NEW DELHI, November 7: With increasing population and existing low per capita expenditure on drugs in our country, the demand for pharmaceutical products is on the rise. According to the working group on drugs and pharmaceuticals for the Ninth Plan, growth for bulk drugs has been estimated at 20 % and formulations at 15 %. Hence, the pharma industry can look forward to happier times.

Some exciting business propositions that exist in the Indian pharmaceutical industry have been discussed here. Due to low cost of production and availability of a large technical pool in India, pharma companies the world over are looking towards it as one of their production bases. Leading pharma companies in the country too are thinking it better and economical (cost effective) to get the products manufactured by third parties. This presents a golden opportunity for enterprising people who have the necessary expertise and infrastructure for quality pharma manufacturing/production.

One can start with processing/manufacturing for a few firms, and gradually expand operations. The principals normally supply the required raw material to third parties who are paid mutually agreed ``processing charges'' or ``conversion charges''for their production services. Another possible business venture in this line is opening a marketing agency. In this, the person will have to promote the products of the company through field force.

Necessary promotional inputs like physician samples, detailing aids, training fieldforce, etc. will be provided by the company to the agent. Payment is normally according to a mutually agreed upon sales percentage. Expenses incurred on maintaining the fieldforce, travelling expenses and other marketing expenses are also reimbursed.

In order to cut down costs, many pharma companies are closing down their sales depots/branch offices. Hence, they look forward to Clearing and Forwarding Agents (CFAs) to carry out their sales/distribution operations. The CFAs are required to make a deposit with the company equivalent to either the value of the stocks that they will be holding at any point of time or value of average sales for a given period of time (eg. 45 days average sales). The CFAs, in return for the services rendered, get a mutually agreed percentage on net sales value realised (eg. 3%), besides getting reimbursement of other essential operational expenses.

Pharma companies generally offer 8% (for price controlled products) and 10% (for products which are not price controlled) to stockists/distributors. If one gets a stockist/distributorship for some companies with decent sales volumes, reasonable amounts of returns can be expected in the normal course. Transportation of finished products from manufacturers' premises to depots/CFAs in different parts of the country and then to various stockists and distributors, offers a good business opportunity to a transporter with necessary expertise and infrastructure. Rates should be competitive depending upon the volume of business involved, and delivery time should be finalised by both the parties. If such a transportation business is finalised, it will make good business sense as the pharma industry spends around 1.5% of its sales turnover on freight and forwarding charges alone.All pharma companies have to go in for designing and printing of various promotional inputs like detailing folders (used for detailing of products to doctors), technical literature relating to products, leave behinds, novel gifts, various reporting formats for fieldforce, etc., on a regular basis. Since the volume and value involved in this line of business is quite attractive, it is worth a try, especially by innovative/creative agencies.

The author is with Modi-Mundi Pharma

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.