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Why pharmaceutical firms in India hardly took the village road
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MUMBAI: It’s easier to spot an auto showroom in a small town than to locate a pharmacy that sells anything beyond cough and cold, and birth-control pills.

If you are desperate to get hold of life-saving drugs, or insulin or drug for epileptic seizure, chances are you would run out of luck. That’s because pharma firms have largely stayed away from villages. At a time when every business – from toothpaste to mobile handsets to luxury cars – are luring customers in rural India, this may appear strange. But there are reasons.

The growth of the Rs 85,000-crore pharma industry in India has been largely driven by demand from urban Indian patients. The penetration of pharma companies in villages (with population less than 10,000) is limited: their presence is largely restricted to selling acute therapy products — medicines for common or short-term ailments.

According to data from IMS Health, rural India contributed 18% to the total industry’s revenues for the year ended March 2015 – marginally up from 16% in end 2011. This despite the fact that the rural market is the fastest growing segment, buoyed by demand for cough syrups – often a substitute for alcohol — and food supplements. The industry earns two-third of its revenues from metros and towns with population of more than a lakh.

Thus, while pharma remains a stunning story in India, it has bypassed Bharat. The biggest challenge is the poor medical assistance. The doctor-to-patient ratio across the country is at 1 doctor for 1700 people – way below the level recommended by World Health Organisation – but skewed, almost four times, in favour of cities. This confines pharma companies to metros and other cities despite a high patient population in the hinterland.

There are other factors: poor health infrastructure, low affordability, fewer medical representatives (who market pharma products), patchy distribution network and lack of storage facility. India spends less than 2% of its GDP on healthcare. Bulk of this outlay is spent on control of communicable diseases like malaria, tuberculosis and AIDS – leaving little for building primary and tertiary healthcare infrastructure in rural India.

Consequently, there is very little economic incentive for pharma companies to go beyond city lights. In industry parlance, if a region doesn’t yield a per man productivity of at least Rs 2 lakh a month, it is not business-worthy.

Most companies launch singular time-bound projects towards educating doctors and patients on diseases in hinterland. Only a few companies like Mankind Pharma and Alkem Laboratories (both unlisted) have made inroads in rural regions. Some day they may enjoy an early mover advantage. The two firms have converted rural chemists to act as their stockists as well as dole out free medicines to doctors and chemists.

The data from PharmaTrac shows that at 14%, the value of bonus component to the total revenues is the highest in the industry for Mankind. Others are trying, but the models are not easy to replicate and the rural market may take longer to excite larger pharma players. Till then, reaching villages would remain a priority for good corporate citizens rather than a serious business proposition.



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