PCD(Propaganda Cum Distribution) Pharmaceutical Companies- An Outlook
In a candid conversation, one of my close friend said
“Why don’t you start a Pharma company? It doesn’t require much to sell a medicine. You know about medicines and also you have some experience also into sales and marketing”
I said – Why you are saying so?
He replied: You get the product manufactured in Baddi and get some doctor’s to write your products after mutually setting some percentage on the sales and they will be able to provide you better ROI than your current salary.
Many people start citing many examples. At core of my heart I knew this is the scenario which is existing and is proliferating year on year with various entries and exit too.
What are PCD (Propaganda-Cum-Distribution) companies?
- These companies normally start out of a distribution setup or from a manufacturing house who start marketing their own formulations or purely with sales base (any person enters the business with the marketing of branded formulations.)
- These PCD pharma companies work locally at district level, state level and even at national level.
- One company can have range of products from different companies (a franchise) or can have a range of their products getting promoted through a sales team. These companies if run well make a scalable business at local level and have a potential to be a larger company in due course of time.
Propaganda companies in pharma have acquired a strong negative connotation due to its association with its most manipulative techniques of selling and with an objective of quick return and are considered non friendly for sales professionals.
The products are manufactured by third parties which are normally focused in delivering quantity and not quality. Such companies are being known in every market and every stakeholders ( Doctors, Chemists, Stockists) know about them.
This has become a play of Percentages on the sales. YOU GROW THE VOLUME- YOU GROW THE PERCENTAGES. That’s what the Marketing has funneled down to.
Not only this, these PCD pharma companies have created a considerable space in various markets and have eaten out the shares of big pharma companies effectively. Some major Pharma companies might have felt the pinch to some extent in some of their markets.
What is the flip side??
- Are the barriers to entry so nonexistent or so lax that that any TOM start a company arising from any nook and corners jeopardizing the safety and the health of millions of Indians.
- Is this what we refer to Quality. After all we are the guardians of quality to the millions of people in the country. That’s what is the proclaimed mission of the Pharmaceutical industry.
How do the Propaganda companies proliferate?
- Evolution of Pharmaceutical SEZs in excise free zones have created huge capacities and small manufacturers have been able to fulfill the small demand being raised by these companies on a timely basis.
- Existing customer knowledge/Demographic knowledge of the people in the business makes the entry little easy when it comes to selling the products.
- Rapport with some key business leaders in some cities –This drives the initial volume to sustain the business. The time to get the prescription from a doctor reduces and the companies reduces the time gap to sustain in the market.
- What is in it for me- This attitude of the some doctors has led to the growth of these companies. This is a pure business transaction between two entities.
- Good relationship with stakeholders (Distributors, chemists) which supports them with the initial availablility.
What does this indicates?? If Person has a good relation with doctors and knows him personally and professionally (irrespective of being in the industry or an outsider), there are high chances of supporting the prescriptions for a particular person as the person changes the company? But do really doctor attach themselves to the person or to the company? What do they trust? A sales person whom they know for last 5-10 years (at least 120 visits officially in a span of 5 years) or a company which they have not seen but heard !!!!
In some towns and rural villages we might not be surprised of a doctor running his own Pharma company, practicing at the same time and also having a retail chemist. In short, a mini industry on its own.
The Positive side of PCD pharma companies:
- It Leads to price reduction in the market :Is reduction in price getting passed on to consumers?Is poor patient getting benefited ?
- Our government wants such business entrepreneurs to flourish in the name of affordable healthcare. But where is the affordable healthcare when 50% of the margins is getting siphoned off between a doctor and the company. Who even bothers about the poor patient in a small city or a rural village??
- Creates employment opportunity at local level
- Low barriers of entry increases competition and hence a keep a check on the market forces
The Negative aspects of PCD pharma companies:
- Negligence of the quality of medicines ( If quality parameters are neglected)
- Increase in unethical promotion, malpractices and the corruption in the value chain
- More profit for the retailers leading to profit clustering creating a local generic push making it difficult for brands to compete at retail level in the context of push sales.
- When will the state government ( Drug inspectors in the states could start taking strict action against the companies who manufactures low quality medicines )
- What pertinent measures the regulatory authorities will take to strictly ensure that the quality of the product is not compromised?
- Is Pharma Industry taking into account the sales erosion due to the proliferation of these companies with new launches happening daily?
- Is the industry taking into account the share that these PG based companies are eating out from the same SUPER CORE or CORE Doctors?
It Seems Pharmaceutical industry size is much bigger than what actually is reflected!!
Such Small companies proliferation is beneficial for the industry:
- If the price reduction is getting passed on to the patients.
- Creates more employment opportunities
- Plays a balanced game in the market