Precia Pharma: Spending, Rapid Urbanization, Greater Acceptance of Medical Insurance, Infrastructure

Precia Pharma

Case Facts & Summary

 Indian Pharmaceutical Industry:

o IPM grew at a CAGR of 17.5% between 2005-16.
o This tremendous growth was driven primarily by increased consumer
spending, rapid urbanization, greater acceptance of medical insurance,
and increased government focus on rural health & healthcare
infrastructure.
 There’s immense pressure on S&M executives to meet ambitious unrealistic targets,
which often manifests itself in unethical practices in the pharmaceutical industry to
gain market share.
o Katoley, the top performer for 3 consecutive years was found submitting false
daily report of customer calls.
 Director’s Desire: To walk the tightrope & sustain company culture while balancing
steep targets and good selling practices.
o They were aiming for a Net Revenue of INR 2,700 million in 2017.
o Pawar had a track record of turning around loss-making Maxter division of
Lupin into profitable division based on ethical sales practices by implementing
a sales hygiene.
 Precia Pharma had found it easier to rise up in the Indian Pharmaceutical industry due
to its innovative healthcare solutions.
 Focus: Diabetes Segment with a range of gastropathy, neuropathy, & cardiac
products.
o All products are approved by WHO and in March 2017, Precia boasts a line of
22 brands.
 Core Strength: Understanding of product differentiation & marketing as well as sales
& distribution.
o The underlying logic was that physicians recommend products of the
representatives they trust and who are properly able to illustrate how useful
their products are.
 The team comprised of 140 marketing executives.
 These representatives were responsible of demand creation and
fulfilment.
 Precia’s MEs sold pharmaceutical products but also analysed sales
statistics, prepared travel plans, and presented daily reports on daily
calls, stock and sales, expenses etc.
 Precia also used Sales-Force Automation (SFA) software by
GoGreen SFA to monitor various sales activities and follow a planned
calling system for regular visits.
o Since many companies don’t even train their sales representatives, Precia
gained competitive advantage by empowering & training its S&M personnel
while providing an employee-friendly company culture – Good Work-Life
Balance, Competitive Compensation, Commitment to internal promotion
etc.
 The company’s training involved an intensive 4-week training for
every new ME and annual week-long refresher course at the same.
 Focus on Distribution:
o The basic pharmaceutical product movement chain involves products moving
to a central warehouse from production department and subsequently to
C&F agents in different states. These agents supplied the products to
wholesalers in their respective areas who finally moved the product to
millions of pharmacies across the country.
 Setting Targets:
o Each November, Precia decided on its sales targets for the following year.
 These targets were based on industry & segment growth and
previous year’s sales.
o Precia followed a Quality-Target-Quantity (QTQ) technique whereby all
RBLs, ABLs, and MEs needed to achieve both qualitative & quantitative
targets.
o Also, their time was divided as follows: 50% to Gold Class customers, 30% to
Silver Class customers, and 20% to Iron Class customers with each ME
expected to complete 242 calls to physicians and 110 calls to retail
pharmacies every month.
 Focus on Ethics:
o The sales team was trained to look at the long-term consequences of their
actions.
o The company also had strict guidelines regarding ethical business conduct for
every customer segment (physicians, distributers, and retail pharmacies)
 Policies for Channel Partners:
o Margins offered to distributers ranged from 10-20% depending on the
category of the product.
o Also, there were sales promotion activities like bonus offers, sales contests,
rewards, and recognitions.
o Sales force was also empowered to take prompt decisions to help customers.
MEs, ABLs, and RBLs were entitled to extend credit notes for
breakage/expiry of goods with a monthly cap.
 Promotion to Physicians:
o Physicians samples were the most effective means of influencing brand
choices as physicians could confirm the efficacy of the products.
o Physicians appreciated the academic initiatives to continuously upgrade the
knowledge of health care professionals in the respective areas.
 The Issue:
o Katoley had been a top performer at Precia for 3 consecutive years. However,
discrepancies were found in his daily sales report for January 28. Katoley
reported meeting 3 orthopaedics that day but the ABL found out that he’d met
them at a medical conference in another city that day.
o Upon discussion, Katoley said he’d erroneously reported January 28 instead of
January 25 and the matter was brought before Pawar.
o We will discuss what disciplinary action should be brought against David
Katoley for submitting the false report against the backdrop of industry’s
fierce competition and aggressive atmosphere & the company’s strict
adherence to ethical practices.

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Precia Pharma

Case Facts & Summary

 Indian Pharmaceutical Industry:

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