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No question, we are in a difficult situation in Pakistan. All industries are in great stress, and it is not just about increasing the selling prices, there are additional challenges. Pharmaceutical industry is no exception. Stress factors for Pharma can be quickly run through like this.
Pharma industry is heavily dependent on imports. With the rupee at current exchange rate, the cost increases exponentially. Add to it the increase in utilities prices, paper prices, logistics cost and so on, and the margin is all but eroded. Pharma industry selling prices are regulated by DRAP and increase in drug prices is almost always a political issue. Pharma industry candle is burning at both ends. It may not be far when some of the manufacturers halt the production till the situation improves. It may result in medicine shortage, and certainly in job losses.
This is a snapshot of the present and the foreseeable future. Significant improvement is not anticipated because the country is reeling with political turmoil and there is no one at the helm of affairs to take bold policy decisions.
What is the Industry Doing? The industry is apparently doing more of the same.
Put More Pressure on Marketing and Sales
A state of confusion is prevailing. Because something new comes up every day, most actions are ‘reactive’ and ‘knee-jerk’ type.
There is a lot of movement in the industry. The LinkedIn is rife with ‘happy news’ of joining various companies. Many of these gentlemen (most are) are leaving their current organization after ten or more years and joining a new one. In many cases, the new choice is not better than the previous one, not even as good. It clearly shows that the change is due to stress, not due to better opportunity. They did try to get a somewhat better designation maybe or at least equivalent position.
The problem is that both corporates stand to lose from this exercise. The first one increased the pressure to sustain the growth trend, or to meet high targets. The team probably could not do it, so some people were asked to leave, and some opted to leave before forced ouster. The corporate lost the team which might have evolved over many years. The remaining team members would be suffering from low morale and even lower energy. The outgoing people will be replaced by new ‘blood’ who would try to run faster, but they may be acting alone. The second corporate would be in a similar situation and that is why they had open position to hire. The new joiners will have same disadvantages in both corporates. They would not be able to perform optimally.
The lesson here is that putting more pressure will not sustain the results. It may show some result temporarily, but the slide down will be faster after that. The team(s) would be broken, team spirit will be lost, and the people will go into ‘survival mode’ rather than ‘performance mode’. In one of the corporates where I worked, people openly said that previously they worked, but later they just did the job. There is a world of difference between the two.
Do More Investment on Customers
The second most prominent feature seen today is increasing the focus, effort, and investment on doctors, or offer greater incentives to pharmacies.
Under normal circumstances, these tactics pay off, but these are not normal times. What the pharma companies are not considering is the fact, that the sale is only routed through doctor, even if the doctor purchases stock himself. The sale is actually done when the patient purchases the drug, from the doctor or from pharmacy. The current scenario is that the purchasing power of patient has gone down considerably. They are unable to buy any drug other than the ones which may be essential. The money circulates in medical business in this manner: the patient visits a doctor and gets a prescription, which includes lab tests; goes to lab and pays heavily for tests; goes to pharmacy and pays for medicines. The circle is completed.
Now the circle is not completing. The patient goes to doctor only for serious condition. He argues about tests and may not get all of those done. Same happens at the pharmacy where the patient may not buy all drugs in connivance with the pharmacy guy. It means that the intended strength of the prescription is lost. The customers are trying to keep the impression that they still can pull the strings of business, but it is hollow.
The lesson here is that doing more investment on customers will not help, because the final payer does not have enough money to pay.
Do More Price Increases
As per agreed formula, the pharma companies are allowed to increase prices once a year as per the CPI – Consumer Price Index announced by the government. There are three issues here.
One, the announced CPI is not considered credible, and the price increased based on it may not reflect the actual impact.
Two, the price increase also will be extracted from the patient who is already unable to pay. Therefore, the price increase cannot be beyond a certain point.
Three, generic drugs prescriptions are more easily substituted than the research brands. The generic manufacturers, therefore, have limited window for price increase and it may not compensate increase in cost adequately.
The lesson here is that doing more of price increase will not help.
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