Successfully reported this slideshow.
We use your LinkedIn profile and activity data to personalize ads and to show you more relevant ads. You can change your ad preferences anytime.
Direct Drug Distribution- Evaluation on Indian Pharma Distribution                      Authors:                      Bala...
Indian drug distribution system                   Current state                                                    Trends ...
Direct drug distribution   Direct Drug Distribution, is the supply of drug directly from Drug Manufacturer to   either Dru...
FACTORS AFFECTING DIRECT DRUG DISTRIBUTION MODEL                        • Lead time                                   • Im...
Logistics contingencies    During establishing new distribution network:    • Inadequate infrastructure (power, telephone,...
IS C&F System replaceable?     All the roles of C&F agent can be performed effectively and efficiently      by proposed d...
Evaluation of Direct Drug Distribution Model                                                                              ...
Suitability to                                                       Retailer                                             ...
Direct Drug Distribution Model                              Risk – Reward Analysis         • Financial           • Huge in...
Evaluation Cube model    Analysis of the proposed          Evaluation    system                            Model    “Favor...
Final call – Is it worth it?                                                              Putting pieces together         ...
Appendix    •    Attached Excel sheet contains the details of analysis                                                    ...
Upcoming SlideShare
Loading in …5
×

Indian Pharma Direct Drug Distribution

10,574 views

Published on

An evaluation of Direct Drug Delivery model with current distribution model in Indian Drug Distribution

  • DOWNLOAD FULL BOOKS INTO AVAILABLE FORMAT ......................................................................................................................... ......................................................................................................................... 1.DOWNLOAD FULL PDF EBOOK here { https://tinyurl.com/y8nn3gmc } ......................................................................................................................... 1.DOWNLOAD FULL EPUB Ebook here { https://tinyurl.com/y8nn3gmc } ......................................................................................................................... 1.DOWNLOAD FULL doc Ebook here { https://tinyurl.com/y8nn3gmc } ......................................................................................................................... 1.DOWNLOAD FULL PDF EBOOK here { https://tinyurl.com/y8nn3gmc } ......................................................................................................................... 1.DOWNLOAD FULL EPUB Ebook here { https://tinyurl.com/y8nn3gmc } ......................................................................................................................... 1.DOWNLOAD FULL doc Ebook here { https://tinyurl.com/y8nn3gmc } ......................................................................................................................... ......................................................................................................................... ......................................................................................................................... .............. Browse by Genre Available eBooks ......................................................................................................................... Art, Biography, Business, Chick Lit, Children's, Christian, Classics, Comics, Contemporary, Cookbooks, Crime, Ebooks, Fantasy, Fiction, Graphic Novels, Historical Fiction, History, Horror, Humor And Comedy, Manga, Memoir, Music, Mystery, Non Fiction, Paranormal, Philosophy, Poetry, Psychology, Religion, Romance, Science, Science Fiction, Self Help, Suspense, Spirituality, Sports, Thriller, Travel, Young Adult,
       Reply 
    Are you sure you want to  Yes  No
    Your message goes here

Indian Pharma Direct Drug Distribution

  1. 1. Direct Drug Distribution- Evaluation on Indian Pharma Distribution Authors: Balachandru G g.balachandru@gmail.com Surendran P surendran.ece@gmail.com ------------------------------------------------------ Department of Management Studies, IIT Madras 1
  2. 2. Indian drug distribution system Current state Trends – Multi-layered and regulated • Growing rapidly – Estimated to become $1 billion – highly fragmented nature industry by 20201 • Next wave of revolution in Indian pharmaceutical is • High distribution margins for middlemen (25-40%) expected to be in distribution (as it accounts for 35% • High distribution costs (distribution cost of the total cost3 & because of explosive growth of constitutes 35% of total cost) organized pharmacy retail chains) • Ineffective controls of inventories • Rural pharmaceutical growth rate far exceeds – Demand-supply mismatch: Bull whip effect industry average growth (new distribution model is (primarily due to lack of information required to reach out rural India) sharing) • Entry of MNCs in to Indian pharmaceutical markets – High expiry cost and lost sales cost (demanding for organized drug distribution) • Sub-optimal penetration of rural • Growing export market (demand for global standard market – pharmaceutical companies fails to access supply chain infrastructure including cold chain 65% of market (out of which 70% is rural infrastructure) market)2 • CFA system becoming redundant due to introduction – regular stockiest do not supply to interior of Goods and Service Tax – GST areas – only 20 to 30 percent of the sales force is • Growing health insurance (Public and private deployed in Tier two markets and rural schemes) demands for integrated supply chain markets1 mechanisms – difficult to reach many parts of the country, • Increase in demand for high value drugs & drop in either because of inadequate transportation or insurgency in some places demand for common drugs 2DoMS, IIT Madras
  3. 3. Direct drug distribution Direct Drug Distribution, is the supply of drug directly from Drug Manufacturer to either Drug Retail stores or End Customer ADVANTAGES DISADVANTAGES • Closer relationship with •High resistance from customers wholesalers, stockists and other • Control prices / discounts to stakeholders pharmacy •Considerable setup and support • Full visibility of stocks and cost demand data •Highly complex and system dependent • Full supply integrity against •Increased debt risk counterfeit drugs •Supply integrity policy Impact is • Control volume quickly unclear (Liability depends on • Increased agility across the contracts) supply chain •Loose stock holding value whenDoMS, IIT Madras change over occurs 3
  4. 4. FACTORS AFFECTING DIRECT DRUG DISTRIBUTION MODEL • Lead time • Implementation of GST Internal factors • Inventory holding cost • Vast geography and strong domestic demand • Substitution/lost sales cost • Generics-driven nature of the Indian pharmaceutical market • Expiry cost (Push-pull cycle management) • Growing institutional sales (government schemes) Macro factors • Credit cycle • Increasing health insurance coverage • Cold chain infrastructure (public schemes) • Increasing net disposable income and spending on health External factors • Opposition from • Rural market growing at a faster pace (8% stakeholders more than the industry growth) • Margin sharing • Explosive growth of organized pharmaceutical retail chains • Regulation by central and state governments • Rising export market (primarily US and Europe) 4DoMS, IIT Madras
  5. 5. Logistics contingencies During establishing new distribution network: • Inadequate infrastructure (power, telephone, rail, road, airport) • Lack of connectivity in case of several rural areas of India • Difficulty to establish required cold-chains • Difficulty in getting skilled professionals and labor • Lack of IT infrastructure and connectivity ( E.g. Internet connectivity in rural and remote areas) • Legal regulations on drug distribution Contingencies that can disrupt business continuity: • Disruption in some/all modes of transportation • Unexpected extrinsic factors: Natural calamity/Strike • Failure of IT system • Demand exceeding capacity: Due to sudden spike in demand • Failure of Cold-chain infrastructure • Shutting down of distribution partners: Courier service/postal department 5DoMS, IIT Madras
  6. 6. IS C&F System replaceable?  All the roles of C&F agent can be performed effectively and efficiently by proposed direct distribution model  Implementation of GST would simplify the taxing system and would eliminate the need for a C&F in every state.  Consolidated distribution centers could achieve better economies of scale  Direct shipping to pharmacist through courier service providers and postal department of India eliminates the necessity of C&F agent Despite the technical feasibility, replacing C&F system would be difficult , gradual and slow • Resistance from Pharmaceutical Wholesaler Association & All India Organization for Chemists and Druggist • Regional political parties are more likely to support the local warehouse dealers and C&F agents 6DoMS, IIT Madras
  7. 7. Evaluation of Direct Drug Distribution Model Transportati return/recal Credit Cycle reduction* Chain lead l of Goods reduction reduction Inventory TOTAL Holding on cost Favorability of operational Parameters Supply Easing RATING time Cost parameter of “Proposed” Supply Chain over “Existing” supply chain Rating H H M H M H Technological Availability of Investment manpower TOTAL Return on capability Parameters required Feasibility of executing the RATING “Proposed” Supply Chain Rating H M H M Financial risk (locking up of capital/ high Resistance from Dependency on external factors existing players (Courier/postal cost of capital) (PWA,AIOCD) Legal issues Time delay services) TOTAL Risk Level associated with the Parameters RATING execution of “Proposed” supply chain model Rating M H H L L M L M H Refer Appendix (attached excel sheet) for complete analysis LEGEND Low Medium High 7DoMS, IIT Madras
  8. 8. Suitability to Retailer Manufacturer Macro factors perspective perspectiveDoMS, IIT Madras LEGEND Traditional model Traditional model Traditional model L Direct drug distribution Direct drug distribution Direct drug distribution Low Market Growing rural Credit L H H H M M Penetrating market cycle ability Demand for Inventory Bargaining H H H M M M high value cost M power Medium drugs reduction Strong growth Recovering Retailer H H H M M M in export supply chain margin market margins H Internet Ordering L L L High H H H demand data penetration Flexibility Growing Suitability to health L H M M new tax system insurance (GST) coverage Emergence of supply integrity L H M M pharmaceutica against l retail chains* counterfeit L H Agility H M Export market Evaluation of Direct Drug Distribution Model H H M M M M TOTAL TOTAL TOTAL Refer Appendix (attached excel sheet) for complete analysis 8 RATING RATING RATING
  9. 9. Direct Drug Distribution Model Risk – Reward Analysis • Financial • Huge initial investment • Financial • Locking up of capital • Decreased distribution cost • Business/operational • Better margins • Dependency on small number of • Better control of end prices distribution partners • Decreased expiry cost/ lost Reward • Straining existing partner relationships • Employees and pharmacist sales cost unwilling/slow to change • Business/operational Risk • Political • Supply chain visibility • Political parties supporting local wholesalers • Matching demand-supply • Legal • More control in supply chain • Licensing • Control sales promotion and • Competition/ fair trade act discount • Technological • IT unable to meet the specifications • Unable to integrate new system with existing IT systems 9DoMS, IIT Madras
  10. 10. Evaluation Cube model Analysis of the proposed Evaluation system Model “Favorability” of operational factors - HIGH “Feasibility” of execution- Accept MEDIUM “Risk” Level - MEDIUM Neutral The proposed system falls in the “Neutral” category in Reject project evaluation. If some of the risks identified can be mitigated, then the proposed venture can be accepted 10DoMS, IIT Madras
  11. 11. Final call – Is it worth it? Putting pieces together •The proposed direct drug distribution venture Direct drug distribution venture is Favourability of operational parameter of Feasible Promising Intrinsic factors “Proposed” Supply Chain over “Existing” H supply chain Profitable •However, It is important to mitigate the identified risks* before starting the new venture Feasibility of executing the “Proposed” Supply Chain M •One of the essential step is to partner with PWA and AIOCD to reduce extrinsic risk before rolling out the new venture Risk Level associated with the execution of Risk M “Proposed” supply chain model Value for other Manufacturer perspective H stakeholders Retailer perspective M Extrinsic factors Suitability to macro factors H *Refer Appendix, Risk factors PWA - Pharmaceutical Wholesaler Association 11 AIOCD - All India Organisation for Chemists and DruggistDoMS, IIT Madras
  12. 12. Appendix • Attached Excel sheet contains the details of analysis Thank you 12DoMS, IIT Madras

×