[Pharm-policy] WSJ on marketing practices in India

[love@cptech.org]

Pretty good WSJ reporting on Indian marketing practices.  

http://interactive.wsj.com/articles/SB997910373349012375.htm

August 16, 2001  
 
Drug Firms' Incentives Fuel
Abuse by Pharmacists in India
By DANIEL PEARL and STEVE STECKLOW 
Staff Reporters of THE WALL STREET JOURNAL


BOMBAY -- Pharmacy owner Ranjit Ranawat smiles as he recalls how he
surprised his wife one day with a new, 29-inch color television,
courtesy of GlaxoSmithKline PLC's India unit.

How did he get it? He ordered 600 vials of Fortum, an antibiotic, and
100 boxes of Ceftum, a drug for urinary-tract and respiratory
infections. That's about 10 times as much as he normally would stock.

Incentives to buy large quantities of prescription drugs have become
commonplace in India, where thousands of drug manufacturers compete for
shelf space and the country's half-million pharmacists wield an unusual
amount of clout.

Pharmacists in the U.S. and other developed countries have little
influence over the volume of prescription-drug sales. There, the
marketing push usually targets doctors, the main legal conduit for
prescription drugs. In India, many patients are too poor or too busy to
see a doctor and often rely on local pharmacists for medical advice. As
a result, powerful drugs are routinely, and illegally, sold over the
counter.

Wide-Open Competition

The strange contours of India's medicines market arise partly from the
country's success in fostering wide-open competition, which has lowered
prices, made drugs widely available and served as a model for other
developing countries. But the incentive system poses dangers for
customers and raises ethical issues for drug makers and pharmacists. And
with an estimated 20,000 pharmaceutical companies fighting over $3
billion in annual sales amid little regulation, the Indian model has
taken competition to a questionable extreme.

"It's a war out there. You have to get maximum business," says Deepak
Arora, group product manager for Bombay-based Glenmark Pharmaceuticals
Ltd. and a former Glaxo salesman. The pharmacist, he adds, is "a
powerful person in the decision chain."

To boost prescription-drug sales, pharmaceutical companies -- many of
them local outfits making knockoffs of Western drugs -- try to woo
Indian pharmacists with gifts and other incentives. The most popular
incentive, often called a "bonus scheme,'' offers a free
foil-and-plastic strip of prescription pills for every, say, 10 strips a
druggist orders.

Boosting Profit Margins

A study by the Bombay market-research firm Interlink Healthcare
Consultancy found that all but one of the top 25 drug companies in India
offer such discounting deals at least once a month. A recent letter to
pharmacists from Blue Cross Laboratories Ltd., a Bombay company with no
connection to Blue Cross & Blue Shield of the U.S., outlines a deal that
offers druggists up to a 103% profit margin on a variety of prescription
drugs.

For pharmaceutical companies, offering profit incentives to pharmacies
serves a variety of purposes: to introduce a new brand, to liquidate a
slow-moving batch of drugs, to book more sales at the end of a financial
quarter, or to push competing brands off the shelves. The incentives
change so often and there are so many new ones that just keeping track
is a chore for drug wholesalers. Janak J. Kothari, director of R.J.
Distributors Pvt. Ltd. near Bombay, created a special function for his
computerized database to monitor the deals available.

Some of the prescription drugs being promoted by pharmaceutical
companies are mild cough medications or skin creams. But many of the
more lucrative incentive plans promote a powerful array of antibiotics,
anti-inflammatories, sedatives and painkillers, some of which must be
injected.

Serious Side Effects

Moreover, some of the medications have been banned in other countries
because of potential serious side effects. One of Aventis SA's Indian
units, Hoechst Marion Roussel Ltd., has been promoting Baralgan-M (buy
19 packs, get one free) and Novalgin (buy 24, get one free). These are
painkillers that contain metamizole (also known as dipyrone and
Analgin), which has been banned in the U.S. and some other countries
because it can cause a rare but fatal blood disorder. Aventis, based in
Strasbourg, France, said in a statement, "We believe that the safety and
efficacy of metamizole have been well-established in its more than 75
years of clinical use" and noted that the drug "is currently approved
and marketed in more than 100 countries."

Many companies also use bonus deals to market cough syrups containing
phenylpropanolamine. Last fall, the U.S. Food and Drug Administration
asked drug companies to discontinue marketing any drug products that
contained the ingredient after a study showed it can increase the risk
of stroke.

Health experts say the drug companies' incentives have helped foster a
marketplace in India rife with abuse, encouraging pharmacists to sell
prescription drugs that may not be appropriate and to do so illegally.
"It's the tipping of the market toward the clinically irrational," says
Dr. Dennis Ross-Degnan, an associate professor at Harvard Medical School
who specializes in health care in developing countries. To benefit from
the discount deals, which are based on volume sales, pharmacies "have to
push the product," he says.

That can be dangerous. Hospitals say they get a steady flow of patients
who suffer gastric bleeding and kidney complications shortly after
taking prescription pain medications without a doctor's supervision. One
such patient is 34-year-old Vipul Shah, a Bombay businessman.

He says when he had leg pain, three different pharmacies in Bombay sold
him Dicloran pills even though he had no prescription. He also says he
was given no instructions on how the drug should be taken. Dicloran is
an Indian brand name for diclofenac sodium, a prescription arthritis
drug. It is marketed to druggists by Bombay-based J.B. Chemicals &
Pharmaceuticals Ltd. under a buy-nine-get-one-free scheme.

After taking two tablets a day for a month, Mr. Shah started feeling
lower-back pain and saw a doctor, Bharat Shah, at Bombay's Hinduja
Hospital. Dr. Shah (no relation to the patient) found permanent kidney
damage and believes the drug aggravated an existing condition. Patients
with serious kidney problems normally are advised to use diclofenac with
great caution. J.B. Chemicals didn't respond to repeated requests for
comment.

The bonus deals worry health advocates for other reasons. By giving
extra profits to the pharmacist instead of reducing the retail price,
they say, manufacturers are keeping medicine prices higher than
necessary for Indian patients. In addition, nearly half of all bonus
deals feature antibiotics, which are overused and misused in India,
according to health experts. "For any condition, a patient gets
antibiotics over the counter," says Sujeet K. Bhattacharya, director of
the National Institute of Cholera and Enteric Diseases in Calcutta.

Frequently, those patients don't complete the full course of treatment,
he adds. That has led to a number of serious diseases in India,
including cholera, typhoid and gonorrhea, growing resistant to common
antibiotics in recent years.

Ethical Questions

The offers of televisions and other prizes to pharmacists would raise
ethical questions in Western countries. Officials at two large U.S.
drugstore chains, CVS Corp. and Walgreen Co., say their pharmacists are
prohibited from accepting any gifts from vendors.

Local and foreign drug companies in India defend the incentives, and say
they aren't designed to boost sales without a prescription. They say the
main purpose is to persuade pharmacists to substitute their brand over
competing brands when a prescription is written -- or "to defend our own
prescriptions," as Glaxo India's director of pharmaceuticals, Kal
Sundaram, puts it. He says that for every two Glaxo prescriptions
written, only one Glaxo drug ends up being sold because druggists often
substitute a competing medication. Glaxo, the world's No. 2 drug maker
after Pfizer Inc., says it decided to award TV sets to druggists buying
high volumes of Ceftum and Fortum in late 1999 after a rash of
substitutions of other brands. The company says trade promotions
represent less than 1% of Glaxo's sales in India, which totaled $198.5
million last year.

Aventis says it offers incentives on a "need basis only," to make sure
patients "get what they ask for."

"For certain drugs, bonus schemes have to be given," adds Rashmi Pai, a
Bombay-based product manager with Wyeth Lederle Ltd., an Indian unit of
American Home Products Corp., Madison, N.J. Some drugs in India are
available in as many as 100 different brands, she says.

Pharmacists weren't always so powerful in India. Until the 1970s,
foreign companies such as Britain's Glaxo and New York-based Pfizer
dominated the market, and most drugs had only a single manufacturer, so
pharmacists had little choice over what brands to stock. Some
manufacturers gave retailers margins below 4% on certain drugs and
refused to issue cash refunds on medicines that expired.

A New Patent Law

The balance of power started changing in 1972, when India passed a new
patent law allowing companies to duplicate any foreign drug under patent
as long as they altered the manufacturing process, even slightly.
(International trade rules require India to enact a tough patent law by
2005.) Thousands of manufacturers sprang up, producing more than 60,000
brands of drugs. When Eli Lilly & Co. of Indianapolis introduced Prozac
in 1986, nearly two dozen copycat products appeared within two years.

Marketing also changed. As in the U.S., pharmaceutical companies had
long courted Indian doctors with gifts and junkets. But as the number of
Indian companies proliferated and their representatives began descending
on doctors' offices in droves, they often were given scant time to
promote their products. So the drug makers began paying more attention
to pharmacists.

To increase their leverage over drug companies, pharmacy owners banded
together into trade associations. The associations launched boycotts
against drug companies to win higher profit margins. The associations
also began demanding that drug companies obtain a "no-objection letter"
from each state trade association before a new drug could be sold there.
Otherwise it would be excluded from the pharmacists' stock lists. For
each new drug, the trade groups usually solicit a cash donation.

Dilip Mehta, president of the All India Organization of Chemists and
Druggists, which represents 500,000 Indian pharmacists, boasts of how
his association also has forced drug companies to sign "memorandums of
understanding" in which they agree to increase profit margins to
pharmacies.

'A Parallel Government'

"They have to surrender," Mr. Mehta says, speaking from his tiny office
at the rear of a wholesale apparel center in Bombay. The chemists
association, he says, is like "a parallel government."

Mr. Mehta doesn't dispute that his members often dispense medicines
without prescriptions. He argues that they are performing a public
service by doing so. "We cannot allow a person to die without medicine,"
he says.

On a busy recent Sunday afternoon at the Shree Samarth Medical Store in
the western India agricultural town of Dinduri, owner Bapusaheb Patil
was openly selling prescription drugs without prescriptions, including
anti-inflammatory pills, ulcer tablets and antituberculosis drugs. He
used a notebook to keep track of his regular customers' favorite
medicines, in case they forgot the name or remembered only the color.

Mr. Patil also didn't disguise his motivation for recommending certain
brands. "The ultimate decision is based on what the margins are," he
said. For fevers, he usually recommended a generic version of the
antibiotic ciprofloxacin; a recent incentive deal from an Indian
manufacturer offered him a 250% profit margin and a chance to win a
motorcycle. Mr. Patil said he needed the extra profit because many of
his customers are poor villagers who buy on credit and sometimes fail to
pay up.

He said he sells vials of injectable medicines to the area's village
doctors. As in much of rural India, few of them have formal training in
Western medicine or are even licensed by the Indian government to
practice conventional medicine. Mr. Patil also lets his customers return
any unused pills. "I tell them to stop after a few pills if they have
side effects," said Mr. Patil, who has a degree in pharmacology. He said
he won't recommend drugs he believes are hazardous.

At least Mr. Patil's customers get advice from someone with an
education. Despite Indian regulations that require a licensed pharmacist
to dispense all prescription drugs, untrained counter assistants often
perform that role. And even when pharmacists are on hand, they often
don't provide printed information about a drug's possible adverse
reactions or explain the proper dosage.

'Sell and Enjoy'

To overcome competition from multinationals, Indian companies usually
offer the retailer significantly higher profit margins. India's leading
home-grown drug maker, New Delhi-based Ranbaxy Laboratories Ltd.,
recently offered pharmacy owners eight free vials of injectable
ciprofloxacin for every seven they bought. Ranbaxy says most of those
sales go to hospitals.

Some companies have become creative. German Remedies Ltd., an Indian
company that manufactures products under license from GlaxoSmithKline's
SmithKline Beecham unit and Schering AG of Berlin, among others,
recently offered a promotion dubbed "Mega Merchants: Sell and Enjoy." In
exchange for buying three boxes of Primolut-N, a Schering hormone
prescribed for menstrual irregularities, and several other drugs, a
retailer received a free box of the antibiotic amoxycillin, and a ticket
for a drawing for 124 vacations in Germany, Nepal and several Indian
destinations.

Makarand Deshpande, general manager of sales and marketing for German
Remedies, says the four-month promotion was a "moderate success." It
boosted sales of some slow-selling drugs by $1 million, while the trips
cost the company only about $100,000. He acknowledges that some of
Primolut-N's sales in general are over-the-counter, but he says the
promotion wasn't aimed at encouraging that.

Schering spokesman Oliver Renner says that because German Remedies is a
licensee, "all the promotion they do for the product is their sole
responsibility."

Gynecologists say Indian women frequently buy Primolut-N without a
prescription and use it to delay menstruation during religious holidays.
The practice can increase chances of birth defects if the woman has just
become pregnant, gynecologists warn.

Drawing the winning tickets for the "Mega Merchants" promotion was Mr.
Mehta, the pharmacists' association president and an unabashed fan of
promotions. "Who doesn't like schemes?" he asks.

Some multinational drug companies don't. "It's a mugger's game," says
Vinod Topa, director of sales and marketing for the Indian subsidiary of
Abbott Laboratories, of Abbott Park, Ill. He says when he joined the
company in December, it was saddled with huge amounts of expired
medicines returned by pharmacies that had bought them under incentive
programs but failed to sell them. He notified distributors that there
would be no more bonus plans after July 31, but he says pharmacies
immediately responded by reducing purchases of Abbott drugs. "I am
facing the music now," he says.

Write to Daniel Pearl at danny.pearl@wsj.com and Steve Stecklow at
steve.stecklow@wsj.com