Coping with the Pharma Market Squeeze

The Philippine pharmaceutical market is indeed getting increasingly competitive and challenging both from the sales/marketing perspective and from the regulatory aspect of the business. Among the significant developments in our sector are:

• Implementation of RA 9502 (check my blog on impact analysis on RA9502) otherwise known as the Cheaper Medicine Bill which dramatically changed the pharmaceutical landscape due to its direct impact on the products affected (which will be expanded soon) and collateral impact on other products sharing similar therapeutic indications, not to mention its implications in Intellectual Property laws.
• Consolidation of the Phil. regulatory agency (from BFAD to FDA) and imminent implementation of stricter and regionally harmonized registration guidelines (ACTD) that will eventually result in higher cost of product registration and more stringent requirements such as in vivo BE studies etc.
• Now fully aware of the increasing threats of generics and branded generics, Multinationals are now focused to meet the challenge head-on through innovative marketing programs, aggressive pricing strategies, operational consolidations and mergers and through direct marketing of generic and generic priced products either through outsourced marketing outfit or their own generic divisions.
• The market is increasingly getting crowded. Based on the latest count, there are now over 448 Traders and 4,165 distributors (as of March 2009) operating nationwide and this does not include informal and unregistered outfits that also compete in the market. The number of registered pharmaceutical brands have likewise breached over 16,450.

It may therefore be prudent that at a certain point we have to assess the vulnerability and sustainability of our operation by taking these developments into serious consideration. A time tested approach is to look thoroughly into the 4 P's (Product, Program, People & Processes) of your operation and assess your strengths and vulnerabilities ( a SWOT analysis may also help). A subjective but useful assessment tool is the 4 parameters "Stability Web Chart" below.

PRODUCT: (Using the following question guides, rate your Products from 0 to 10 with 10 as highest rating)

• Are your products growing above industry growth rate?
• Are the products that substantially contributes to your revenue affected by RA 9502?
• Does your product portfolio includes "bridge" products or products with unique properties (not 'me-to'), unique delivery system or products that competes in less crowded therapeutic segment?
• Can all your products (or its manufacturers) comply with ACTD (Asian Common Technical Dossier) requirements upon its full implementation which is expected this 2010?
• Does your products encounter rejection or non-inclusion in hospital pharmacies due to issues of quality?
• Do you have products that are not dependent on cash rebates or contract selling to generate revenue?
• Have you diversified the sources (and the country of origin) of your products?
• Do you have a pipeline (new products for launching) of products in place

PROGRAM (Using the following question guides, rate your Programs from 0 to 10 with 10 as highest rating)

• Are you mainly leveraging on price competitiveness to move your products?
• Have you invested in relationship building and brand building programs?
• If you have a marketing program, is it focused on a specific therapeutic category or indication?
• Do you have an assessment process to gauge the effectiveness of your programs?
• Are you still relying on traditional marketing programs (vs. guerrilla marketing etc.)?

PEOPLE (Using the following question guides, rate your People from 0 to 10 with 10 as highest rating)

• Is the average tenure (add the months or years of service of all employees divided by the number of employees) of your sales force increasing or decreasing every year?
• Does your employee undergo a comprehensive training program or are your Medical Representatives accredited by MRAP (Medical Representative Accreditation Program by PHAP)?
• Is your compensation package above or below industry standard?
• Do you have an attractive incentive program?

PROCESSES (Using the following question guides, rate your Processes from 0 to 10 with 10 as highest rating)

• Do you have an efficient accounting (Sales, Collection & Inventory) system?
• Is your company ISO certified?
• Does your company have an efficient Customer Service System?
• Do you have an efficient reporting system?
• Have you adopted hardware & software technologies to enhance your efficiency?

Plot your ratings in the STABILITY WEB CHART below. The bigger the footprint (Area) the more stable your operation. You may also expand the parameters (to 5,6 or more) to give you a more comprehensive picture.