A combination of factors in recent times, seem to have brought the issue of bonus offers centre-stage. Consider these:

* The Wall Street Journal (no less!) runs a story on the issue with the headline. ''Drug firms incentives fuel abuse by pharmacists'', which relates how bonus-offers and other retailer incentives pose dangers of patients'' health in India, and raises ethical issues for drug makes and pharmacist.

* A research agency''s findings conclude that bonus schemes are being offered so frequently by drug companies, that they fail to improve significantly either their volumes or their bottom line.

Let us examine from different perspectives then, the ground realities and the compulsions, which have resulted in the perpetuation of this practice.

The Drugmakers'' perspective

An estimated 20,000 companies spew out 60,000 brands, which slug it out in an extremely competitive market. Existing patent laws and Regulatory infrastructure enable introduction of latest molecules near simultaneously by at least 5-10 companies. The situation in the area of off-patent molecules is even more difficult. Therapeutic classes such as antibiotics, cough and cold, anti rheumatic / anti-inflammatory, anti parasitic, antacid and anti flatulent, antidiarrhoeals, analgesics and multivitamins are overcrowded, and yet new companies choose to enter these very segments because of the low-entry barriers, and long established companies continue their presence because the age and equities of their brands make for relatively easy sales. Moreover the combined market size of more than Rs. 11,000 crore for these therapeutic categories creates its own compulsions.

This situation of multiplicity of brands - both in the latest and off-patent areas, results in creation of perceptual parities of important drug parameters like quality and efficacy in the minds of the customers - doctors, chemist and patients alike, with these critical factors discounted by a majority of the customers, the only option left to the pharma companies is to motivate doctors to prescribe their products, and chemists to push their products, and chemist to push their products, through means outside the pale of the strictly ethical.

The Retailer Perspective

There are an estimated 1,00,000 chemist outlets in the country. More and more outlets are sprouting up and competition among them is fierce.

Moreover, a chemist shop-owner has a tough time deciding what and how much to stock. This is especially so because not only pharma companies, but makers of cosmetics, toiletries, confectionary, personal products, food products, stationary, dentifrices and pest control products all vie for space on his shelves. It is estimated that an average chemist keeps over 15,000 SKU''s in his shop and that, just 55% of his shelf space is devoted to medicines!

It is only natural then that every inch of shelf space on the chemist shelf is valuable and that he has to evaluate carefully what to stock and what not to. In the case of drugs, his task has been rendered easier by the bounty of bonus offers and the increasing non-insistence by doctors that their prescriptions be honoured by the chemist. He therefore substitutes with a brand which offers him the largest profit, if the patient however insists on the brand; he comes up with the stock reply that the particular company has closed down!

Is there a way out?

The bonus offer situation is akin to the predicament of the central government on the issue of withdrawal of state subsides of food grain, fertilizers and petroleum products. While the bonus offers were supposed to be marketing tools to ''pulse'' sales, state subsides were socialistic tools of the Nehruvian ideology. However, both have reached a point of diminishing returns and are doing more harm than good.

Just as withdrawal of government subsidies required a strong political will and external prodding from bodies such as the IMF and the World Bank, withdrawal of bonus offer (among other reforms within the industry) would require a strong moral will on the drug makers parts and external prodding from the Regulatory Licensing authorities.

This is so because the chemist being the guardian of the last mile in the patient supply-chain, or the end customer interface, is the biggest beneficiary of the incentives and bonus offers. What motivation would he have to suggesting withdrawal of bonus offers?

As far pharma companies, in face of retaliatory factors by chemist associations, they can withdraw bonus schemes only at risk of affecting their sales-as the marketing director of an MNC interviewed by the Wall Street Journal, found out to his cost! All this leaves only the Regulatory and licensing authorities that can do something in the matter.

One way would be to make it compulsory for the retailer to pass on the benefits of the bonus offer to the customers - as the Super Bazaars in Delhi and Apna Bazaars in Mumbai do. This would have the additional advantage of benefiting the much-harried patient. Drug inspectors may be asked to monitor chemist transaction to ensure implementation. Also it should be made compulsory for retailers to issue a bill for sale at all Schedule drugs. This is something the retailer circumvents by issuing fictitious bills, which the sales tax authorities should ensure, does not happen. The drug inspectors to monitor purchase and sales made by the chemist can then use the bill book.

However implementation of these measures would be no easy task, considering that the entire country has a total of just 750 drug inspectors to enforce the Drug control Administration''s writ! The job of these overstretched functionaries'' range from detection of spurious drug to violation of the DPCO! Hopefully, the increase in licensing fees as well as the Rs 80 crore the World Bank has given for a revamp of the country''s regulatory departments should go a long way in redressing the problem of shortage of enforcement personnel.

Pharma companies in the year 2000 have spent a whopping Rs. 1557 crore on bonus offers (imagine how much productive uses this money could have been put to!) Considering how these and other incentives offered by companies, have led to serious consequences for patients who have been issued potent medicines inappropriately and illegally by retailers - merely for the sales of profit, it is time a serious introspection was done not only by pharma companies but by all concerned.

About the author:

-- The author is a Mumbai-based senior marketing consultant.