Novartis, GlaxoSmithKline, Pfizer & Ranbaxy focus on hinterland

Mumbai: Sample this: India's rural market accounts for half of two-wheeler sales, a third each of fast-moving consumer goods sales and telephone subscriptions and 60% of gold consumption. In contrast, the drug industry in spite of the importance of medicine still sees the rural market accounting for just 20% of its revenues.

Big drugmakers such as Novartis, GlaxoSmithKline, Pfizer, Ranbaxy and Aventis are keen to emulate the consumer industry's success in the hinterland, but are facing a raft of challenges. "While aspiration products like mobile phones, and direct-to-home televisions have gained a strong share of the rural consumer's wallet, health is still a low priority in villages," says a Novartis India spokesperson.

Doctors are spread across wider geographies and people don't always seek treatment. There is only one doctor for every 25,000 people in rural areas including practitioners of Indian systems of medicine such as Ayurveda, compared to one doctor for almost every 500 people in urban areas.

"It's a long haul," says GlaxoSmithKline Pharmaceuticals Managing Director Hasit Joshipura. "Unlike the FMCG industry, which saw growth being created by the increasing penetration of media and good monsoons, in pharmaceuticals it is healthcare infrastructure in addition to the ability to pay that matters," he says.

IMS Health estimates that per capita spending on medicines in rural areas averages $2, or just over Rs 100, per year compared to $36, or almost Rs 2,000, in urban India.

Pratin Vete of Aventis Pharma, a subsidiary of European drugmaker Sanofi, says the standard of doctors and medical staff is an issue. "As we go deeper, the doctor's qualification diminishes," says Vete, who is senior director for tier 2 and internal medicine at Aventis.

Big drugmakers also face intense competition from small, regional players, he says. "These are not virgin markets and there is no dearth of drug brands." Then there is lack of infrastructure and investment.

Simple things like a refrigerator to store vaccines, or a computer to maintain records in the pharmacy, and an X-ray machine can improve medical diagnosis and availability of drugs, says Novartis India Vice-Chairman and Managing Director Ranjit Shahani.

Another problem is field force attrition. "A sales rep may attend a training programme from one company and then end up joining another," says a drug industry executive. Many field representatives are hired on contractors' books to keep costs down, making retention tough.

A September report by Mumbaibased MAPE Securities pegs the share of revenues of large listed pharma companies from this market at 5-10% of sales. But rural markets are expected to grow 25-30% a year, or at double the speed of urban markets, till 2016.

"The rural piece is getting urbanised," says Sunil Madhok, senior director, business operations, at Pfizer.

"If you go there now, you can get the first-mover advantage with the doctor, the supply chain, and the community." Some companies are thinking out of the box.

Aventis has started Prayas, an initiative that gives doctors in small towns and villages the chance to attend training sessions by doctors from major cities on a variety of relevant health issues. Popular topics include treating snakebites and pesticide poisoning.

Novartis educates 6 million villagers a year on health under the banner of Arogya Parivar. A large proportion of these people now go to doctors for timely treatment, a company spokesperson says.

Borrowing a page from the FMCG book, Novartis has also launched smaller packs of medicine that cost less. In a pilot, it also facilitates small loans to individuals to stock up on drugs.

Most companies are not sure whether their rural marketing efforts are bearing fruit, says Anjan Sen, director at Deloitte's life sciences and healthcare practice. "Ultimately any model has to be commercially viable," he says. But results of such initiatives are slow to appear.

Aventis' Vete says that out of every 15 doctors touched by Prayas, six might prescribe its brands. And Novartis agrees that smaller packs meant that patients may not necessarily complete treatment. Industry executives say medicine retail is not just about capital but regulation as well-hawking prescription drugs requires a drug licence.

To win over the rural markets, companies need to offer hefty discounts to edge out local players who work on much lower margins, says MAPE's Adhia. They also need to rework their compensation to field staff by adding a larger component of performance-linked incentives to overall pay, he adds. Partnerships with other sectors such as FMCG and medical technology are on the anvil.

GlaxoSmithKline Biologicals in talks to buy BE's vaccine division

Bangalore: GlaxoSmithKline Biologicals , a division of global drug giant Glaxo, is in talks with the Hyderabad-based Biological E Ltd (BE) to purchase its vaccines division , people familiar with the discussions said.

This division produces and markets a range of paediatric and adult vaccines and has a sizeable market share in the Indian vaccine market . Officials from Glaxo Biologicials, which is based in Belgium, recently visited the Indian firm's manufacturing facility in Shameerpet near Hyderabad, people close to the development said.

Biological E managing director Dr Vijay Kumar Datla did not respond to an emailed questionnaire on the issue. A Glaxo spokesperson in Mumbai declined to comment.

BE, which has already invested around Rs 350 crore for its facilities, has three key divisions, biologics, pharma and public markets. Biologics makes paediatric and adult vaccines, while public markets is in charge of distributing all kinds of vaccines to the state and central govt and public health services.

The talks are believed to be at a preliminary stage. The Biological E's website says that it was the first private sector company to enter the vaccines market. Diphtheria and tetanus vaccines are some of its key products and this has given BE a significant share of the Indian vaccine market. Its pharma division manufactures solid dosage forms, liquid orals, syrups and active pharmaceutical ingredients catering to both local and international markets.

A pharma analyst said Glaxo had recently faced some constraints in supplying vaccines to its markets around the world from its plant in Nashik, Maharashtra. It would be interested in buying out companies with modern manufacturing facilities approved by international agencies like US FDA, said the analyst, who did not wish to be quoted because he is not authorised by his firm to speak. He also added that GSK Biologicals is globally huge in paediatric vaccines and BE's expertise in that segment would offer excellent synergies in terms of a strategic fit.

Glaxo was also believed to be interested in Shantha Biotech which was eventually sold to French drugmaker Sanofi's vaccine division for $ 780 million in 2009.

The Belgium-headquartered GSK Biologicals is one of the world's leading vaccine manufacturers and employs more than 1,000 research scientists. As per a previous company statement, in India, the division leads the vaccine market in terms of market share and also exports vaccines to both developed and developing markets.