The spoils go to the speedy ?in a foot race as well as in business. In fact, the first mover?s advantage can help a company capture market share, take advantage of price premiums, increase and retain profits, and thrive in a competitive market. Increasingly, this paradigm is being played out in India?s rural pharmaceuticals market. With increasing incomes and improving healthcare infrastructure, small cities and villages are emerging as high growth markets for multinational pharmaceutical companies and their Indian counterparts.
Accordingly, most pharmaceutical companies are busy chalking out specific business and marketing plans to penetrate the largely untapped market. Specifically, they are setting up focused distribution channels and developing locally trained sales personnel. They are also focused on regularly updating rural doctors on their product portfolios and on any other developments in specific therapeutic segments.
To be first, though, a business must understand what its customers need. It must also have the resources to capture market share and ultimately thrive in the market. In this regard, Novartis India has deployed an interesting marketing strategy to approach rural markets. Based on a four ?A? approach, the Indian subsidiary of the Swiss drug company, works by creating ?Awareness? at various levels, improving ?Affordability? and ?Attractiveness? of medicines, and making them ?Available? to patients in rural areas.
Novartis? Arogya Parivar, a rural health initiative, which is both unusually simple and surprisingly powerful, is notable for achieving the maximum impact with minimum input. The initiative has managed to address common diseases rampant in rural areas, including tuberculosis, respiratory infections, skin and gynaecological infections, diabetes, micronutrients during pregnancy and childhood, intestinal worms, cough and cold as well as allergies.
As part of the initiative, Novartis India has deployed health educators to create awareness among the rural population on diseases, prevention and treatments. The health educators also refer patients to doctors, apart from making the medicines available in chemist stores and briefing the doctors about the programme and treatments.
Ranjit Shahani, vice-chairman and managing director, Novartis India, says, ?Developing the rural market calls for long term commitment of resources. One has to patiently invest in growing the market and address challenges of infrastructure before one can actually reap benefits. We have a commitment to grow medicine access for 100 million people over the next 2 years and work within the existing infrastructure wherever possible to leverage results.?
According to Shahani, two-thirds of India ?s 1.2 billion people do not have access to quality healthcare. ?Many of our people living in rural areas often remain undiagnosed because of a lack of awareness of even basic healthcare. Arogya Parivar uses an innovative direct approach to make villagers aware of prevalent diseases and encourages them to seek treatment.?
Shahani says, ?In about three years since we began, 42 million villagers in 28,000 villages across 189 districts in 11 states now have improved access to medicines. Arogya Parivar uses a holistic approach which includes partnerships with NGOs, particularly in the areas of health education and drug compliance.?
Novartis has created small packs that are easy on ?out-of-pocket? expenses for the poor. The higher cost of packaging, distribution and other associated higher costs of smaller pack economies are not passed on to the patient. These medicines are locally produced and for common ailments. ?We currently have 70 products that address 12 rural disease burdens. Of these, 10 have been created especially with the rural consumer in mind, including smaller packs. Some of the common diseases are gastrointestinal diseases, respiratory tract infections, tuberculosis, diarrhoea, etc,? Shahani says.
Until a few years ago, most rural markets in India were a non-viable business proposition for the pharmaceutical companies. Despite having a strong patient base?nearly 70% of the country?s population lives in rural areas?the healthcare infrastructure was low compared to urban areas. Shakti Chakraborty, Group President, India Region Formulations, Lupin explains: ?The rural market is very fragmented, widespread and complex and more often than not, outlook and awareness on healthcare, personal hygiene, diseases and drugs has been very weak and differs across regions.?
As a result, most of the pharmaceutical companies concentrated on larger cities. According to healthcare analysts, the current sales from rural sectors are only about 20% of the total sales volume of the $8.2 billion domestic pharmaceuticals market. A McKinsey study estimates the rural market to grow to 25% in the next five years. ?Although urban markets are still more lucrative and will continue to be the focus for the industry, the untapped potential of Indian rural markets is now seen as the next volume driver,? says Ajit Mahadevan, partner, health sciences practice, Ernst & Young.
Some key trends are prompting drug to plug into the rural sectors with increasing ferocity. Driven by a burgeoning patient base, increasing incomes and improving healthcare infrastructure, the pharmaceuticals market in small towns and villages is projected to double in size in the next five years. ?Although the rural markets are still more or less dominated by acute ailments, of late they have started showing interest in lifestyle related treatment as well. The increasing penetration of lifestyle-related diseases is expected to fuel growth of drugs targeting chronic diseases,? explains Mahadevan.
In recent months, Lupin has focused aggressively on developing its reach into rural markets and tier II & III towns. ?Rural markets are a critical part of our India roadmap and to ensure growth, we believe that it was necessary to educate the masses on diseases. We believe that these markets will continue to contribute to our growth momentum,? says Chakraborty. The tier II & III towns and rural markets contribute close to 20 % of Lupin?s India formulation sales, up from 10% three years ago.
Similarly, Dr Reddy?s has embarked on an ambitious foray with its portfolio of drugs targeted at the needs of people in rural India. Ritha Chandrachud, senior vice-president and head of India formulations business, Dr Reddy?s says, ?Our rural initiative has reached nearly 2 lakh rural medical practitioners spread across 200 major districts in eight states thus providing access to quality medicines to a large population. Medical awareness and diagnosis is a key institutional void which we are trying to address in the rural markets.?
Through its rural initiative, Dr Reddy?s has diagnosed about 65,000 habitants for anemia in FY10, Chandrachud claims. Dr Reddy?s markets about 20 brands through its rural initiative which include Doxt-S for skin and dental infection, Redicate for respiratory tract infection and Omez-10 for gastritis and drug-induced acidity.
Among others, Aventis Pharma has set up a new business unit, in which medicines will be branded under the Hoechst name and sold in rural markets. These will be generic drugs that are most commonly prescribed in these markets. Similarly, Elder Pharma believes the real growth potential lies in the rural and semi-urban markets, which the company expects to grow at about 15% annually. It has a rural division called Elvista which looks after the rural and semi-urban markets of Uttar Pradesh, Maharashtra, Andhra Pradesh, Bengal and Bihar .
Going forward, Elder Pharma aims to penetrate up to 1,500 new villages and has a product basket of over 350 products in various therapeutic categories including women?s healthcare, pain management and lifestyle diseases. So is the case with Ranbaxy which has a sales team of nearly 3,000 people and would augment its marketing force to penetrate deeper into the rural markets.
Clearly, the increase in rural income has enhanced the propensity to spend on medicines. Not surprising, the road to rural India is full of opportunities for pharmaceutical companies.