Consumption of healthcare services in any economy is highly dependent on its accessibility and affordability. It’s nothing less than obvious that when emerging economies, such as India, experience an increase in disposable income and awareness through public/private initiatives, they would also attract ideas to capture the latent healthcare needs. It therefore is no surprise to see incumbents in the sector trying to carve out their share of the pie or start-ups exploring a known yet unorganized opportunity. However, what’s new is the competing play between two sectors, Pharmaceuticals and FMCG for the OTC market. Over-The-Counter (OTC) drugs are medical products that can be procured without a prescription and focus on improving the quality of everyday life instead of treating specific therapeutic conditions. While Pharmaceuticals master the know-how of developing such products, FMCG has the ability to leverage its current reach and place these products right into the essential basket of an otherwise inaccessible rural consumer.

With strong distribution capability, fast-moving consumer goods (FMCG) companies are already shifting gears and preparing to cater to the needs of a more health conscious rural population with OTC medical products, which can be purchased from any retail medical store. P&G’s recent decision to acquire Merck’s OTC division that focused on Europe, Latin America and Asia could be an easy example of FMCG’s growing interest in emerging OTC markets.

With healthcare being the need of the hour, we believe pharmaceutical companies can leverage the self-sustaining FMCG marketing insights for tapping and penetrating the rural markets and for establishing trust for modern medicines. The current focus would require introducing their OTC product as the most utilitarian and essential commodity rather than the most economical one. The adoption of a few FMCG strategies can possibly facilitate the gradual changeover of the rural population from being non-consumers into more health-conscious ones.

While challenging infrastructure coupled with lower disposable income and the scarcity of necessary health awareness of the rural consumers limited pharmaceutical penetration, FMCG companies with deep pockets and ability to sustain long gestational timelines became leaders in penetrating emerging markets like India. FMCG marketing maneuvers motivated the rural population to either purchase cost-focused products or more ‘urban’ products for occasional use. Higher sales of cost-focused products ensure stable profits for the firms even at low margins, while premium products survived small sales volumes and seasonal variability through additional margins.

However, in India, owing to their nature, medical products usually fail to generate high volume sales, and some of them, being under the national list of essential medicines (NLEM), cannot be priced at premium margins. These pose significant challenges that restrict pharmaceutical industry from creating alternative distribution channels as easily as FMCG or in replicating distribution strategies from FMCG.

However, four key insights from FMCG rural marketing models could help pharmaceuticals catch pace:

Identify preferences: Establishing communities like self-help groups (SHGs) can facilitate the better understanding of the consumption behavior of rural consumers and in bridging the cultural lacuna in the sale of a specific product. For example, New Delhi-based Aakar Innovations provides low-cost machines to produce biodegradable sanitary napkins, a growing need.

Identify pitfalls: Need to address cultural, infrastructural or demographic shortcomings, for example, superstitious beliefs, lack of trust in western medicines, shortage of physicians, restricted access to primary healthcare services and unscientific treatment practices offered by unqualified providers. Established in 2014, Karma Healthcare is one such example of a high-tech startup which is mostly inclined on juxtaposing digital technology with on-ground platforms for delivering affordable, accessible and essential healthcare services to the rural populace in India.

Inclusive vs. standalone approach: Emphasising on the importance of complementary alliances and partnership in designing a sustainable ecosystem-based approach. For example, easy accesses to nearby suitable diagnostic services for complete diagnosis and fast-track treatment. iKure Techsoft provides patients access to their nearest rural health center, where doctors and trained health workers are available throughout the week, pharmacists offer approved medicines, and a mobile medical unit has been set up to address critical healthcare requirements. Plugging in any gap where the patient could fall out of the process.

Accessibility: Designing a portfolio where existing distribution channels can be used to piggyback other complementary products, for example, using the current retails outlets for extending OTC channel first and later extending it for prescription drugs. For example, Netmeds, the online retailer of prescription medicines and other healthcare products in India, uses its digital platform to seamlessly distribute drugs and other medical products in the emerging markets across the country.

We believe these rural marketing learnings will help pharmaceutical firms diversify and design new channels that create, capture and sustain demand, and thus establish a non-conventional business model focused on addressing the healthcare needs of the localities. Swiss pharmaceutical company Novartis’s Arogya Parivar initiative provides a live example of how such FMCG learnings can be extrapolated to pharmaceuticals in establishing self-sustaining models for healthcare products.

Arogya Parivar, a for-profit, social enterprise set up to address healthcare needs of rural India, adopted some of the FMCG marketing models to serve the bottom-of-the-pyramid population and penetrate the untapped healthcare potential of the region.

Deploying its 4A strategy – awareness about the need for a healthy living and efficacy of the drug, access to well-grounded physicians and pharmacies in the vicinity, affordability of the medicine, and adaptability of the product within the ecosystem – Arogya Parivar has been triumphant in breaking even in less than three years and is currently operating across 11 Indian states.

As new digital technologies are being rolled out and adopted, marketing focus is shifting from a mass-based approach to personalised approach. Digital platforms accelerate the learning process for the new “urban-to-be” rural population who historically have trusted consumption processes that are more collective in nature. Also, as organisations venture into this new consumer segment, apart from collecting preferences, they would need to first learn about the basis of such preferences that govern consumer awareness, access, affordability and adaptability. Under such circumstances, village level entrepreneurs (VLEs) can play a critical role in both eliminating the trust deficit and bridging the technology gap.

VLEs act as highly efficient service delivery points and have been a key choice across sectors, be it an e-governance scheme or private initiatives. Deploying VLEs or personnel as primary information sources for amassing consumer-related data and circulating product details, as well as for generating and encouraging positive externalities such as employment and improved quality of living, has been a common thread in most if not all success stories.

Being one among them, a VLE has the prerequisites to operate in adherence to the village framework with the ability to reach out to one and all. Their substantial knowledge about the consumers and capability to communicate in local language bring them a step closer to realizing the consumer demand. Their shared kinship makes it easier for the VLEs to motivate the population in adopting a product or service as essential and not as a luxury, which in turn opens new opportunities for the incumbents to serve the underprivileged lot. We also have the French-based ophthalmic optics company Essilor, that launched its Eye Mitra program in 2013 to train and help the under-employed citizens of rural India to set up small eye care practitioner (ECP) businesses. Through the VLEs, the company aims to enhance awareness and access to vision care for underserved populations. Hence VLE’s could prove to be equally critical in helping pharma set its pace and place.

While pharma companies, like FMCG firms, could also consider offering medical products in affordable packs that would fit into the demographic lifestyles and address other environmental and cultural challenges, they should understand the need to appoint VLEs to make a reliable connection with the consumers and hence establish and sustain their trust in the products. VLE’s could prove to be critical levers for setting the pace for Pharma.

S. Arunachalam is assistant professor of marketing at the Indian School of Business (ISB)

Meenakshee Sinha is an ISB Graduate and currently part of global portfolio and strategy team at Cipla.

Views are personal.

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