The 46th annual general meeting of the Organisation of Pharmaceutical Producers of India (OPPI) was recently held in Mumbai which released the much anticipated annual report outlining the initiatives undertaken by the OPPI in the year 2011-12. The report highlighted some of the major concerns and issues faced by the pharma companies along with analysing the implications of various issues with possible suggestions.
Main focus of discussion during the AGM was on access to universal healthcare and steps that need to be taken to realise this vision. While giving the keynote address Chandra Prakash Singh, chairman – National Pharmaceutical Pricing Authority (NPPA) stressed that access to affordable medicine is one of the most important issues that needs to be focused.
Dilsher Singh Kalha, secretary, Department of Pharmaceuticals (DoP), Ministry of Chemicals & Fertilizers, who was the chief guest at the AGM stated that timely access to healthcare is a major issue. He also aired his views on compulsory licence and stressed on the needs to be more clarity in the law on the provisions of the same. On pricing policy he said that the decision now lies with the Group of Ministers (GOM), which he hopes should be taken sooner than later for the benefit of the patients.
Sam Pitroda, advisor to Prime Minister of India and the guest of honour at the event, highlighted the importance of the Indian system of medicines and how the government is re-focusing on building the industry at the world forum.
However, the main focus was on the report released jointly by OPPI and Ernst and Young on, 'Unlocking the potential of the pharma distribution channel'. The loss of sales due to non-availability of products at the retailers end in the pharma distribution set up and lack of visibility of pharma companies into stock holding and stock movement in the post Carrying & Forwarding Agent (CFA) supply chain were identified as key concern areas according to the study.
The study attempts to understand the character, dynamics and players of the post CFA supply chain, with the intention of strategically leveraging this channel for growth rather than being limited by its capabilities and constraints. The survey findings are structured on the effectiveness of the post CFA supply chain in making products available to the end consumer, which manifests in loss of sales over the retail counter. It also looks upon the efficiency of the supply chain in terms of the cost of making products available to the end consumer, which manifests itself in excess inventory levels in the channel and a month-end ‘skew’ in stockists’ inventories.
Muralidharan Nair, partner, Ernst & Young said, “With new product introduction driven growth on the wane, effective channel management can be a strategic differentiator for the pharma companies in times to come. Channel management is the key to growing the classic brands but what is less understood is the positive impact it has on the ethical portfolio by virtue of improved trade hygiene and focused efforts of ethical sales reps.”
Tapan Ray, director general, OPPI asserted, “In the pharmaceutical industry, the sales force plays an important role in demand generation processes and supply chain ensures demand fulfilment. Significant amount of work is being done in improving the deployment and training of the sales force to gain competitive edge in the market place. Quantum efficiency in the supply chain system has been brought in by many companies over the years with thrust on process engineering and process up-gradation driven purely by customer oriented financial parameters. It is about time to integrate supply chain and the demand generation process with a holistic customer focused approach in search of excellence.”
The report states that the non-availability of products at the retailer’s end is leading to the sales loss, a damaging trend noticeable in the current pharma distribution set-up. However, the incidence and quantum of this loss differs across geographies and product categories. The extent of sales loss varies from 0 to 1 per cent in metros across product categories to up to five per cent in tier two and rural geographies as high as 20 per cent in small OTX brands. The report suggests that the variation in loss of sales across geographies and product categories can be attributed to supply chain aspects such as the reach of the supply chain, service levels, the working capital constraints of stockists, awareness of customers and financial returns to stakeholders.
Report also suggests that one of the key operational reasons for excess inventories in the channel is the lack of visibility of pharma companies into stock holding and stock movement in the post CFA supply chain. In the current state, visibility of the post-CFA supply chain is limited, and is traditionally through the visits of the sales force to stockists/retailers as well as through the monthly stock and sale statements of stockists. As a consequence of this opacity in the chain, pharma companies rely on primary sales to stockists as a metric for measurement of performance. Driven by sales targets on primary sales, the sales force may resort to pushing stocks to distributors at month end, which may result in a month end skew in stockist inventories. Where there are variances in demand and primary sales is not aligned to secondary sales, there is an inventory pile-up at stockists.
Report also states that to manage the pressure of high growth, companies could consider two options of either neglect heritage OTX brands and invest fully in prescription products, which would indirectly contribute to the faster erosion of heritage brands, or invest the effort of their sales representatives in managing the availability of OTX brands, and thereby detract from their focus on prescription brands. This could lead to a potential conflict of resource allocation leading to sub-optimal performance in both.
For the issues of distribution effectiveness and efficiency identified, the key levers to address the root causes as reported in the study are increase visibility of the channel, release working capital at the stockist and ensure generated efficiencies that are passed down the channel up to retailers.
OPPI also presented excellence awards to top scientists working in drug discovery and pharmacology. Centaur Pharmaceuticals received the Best Vendor 2012 award in the Contract Manufacturing category. The event was attended by the managing directors, CEOs, and senior managers from the pharmaceutical industry.