Pharma Bureau and the OICC (Overseas Investors Chamber of Commerce). The MNCs do business separately but watch their interests together. Local Pharma is too fragmented and too engrossed in petty conflicts to achieve anything worthwhile.
The first fragmentation is the distribution of business. Almost 95% business is with top 50 companies while the rest 700 companies are fighting within 5% market. It also means that 700 companies have no influence on the market and cannot drive the market in any direction. They have to simply follow what the big ones force them to do.
The uneven distribution of business leads to uneven accumulation of wealth and the disparity in the spending power. What the Big 20 can offer to customers cannot be done by the other 730 companies. For a customer, a product is a product and all generics are considered more or less equal. The consequence is that the rich keep getting richer while the poor keep trying to survive somehow.
The representative body of Local Pharma, PPMA (Pakistan Pharmaceutical Manufacturers Association) does not have an enviable record of working for the industry at large.
The smaller members of Local Pharma find it increasingly difficult to comply with the new regulatory requirements and are constantly falling behind. They are forced to indulge in undesirable activities.
A certain number of Local Pharma owners are not ready to comply with regulatory requirements even when they can afford. They would like to get away with whatever they can.
The newer monster of high-price-undoumented-efficacy-nutraceuticals-from-dubious-manufacturers is growing at the expense of Pharma. The revenue going to them is actually being diverted from Pharma. Their astronomical growth and their huge capability to invest in market is difficult to combat.
The regulator, DRAP (Drug Regulatory Authority Pakistan) has been in difficulties since its inception and is not effective in performing its mandate.
These are some of the several significant issues facing the Pharma Industry at present. A common strategy to get out of the COVID19 setback is probably too much to expect or ask for. Everyone has to look after his interest himself; the typical ‘Nafsa Nafsi’ is the order of the day.
Even in this rather bleak backdrop, I would like to offer following suggestions in the area of strategy.
Rationalization of Marketing Expenses – among the Post COVID strategies, this is most significant. The average cost of selling has gone to a level where even medium size companies find it hard to compete. The average investment on the so-called KOLs is disproportionate to their capacity to prescribe and is causing wastage of large sums of money. If companies review and rationalize their market expenses, they can increase their profitability and use that money to invest in R&D. Rather than just changing the colors of tablets and capsules and packaging, this money can be used to develop innovative drug delivery systems.
There is an international code of ethics for Pharma Marketing; a code of what you can and cannot do to promote products. These guidelines can be taken as a cue and local policy may be developed along these lines.
In my view, this is the best time to rationalize marketing expenses. The customers know that millions and billions have been wiped out of economy and some kind of spending cuts are necessary. Pharma companies have lost business and it will not be recovered any time soon because the overall economy has weakened. If this time is not availed to bring in much required rationalization, all companies shall suffer, whether they admit it or not.
Holding New Launches – there is no denying the fact that new launces are the lifeline of a Pharma company. Most generic products do not have a classic life cycle as given in the books. Or the course may be the same but with twisted timelines. New launches at this time should be done with greater thinking. Each new launch is an additional expense and adds a new figure in the forecast to justify that expense. New revenue from new launches at this time is harder than generating a little more from the existing products. While I am not suggesting a freeze on new launches, I am certainly suggesting cautious and detailed analysis before doing so.
Expansion Projects – expansion projects may not be halted altogether but may be reconsidered for relevance and urgency. Expansion at the plant, expansion at office or expansion in the field, all may go on but with reviewed priorities.
Flexible Planning – many Pharma companies start new business year from July 1. Planning starts earlier and plans are usually finished before June end. Because COVID is still evolving, it may be considered to keep the planning process flexible, rather than committing it for the entire year. It is better to move from quarter to quarter, making room for adjustments and amendments.
Post COVID spirit is flexibility, adjustment and accommodation. If we understand this, the rest of the journey may be relatively easy to tread.
Good and very useful advice sir.