- Revenue potential for retail drug sales
It can be challenging to set up an independent community pharmacy. SSP has experienced significant challenges to get permits for a community pharmacy.In the Indian environment, each pharmacy needs to have full-time B.Pharm (Bachelor of Pharmaceuticals) license-holder; these professionals are very scarce. Real-estate near a vantage point (typically the market area or the bus-stand) which customers prefer is also expensive. Moreover, the time taken to get certification from the Food & Drugs Administration usually stretches beyond 2-3 months and is often accompanied by the expectation of bribes expected by corrupt bureaucrats.
A successful drug supply chain may require more than one pharmacy delivery model. It is believed that it is not possible to arrive at one single drugs model which will work across all locations and yet be able to provide 30-70 per cent discount on retail prices to the consumers. Doctors have different viewpoints about stocking drugs (primarily due to the risk of carrying inventory).
In 2010, five different models were tested, the last two of which were felt to be viable for further development and possible scaling:
- Drug sales agent model(discontinued): Some doctors are unwilling to take the risk of drugs inventory and bear the administrative hassle of dispensing the drugs. For them, a drug sales agent can sell drugs on an as needed basis at their premises. The drugs are owned by the program and doctor gets paid a fixed fee. This model was unsuccessful due to limited success in recruiting willing doctors as flat fees for the dispensing of drugs was not readily accepted, and doctors were reluctant to reduce revenues from the drugs they dispensed. It was also difficult to create a cost effective drug sales agent and distribution system to serve “mom and pop” clinics. It was also expensive to source the drug sales agent.
- Pharmacy as partner model(discontinued): The idea of this model is that doctor convinces a nearby pharmacy to buy drugs from the program, in order to dispense to our consumers at a discount. Here also, no fees are required to be paid to the doctor. Few pharmacies were interested in participating.
- Owned pharmacy model(discontinued): Challenges included high set up costs, licensing requirements and finding licensed chemists.
- Cash and carry model: Doctors buy drugs on a “cash & carry” model and the entire risk of drugs inventory is transferred onto them. They don't require any assistant at their premises and neither do they require any fees. This was a simpler model to implement and was more readily accepted by some doctors.
- Owned clinic model: The clinic operates with a full-time salaried doctor at the premises who can prescribe drugs. This model is costly to set up and relies on some level of volume to succeed, hence is viewed to be more viable in a higher population area. It also gives greatest control over delivery of care (quality and cost control advantages).
Several models were tried and various factors influenced the models: whether the doctor dispenses or prescribes, population density, doctor acceptance of the drugs made available to prescribe, etc. SIS was able to procure a range of common drugs at an average discount of 40 per cent, the majority of which could be passed on to clients. Long term viability of the owned clinics with pharmacies or the cash and carry model still needs to be demonstrated, but this model shows promise to address a critical element of client demand and out of pocket expenditure.
2. Business and social proposition to create a network of outpatient providers
Doctors resist the increased use of lower cost drugs, if approached with a commercial proposal. Doctors rely on greater margins and incentives from pharmaceutical suppliers to enhance their revenue, and they may perceive brand name drugs to be more effective. If approached with a commercial proposal, they want similar incentives because the program is perceived as “profit making”. Therefore, doctors need to be demonstrated the social benefit of being part of a community health program. And to protect their bare-minimum commercial interests and to ensure that they significantly reduce their own fees, a fixed monthly compensation may be provided.
Doctors who are less established in their communities may be more willing to partner with insurance schemes. SSP noticed that established physicians, who may be older, are less open to new approaches to deliver medical care. Physicians with greater interest to grow their practices were easier to recruit and work with under a low cost drug prescription model.
3. Benefits to consumers of access to lower cost drugs
Patients can resist a change in a prescription to a lower cost alternative, so it’s important to overcome their perception that cheaper drugs may be inferior. It’s difficult for clients to understand the relative value of a smaller discount on a lower priced drug versus a larger discount on a higher priced drug which in fact is costlier. Moreover, consumers are circumspect about “switching drugs” – i.e. procuring a brand different from that prescribed by their physician. Therefore, there is a need for an option of stocking and dispensing drugs through a network of local physicians who already have a good reputation. In India, doctors are legally allowed to retail out drugs. This translates into a “win-win” model for all – the network's outpatient doctors have more footfalls and customers have complete trust in the efficacy of the drugs dispensed.
Date of last Learning Journey update: November 2011