Sunday, June 15, 2008

Returns on Prescriptions!!

Incentives to medical practitioners should be stopped

While speaking about a lot of other things with a parent of a student, he informed me that he is almost on the verge of shutting down his drug manufacturing business and getting into real estate development! I found this transition somewhat intriguing so asked him as to what made him decide this switch! He then went on to state how difficult this trade had become for most of the small and medium drug manufacturers. On one hand, on account of competition, there were/are no margins; and on top of that, increasing pressure to incentivise the doctors and chemists to prescribe and sell their drugs is making things almost impossible for them!

For a market worth almost Rs 1,300 crore, there are around 20,000 pharmaceutical companies who are competing. Cutthroat competition, coupled with the fact that there is no scope to directly brand and advertise the product to its final consumers, make the industry even more challenging! On account of this, drug manufacturers have been left with no other option than to promote their drugs by educating the medical practitioners and the chemists! Moreover, in the absence of any regulation wherein medical practitioners and the chemists need to continue education or apply for re-certification, they have been depending heavily on Medical Representatives, hired by drug companies, as their sole source of information. And most drug manufacturers, in the guise of provisioning information, have been leaving no stone unturned to incentivise the doctors and chemists to push sales. And this is what has been the biggest bane for the industry, particularly for the smaller players. This entire practice, which started with small stationary on the table top of the doctor for mere brand recall has grown to such proportions currently, that most of the small drug manufacturers are finding it impossible to sustain to remain in business. In fact, the days of table top stationary are bygones, and bygones are those days too when drug companies incentivised the doctors and chemists by more valuable gifts like jewellery, electronics and even automobiles. These days, this unholy nexus has created such a monster that, not only have drug manufacturers gone to the extent of funding every need of the doctors but also now offer them a share based on medicines prescribed and actual sale!

It should not surprise anyone as the basic economics of the model is flawed in itself. There is also no doubt that the industry just cannot sustain like this, for if it continues, most of the drug manufacturers would close down and only a few would survive, giving it an oligopolistic structure, which has its own drawbacks. The only way out of this probably is making recertification and continued medical education mandatory for everyone in the business so that neither the doctors nor the chemists need depend on information sources like Medical Representatives; and also then, it would be only merit that would drive the pharma company sales. For one should not forget that here it is not any other product but medicine, wherein lives of innocent patients are at stake!


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