After decades of hunt for fortune abroad, India's pharmaceutical companies now plan to strike gold in their own backyard. Large players from Ranbaxy to Dr Reddy's and Piramal Healthcare are all headed to rural India to boost their revenues.
"For another ten years, rural markets are going to offer huge growth opportunity," said Ranbaxy CEO & managing Director Atul Sobti.
Rural India will be a critical part of the company's new growth plan that will be unveiled in January. Ranbaxy, which is currently the second largest seller of drugs in the country after Cipla, wants to become the largest seller. To make that happen, it wants to get down to the 'last village' in the next five years.
"If you are not going to the rural customer with the right product and right price, someone else will," says Sobti.
That is true. Cipla is increasing its presence in rural India where the ability and willingness to spend on drugs is on the rise. "The number of people working in rural areas is increasing each year. It will continue," said Cipla Joint Managing Director Amar Lulla. The products categories that Cipla is focusing on for rural India are pain killers, antibiotics and syrups, he said.
Dr Reddy's has set up a special field force to cater to select rural markets in a few states. "We launched our rural marketing division, Indura, this year. Our focus is on scientific education, while using innovative marketing tools addressed to the patients and doctors in rural India," said a company official.
The company has already seen a positive response. "In the beginning of this financial year, we began targeting a few states with a contractual field force and now we are beginning to see good traction in this segment of our business," Dr Reddy's Chief Operating Officer Satish Reddy told analysts recently.
Piramal, which has the country's biggest sales force, is ramping up to penetrate further into the rural markets. "We are increasing our rural presence by adding more field staff", said Swati Piramal of Piramal Healthcare.
There are two triggers for this newfound rural thrust. One is the rising expenditure on public health by the government, which the pharmaceutical companies want to grab a slice of; and the other is the success of smaller rivals like Mankind Pharma whose growth has come from the hinterland.
"Pfizer Merck and IPCA have appointed medical representatives on contract to work in rural areas. Most of these marketing personnel get only commission. The model works well as companies do not incur any additional cost", said Ranjit Kapadia of HDFC Securities.
Analysts said that companies are pushing in the rural market OTC (over the counter) drugs that can be sold without prescription. "Even in the case of prescription drugs, the rural markets are driven by chemists who act as prescribers in the absence of qualified doctors. The medicines that gain most are nutraceuticals, vitamins, pain relievers and cough syrups," Kapadia added.
According to market research firm ORG IMS, Indian retail market was worth Rs 38,572 crore (MAT or moving annual total) in October 2009. While there is no authentic data on the drug sales that take place in rural India, broad indications suggest that over 60 per cent of the country's drug sales happen in metros and big cities.