Pharma sector is set to witness a massive surge in the adoption of digital technology with the roll out of Goods and Services Tax (GST) this year.
As of now due to uneven tax structure in the country, companies are facing massive challenge in tapping the unexploited market. Once GST becomes operational, the companies will be increasingly adopting digital technologies viz. social networking tools, Internet of Things (IoT), block chain technology, cloud computing, analytics to ensure faster and wider access to the market, said Dr Sandeep Narula, professor at IIHMR University, Jaipur.
The uniform tax structure to be introduced by GST across the country will have tremendous impact on marketing, business model of pharma companies and will unleash opportunities for digitalisation in pharma.
With implementation of GST, two drug distribution models will come up-- generics and specialty models (diabetes, cardio, cancer drugs etc). Pharma units will enter joint venture with FMCG to scale up generics business. Earlier Teva entered joint venture with Procter & Gamble to set up OTC drug facility in Sanand, Gujarat to meet growing demand for non-prescription drugs in India and Asia Pacific markets. Other companies are likely to follow Teva model. FMCG professionals will be hired by pharma units to push generics sale. For specialty model, companies will rely on MRs to promote medicine sale by influencing doctors' way of prescription, said Dr Narula.
The embrace of digital technologies by pharma companies in generics will differ from specialty model. Social netwoking tools, IoT and block chain technologies will have a key role in driving generics sale. On the other hand, digital KLOs will be roped in by pharma companies to promote sale of specialty drugs.
As of now there is slow adoption of digital technologies by pharma units. Around 90 per cent of pharma companies including MNCs still rely on traditional style of functioning. A handful of MNCs viz Pfizer, GSK had taken steps to incorporate digitalisation into their operation but could not yield desired outcomes.
But GST is set to change the dynamics of pharma companies where digital tools will have a greater role in scaling up business of the drug units as it offers companies speedy and broad access to the market. The companies have started appointing chief information officer in this regard. In coming years pharma companies are expected to allocate 2-3 per cent of their annual turnover for digital marketing.
GST will do away with intermediaries like drug wholesalers in drug supply chain. Removal of intermediaries will lead to a decline in drug promotion expense by 20-25 per cent. The companies will pass the benefits to retailers in terms of bonus, offers etc. This will ultimately result in decline in cost of certain pharmaceutical products, said the pharma marketing expert.
Intermediaries viz. stockists, C&F agents will be put together leading to reduction in drug margin by 15-20 per cent. Uniform tax structure will pave the way for centralised purchasing. Pharmacy supply chain like Apollo pharmacy will be seen wielding role of drug distributors channalising pharmaceutical products from manufacturers to retailers.
Developing countries like India, china, Brazil are big consumers of healthcare products. MNCs are looking for these markets to drive product sale. Digital is the only medium which can offer them speedy and wider access to these markets.
Digital technologies will help pharma companies address a slew of challenges faced by them including supply chain complexity, price and cost pressure and personalized medicine, among others.
By applying digital technology, companies can significantly enhance visibility into their supply chain management and make better and speedy decisions. Digitization allows them to fully integrate their supply chains and increase operational processes, making them more adaptive and responsive. This will improve planning accuracy, manufacturing efficiency and productivity, inventory and service levels, concluded Dr Narula.