Understanding The Pharma Industry - Part IV: Distribution Channel Of Pharma Companies

Sep 25, 2023

In Part I, Part II & Part III, we have covered Pharma Industry in detail - from drug discovery process to its value chain. In this article, we’ll discuss the distribution of a drug.

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To Your Doorstep: Distribution Channel

Distribution channel of a drug has two sides: supply side & demand side.

1. Supply Side

This involves making sure the drug is in stock in all retail pharmacies. The drug distribution process has four stakeholders:

Drug Manufacturer:

The pharma company is responsible for developing, manufacturing & marketing the drug. It then transports it to the clearing & forwarding agent.

High angle view of automated packaging line conveyor belt in pharmaceutical factory High angle view of automated packaging line conveyor belt in pharmaceutical factory. 3D render of pharmaceutical production line with medicines being packed in boxes. medicine manufacturing stock pictures, royalty-free photos & images — Packaging of products in a drug manufacturing facility

Clearing & Forwarding Agents:

They provide warehousing facilities to pharma companies & are responsible for maintaining the stock of the company in a given area/state.

Robotic arm for packing with producing and maintaining logistics systems. Robotic arm for packing with producing and maintaining logistics systems.3d rendering pharma companies warehouse stock pictures, royalty-free photos & images — Warehousing facility of pharmaceutical products

Pharma companies usually have a clearing & forwarding agent in each state, & for bigger states, they might have more. They pay these agents a small percentage of M.R.P. of the products, annually or semi-annually.

Clearing & Forwarding agents then forward the products to stockist as & when they get orders.

Stockists (Wholesalers):

They receive the products sent by clearing & forwarding agents, along with an invoice in the name of the pharma company.

Stockists then pay the pharma company directly.

Stockists are appointed by clearing & forwarding agents for every region, who sometimes further appoint sub-stockists.

After adding their margins, stockists further distribute the products to retail pharmacies.

Retail Pharmacies

Pharmacies then add their own margin & sell the products to final consumers.

2. Demand Side

This involves making sure there is demand in the market for a particular drug. Pharma companies generate demand for different products in different ways:

Over-The-Counter (OTC) Drugs

These are medicines that can sold to the consumer directly, without any prescription.

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Pharma companies are allowed to advertise OTC products. This is to promote self-medication among patients for minor issues.

Prescription Drugs

Under Drugs and Cosmetics Act, 1940, advertisement of prescription drugs is prohibited. Therefore, to generate demand for their prescription drugs, pharma companies hire medical representatives.

Doctor in conversation with pharmaceutical representative Pharmaceutical representative talking with doctor sitting on couch. African mature practitioner discussing results of the analysis with specialist while consulting diagnosis on digital tablet. Doctor in conversation with medical advisor in hospital room discussing patients report case. pharma companies stock pictures, royalty-free photos & images — Medical representative educating a doctor about his companies products

Medical reps are responsible for networking with doctors, maintaining good relationship with them & generating prescriptions for their company.

They educate doctors about newly launched products of a pharma company & persuade them to prescribe the drugs of that particular company.

Thank You for reading Fincredible. Hope you enjoyed the read & learnt something new about the pharma industry.