Chapter - 1

ABSTRACT

1.1 INTRODUCTION

1.1.1 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.

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.

1.1.2 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 2025.

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

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

(Rs.)

Price in

Pakistan

(Rs.)

Price in

Indonesia

(Rs.)

Price in

USA

(Rs.)

Price in

UK

(Rs.)

Adefovir 10 mg tab 10's 180.00 N.A - 7514.42 7850.00

Alendronate

Sodium 10 mg

10's 46.00 531.9 N. A. 1016.12 623.00

Alprazolam 0.5 mg 10's 6.00 42.59 211.60 1067.84 -

Atenolol 50 mg 5.70 61.43 325.54 804.50 NA

Atorvastatin

10 mg tabs

10’s 23.00 481.35 563.91 1082.52 462.41

Cetirizine 10 mg 10's 7.65 32.05 162.62 936.20 195.02

Ciprofloxacin

500 mg

10's 27.00 365.31 924.76 2551.41 1076.25

Ciprofloxacin

0.3% eye drops

5.84 156.63 251.00 2036.00 374.25

Diclofenac 50 mg 10's 4.36 32.79 162.14 736.41 195.52

Imatinib Mesylate

100 mg caps

10's 960.00 8512.64 9214.92 9217.72 9864.21

Lansoprazole 30mg 10's 34.00 421.16 464.74 2068.06 541.62

HCl 8 mg inj 5 ml 25.00 N.A 663.54 11284.13 914.25

Pioglitazone

15 mg tabs

10's 8.00 N.A - 1621.42 657.13

Ranitidine 150 mg 10's 4.17 64.29 218.34 1013.47 15.49

Salmeterol 25 mcg +

Fluticasone

50 mcg inhaler

120

doses

218.54 524.67 721.64 N.A 1346.64

Tamsulosin

0.4 mg caps

10's 54.12 N.A - 842.12 548.85

Note:

1. Retail prices in India & wholesale prices in other countries considered.

2. Conversion rate of exchange considered: 1 USD = Rs. 44.00, 1 GBP = Rs. 76.00

1 Pak Rs. = Rs. 0.73, 1 Indonesian Rp = Rs. 0.005 and 1 Bht = Rs. 1.04 as on 12-7-

2005

Table 2: Comparison of Indian V/s international prices of some pharmaceutical

products

Source: Indian Drug Manufacturers' Association Bulletin, 30th October 2005,

36(40): 42-51

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

1.2.1 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.

Figure 2: Pharmaceutical industry today and projections for 2015 & 2020.

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.

1.2.2 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.

1.2.3 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,

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.

1.2.4 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.

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.

1.3. 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.

2.1. INTRODUCTION

India is the second highest in terms of population in the world (after China), but is

14th in terms of value in pharmaceuticals sales. However by 2015, India is likely to

jump 4 positions to reach the 10th position.

Figure 3: Position of India in the world pharmaceutical market as in 2005.

Source: IMS World review: analyst projection & India Pharma 2015: Unlocking the

potential of Indian pharmaceutical market, McKinsey & Co.

In 2005, India was ranked 14th in the world pharmaceutical market based on value

sales.

Figure 4: Projected position of India in the world pharmaceutical market as in

2015.

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

Table 3: Top 10 pharmaceutical companies in India by retail sales

Source: AIOCD AWACS, June 2013. Among the top 10 pharmaceutical companies, 3

are MNCs & 7 are Indian pharmaceutical companies.

2.1.1 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 (1972-

2005), 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 2005. 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.)

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.

2.1.2 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

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.

2.1.4 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.

● 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 forty-

five 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

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

● 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:

● 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.

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

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

255 45

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:

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.

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.

● 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.

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.

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 1st 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

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

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.