The new regulation shifts the decision making from the doctor to the pharmacist who is clearly not as qualified. The fact that India has a large number of chemists who sell drugs despite not being qualified pharmacists also worsens the problem. Also, depending on the margins offered, pharmacists can push the drugs of companies that give them the highest margins. As a consequence, margins at the chemist level will take off significantly as they become a lot more important. “More than the companies reorienting their strategy, the government needs to frame strong ethical norms for pharmacists just as they have done for doctors,” points out Shaw
The MNCs will be up against their nimble-footed Indian counterparts, who will be more than willing to hike margins and is likely to adapt more quickly to the changing environment. A top executive at one of the MNC companies, admits that internal policy issues prevent him from increasing marketing budgets or hike trade margins. “It is difficult for us to be flexible especially when our bosses are used to seeing more organised markets in other parts of the world. Also, not having significant manufacturing in India and depending on contract manufacturing makes it difficult to have cost controls,” he says. Take the case of Abbott, which with the intention of taking part in the India story, acquired the domestic formulation business of Piramal Healthcare for a whopping Rs.17,000 crore in 2010. The company set itself a revenue target of $2.5 billion within ten years. Seven years after the acquisition, Abbott has little over $1 billion in revenues to show for as it struggles to build on the lead that the acquisition gave them.
Kewal Handa, director, Salus Lifecare and former MD, Pfizer, says companies will be forced to relook at their portfolio. “They will trim their sales force and could seriously scale down operations,” he predicts. The sharp drop in stent prices is an indicator of what could happen. Following the notification issued by the National Pharmaceutical Pricing Authority (NPPA), the price of a drug eluding stent was fixed at Rs.29,600 compared with range of Rs.40,000 to Rs.2 lakh. Bare metal stents are now at Rs.30,000 from a peak of Rs.75,000. Abbott, which ge