You are on page 1of 9

The Distribution Channels

The Indian pharmaceutical industry is continuing its high growth rate at 13% for the last six years but this rapid growth has yet to translate into a modernization of the Indian distribution system.
The main hurdles of the Indian distribution system include : Geographically diverse country with extreme climates Highly fragmented nature of the distribution network Limited advancement in regulatory reforms Presence of strong resistance from lobbies of traders involved in the supply chain of pharmaceutical products Lack of infrastructure for cold-chain management lack of awareness toward the importance of careful climate control throughout the transit period

INDIAN DISTRIBUTION SYSTEM: THE CURRENT STATE


Big Manufacturers Small Manufacturers

Central Warehouse CFA/ Super Stockist Stockists Substockists Hospitals

Retail Pharmacy Customers

PRICING AND MARGINS


The National Pharmaceutical Pricing Authority (NPPA), an organization of the Government of India, established to fix or revise prices of controlled bulk drugs and formulations; largely decides the prices and the margins of drugs for the wholesaler and retailers. In addition to the above mentioned margins, wholesalers and retailers are also compensated with additional trade offers. Hospitals and large institutions sometimes directly negotiate with the manufacturing company and get the drugs in their pharmacy at lower costs. Stockists compete with each other in a given city. Generally, hospitals order large quantities and can negotiate with stockists, who provide payment terms, credit periods, and margins.

THE FUTURE OF INDIA'S DISTRIBUTION SYSTEMS


Organized Retail Large Untapped Rural Market Value Added Tax (VAT) Impact

IT Adoption
Future Challenges Long-Channel Inventory Management

Increasing Competition between Wholesalers and Retailers


Brand Substitution Recalling Drugs International Competitiveness and Cold-Chain Management

The SWOT Analysis


STRENGTHS:
Self-reliance displayed by the production of 70% of bulk

drugs and almost the entire requirement of formulations within the country Low cost of production Low R&D costs Innovative Scientific manpower Strength of National Laboratories Increasing balance of trade in Pharma sector Huge market for lifestyle drugs owing to growth of middle class in the country

WEAKNESS:
The Indian pharma companies are marred by the price

regulation. Indian pharma sector has been marred by lack of product patent. Indian pharma market is one of the least penetrated in the world. Indian pharma industry is highly fragmented due to very low barriers to entry. Stringent Animal rights to conduct essential experiments. Absence of a Drug Regulatory System.

OPPERTUNITIES:

Competent Workforce Cost-effective Chemical Synthesis Legal & Financial Framework Consolidation Low Priced Products Quality Assurance Dominance in the Market Labor Force The Indian Generics Market Smaller Bio-tech Firms Ageing & Obese Population

THREATS:

Possibility of Change of the Patent Act. Threats from other low cost countries like China and Israel . Threat of the dumping of bulk drugs and formulations by neighbouring countries. Short-term threat for the Pharma industry is the uncertainty regarding the implementation of VAT.