MegaIndia: Healthy US Drug Distribution JV In India

There are non many cases in a state ‘s concern terrain where the prevailing supply concatenation is to be wholly changed to a new system. If the MegaIndia-HealthyUS Joint Venture would happen the Indian drug Industry would witness merely that. The C & A ; F based Indian drug distribution system would be transformed into the amalgamate individual drug-distributor based supply concatenation. Mr. Sachin Arora, Head of the freshly formed MegaIndia-HealthyUS Joint venture was worrying whether this trade would be successful, given Indian conditions.

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HealthyUS started in 1971 when laminitis Joe Walter started a little distribution Centre in Findley, Ohio. In less than a decennary, the then-named HealthyUS Foods became a major regional nutrient distributer until ramifying into drug distribution in 1979. That was the twelvemonth the company purchased a Columbia, Ohio, drug distributer and became known as HealthyUS Distribution.

In 1983, HealthyUS went public and, over the following decennary, expanded its aggressive drug distribution concern with theA inorganic growthA of more than 20 U.S. drug distributers. By 1987, HealthyUS ‘ drug distribution concern had become about twice the size of its nutrient distribution concern.

Over the following few old ages, HealthyUS grew quickly, and grosss exceeded $ 1 billion in 1991. By 1994, HealthyUS had established itself as a leader in the drug distribution concern with a countrywide presence and one-year grosss of about $ 6 billion. ( Table 2 ) .

Today HealthyUS is present in 16 states with close to 50,000 employees. ( Table 3 )

The U.S. Drug Distribution Industry

The drug distribution sector is the critical cog between fabricating companies and pharmaceuticss. Billowing demand for drugs across the universe is driving that sector ‘s growing. However, challenges have placed a premium on service and efficiency in drug distribution.

Many states are sing alterations in the manner drugs are distributed to retail merchants. Vertical Integration and disintermediation are all changing the drug supply concatenation.

The coming of the fee-for-service ( FFS ) switch, the Internet, mail order drugs and online pharmaceuticss have quickly been altering the face of this Industry.

The three major US jobbers are AmeriPharma, PharmaDis and HealthyUS.

The Indian Drug distribution Industry

India is a geographically diverse state that makes distribution an of import map. The long distribution channel makes it compulsory for a company to do all its SKUs available at all times. In India, generic drugs have higher borders, so retail merchants normally prefer generics over branded merchandises. To cut down the hazard of permutation, companies must guarantee that their merchandises are available to the retail stores.

Drug distribution in India has witnessed a paradigm displacement. Before 1990, drug companies established their ain Distribution Centres ( DCs ) . Now, uncluttering and send oning agents ( CFAs ) have replaced them. These organisations are chiefly responsible for keeping stock list of the company ‘s merchandises and supplying them to the stockists on petition. Most companies keep 1-3 CFAs in each Indian province. On an norm, a company may work with about 30 CFAs. Unlike a CFA that can manage the stock of one company, a stockist is a regional distributer and handles more than one company, normally 5-15 depending on the metropolis country, and may travel up to even 50 different makers.

The stockist pays for the merchandises straight to the drug company after 30-45 yearss. The CFAs are paid by the company annually.

Figure 1 shows how a manufactured merchandise passes through the company-owned cardinal warehouse, to the consumers ( patients ) .

The drug distribution market in India is valued at $ 200m and has been turning at the rate of 4 % since 2002.

Organized Drug Retail ironss

Organized drug retail ironss are in a nascent phase in India, but have started developing their distribution system. The first drug retail concatenation was started by the Subiksha Retail Services Pvt. Ltd. Others have besides entered the field including Health & A ; Glow, Pills & A ; Powders.

Organized retail is up for a strong opposition from the bargainers ‘ anteroom and realistically it will take a batch of political will and legal reforms to do it successful. The advantages of organized drug retail would include companies offering medical specialty at higher borders, and who knows retail merchants may even be able to go through on the benefits to the terminal clients excessively.

Huge Untapped Rural Market

A big proportion of the Indian small towns still do non hold entree to proper medicine and the state of affairs is far from bettering significantly. With increasing family incomes, the rural market is going more attractive. Table 4 summarises the chances in Indian rural market

IT Assimilation

IT assimilation in health care has grown significantly. Drug companies have realized the demand for complete solutions to maintain optimal stock list degrees and to streamline connectivity between fabricating units, DCs and CFAs in each province. The usage of package like SAP and SAS ( and other packages ) is on a rise. However, the acceptance of latest engineerings such as RFID has been slow.

Future Challenges

Drug companies in India have realized the importance of SCM and are proactively looking for ways to cut down the costs associated with SCM. Distribution in India is comparatively costlier than it is in the US or EU. There are companies that spend tierce of their grosss towards financing their supply-chain operation. In US and EU, the outgo on SCM entirely is possibly 2 % , whereas in India, it averages 4-6 % of entire gross revenues. It ‘s chiefly because the cost of drugs in India is really low compared to the developed markets ; moreover the hapless substructure and utmost geographicss make it hard to restrict the cost involved in Supply Chain.

The multi-layered Inventory Management

The multilayered distribution channel has been the premier ground for forestalling pharmaceutical companies from conveying in important reforms at short-circuiting the multiple distribution beds to make clients straight. As drug makers do non hold direct entree to retail merchants ‘ informations on gross revenues ( third gross revenues ) , most drug companies depend on stockists ‘ gross revenues informations to supervise gross revenues ( secondary gross revenues ) . The primary sale involves reassigning stock from the cardinal warehouse to its CFA. As the MRs ( medical representatives ) are given predefined gross revenues marks, to run into these marks they push stock list on to the stockist to degrees that exceed the existent demand. When the following degree of sale does non take topographic point, the stockist will either return goods to the company or the stock expires.

Increasing Competition between Jobbers and Retailers

Today, with so consolidations and M & A ; As in the Indian drug industry, the figure of stockists for each company has increased. So, two stockists from the same company vie against each other. Retailers, feeling the state of affairs, prolong the recognition period and inquire for more price reductions. All this affects the sustainability of stockists

International Competitiveness and Cold-Chain Management

Indian drug companies are viing to provide drugs to the universe market. A sophisticated cold-chain engineering will be required to accomplish this end. This is indispensable if they are to retain merchandise quality during cargo. Companies like Eli Lilly in India have initiated their ain vehicles equipped with cold-chain systems. Other companies such as World Courier have developed cold-chain direction equipments to assist drug companies maintain the cold concatenation.

The HealthyUS- MegaIndia Joint venture

The MegaIndia Joint venture, which is all set to come in the drug distribution concern, is puting up a joint venture with US drug distribution giant, the $ 80-billion HealthyUS Inc.

HealthyUS will keep a bulk interest in the Joint Venture. The proposed JV, will inbound medical specialties from drug companies and provide them to retail merchants, pharmaceuticss and infirmaries, replacing the bing C & A ; F bureau system.

MegaIndia has a presence in the express logistics section through a 44 % interest in FastCarry Courier & A ; Cargo Ltd, another Indian company, which handles 10 million general cargos a month. MegaIndia is puting Rs 10,000 crore in this concern.

The MegaIndia group

TheA MegaIndia GroupA is aA big conglomerateA headed byA Mr. Vaibhav Mathur and is among India ‘s top concern houses, with US $ 81 billion market capital and net assets worth US $ 29 billion ; MegaIndia has a broad scope ofA merchandises and services. With a footmark covering over 20,000 towns and 4.5 hundred thousand small towns in India, the group has a client base of over 100 million ; the largest in India, The group is present into many sectors from Telecom to Power. The group has headquarters in Mumbai.

FastCarry Courier & A ; Cargo Ltd

FastCarry with 15,000 employees as its strength delivers more than 10,000 nothing countries, managing 10 million cargos every month. FastCarry serves over 250 international finishs excessively.

FastCarry is India ‘s Largest Domestic express logistic Network Company offering assorted customized services. FastCarry delivers to the remotest topographic points in India with the aid of about 4000 concern spouses spread across the geographical terrains of India.

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