Farmantra Newsletter – January, 2011
Global Pharma Pharma distribution in India
New York based Aceto
Corp. completed the Indian pharmaceutical industry is on a strong growth path with the total value of Indian Pharma industry
acquisition of New Jersey
expected to reach almost $50 Billion by 2015-2016. Out of this close to 22 billion is expected to originate
Pharmaceuticals for $ 80 from the domestic formulation business. Fig.1. shows the evolution of the various segments of Indian
million in a move to pharmaceutical industry.
expand its business from
sourcing ingredients for
medications into the
business of marketing its
own medications. The
purchase price of $ 80
million also includes an
additional payout of up to
$6 million based on Rising
performance over the next
(Source: Long Island
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Disease Focus of Though the growth numbers are encouraging, a key issue faced by the industry is management of the
the Month -
supply chain. Supply chain in India is highly fragmented with more than 550,000 retail pharmacies in the
(MS) country. According to a report by bioplan Associates, though the number of distributors have increased by 4
fold in the last three decades, from 125,000 in 1978, the volume of prescriptions distributed have not
It is the disabling increased proportionally. Hence it is evident that though there is a growth in the number of distributors and
which affects mainly young retail pharmacies, distribution is not very efficient. Also the rural markets remain highly untapped.
adults in the range of 20-
40 years. Women are
more prone to this attack
than men. Once it is
diagnosed, it remains
Pharmaceutical Distribution System
throughout the life,
however the effect could
The pharmaceutical distribution system has seen a paradigm shift during the 1990s. Before this period the
be controlled or managed
by different kinds of manufacturers used to own and control the warehousing facilities. During the 90s this was taken over by the
treatments and alternative
clearing & forwarding agents (CFAs) which take care of the storing and forwarding to the stocks to the
medicines. MS affects the
ability of nerve cells in the stockists as per their requirement. The CFAs have exclusive agreements with the manufacturers and cannot
brain and spinal cord to handle the stocks of any other companies. But the stockists generally stock the products of more than one
communicate with each
other. In MS, the body's manufacturer.
own immune system
attacks and damages the
myelin that prevents the
axon from effectively
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The distribution systems in India are more costly and less efficient compared to that of the developed world.
The lower efficiency is attributed to the lobbying involved at the various stages of distribution that prevents
the pharmaceutical companies from bringing the products direct to the patient. The system is controlled by
the distributor unions which makes it inevitable that companies pay huge margins to the middlemen. Also
the systems used in distribution have not been upgraded with time. Future of Indian pharmaceutical
distribution lies with pharmacy retail chains that use the advances in information technology to track the
stocks and avoid unnecessary hassles involved with the current system.
As per the report by Retail Mantra that provides updates on retail industry in India, India’s pharmacy retail
is growing at rate of 20-25% annually with a current size of around $9 billion. The organized pharmacy
retail stared by Subiksha Retail Services Pvt ltd is dominated by 12-15 major chains. The organized retail
pharmacy outlets in India are close to 10,000 which operates either through the company owned and
managed stores or through franchise model. Table 1 gives a list of major pharmacy retail chains in India.
Apart from the companies listed in the table Surya healthcare is planning to have a pan India presence in
the pharmacy retail market through 500 outlets of its new brand “Viva”. Besides the urban concept Surya
Healthcare also plans to enter the rural sector with strategic tie-ups where the stores will provide basic
healthcare, liaison on behalf of the patient with city hospitals along with providing branded and low cost
generic medicines. Furthermore, provide low cost insurance, with meaningful health coverage to all strata of
the rural sector (Source: www.vivayourfamilychemist.com). Life spring, owned by Morepan, is also planning
to invest more than more than $ 10 million to set up another 50-60 stores by next year.
The organized retail in India is on a strong growth path and is expected to improve the pharmaceutical
distribution system in India by improving the standards and bringing in latest technologies for supply chain
management. These chains are also expected to cut down the counterfeit medicine distributed in India.
Some pharmaceutical companies like Zydus Cadilla also see this as a big opportunity to improve the margins
by cutting down the huge commissions that are being offered to the retail pharmacy stores. The industry is
expected to boom with the easing of the foreign direct investment (FDI) norms in the pharmacy retailing.
About the author
Sreenivasa Prabhu is the Co-founder & Director (Asia Pacific) of Farmantra. He has a decade of experience
working with both private and public organizations in India and Spain on different functions ranging from
Research & Development, Business Development, Licensing and Project Management.
Description of Farmantra
Farmantra S.L is a Barcelona based consulting company focused on international business development for a carefully selected portfolio of
clients in the pharmaceutical and biotech industry with a particular focus on small and medium size firms.
Farmantra offers a wide range of services including the Valuation of Pharma/Biotech products & Technology, both marketed & under clinical
development, Licensing of products/technology, International Business Development for SMEs, Mergers & Acquisitions, Advisory services for
Strategic Alliances, Fund Raising, Market Research, Regulatory Consulting, Commercialization & Marketing consultancy, Managing of new
product launch, GMP Consulting.
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