Pharmaceutical Marketing and Entrepreneurship

UNIT I : The Pharmaceutical Health Care Industry

1.0Intended Learning Outcomes:
• Identifying the world market performance in retail pharmacies and therapeutic categories.
• Recognizing the trends and developments in different therapeutic categories of drugs and their
market segments.
• Identifying the leading causes of mortality/morbidity and the marketing environment in the
Philippine pharmaceutical market

1.2 Introduction
Marketing is the act of facilitating the exchange of a given commodity for goods, services, and/or money to
deliver maximum value to the consumer. From a societal point of view, marketing is the link between a
society’s material requirements and its economic patterns of response. Marketing satisfies these needs and
wants through both the exchange processes and building long-term relationships.

Marketing can be viewed as an organizational function and a set of processes for creating, delivering, and
communicating value to customers, and managing customer relationships in ways that benefit the
organization and its shareholders. Marketing is the science of choosing target markets through market
analysis and market segmentation, as well as understanding consumer buying behavior and providing
superior customer value.

The specific role of marketing is to provide assistance in identifying, satisfying, and retaining customers.
Noted Harvard Business Professor Theodore Levitt claimed the purpose of all business is to “find and keep
customers. ”

Customer WANTS and NEEDS

Consumer wants and needs should drive marketing decisions, and no strategy should be pursued until it
passes the test of consumer research.

Demand is the economic principle that describes a consumer’s desire, willingness and ability to pay a price
for a specific good or service. A firm in the market economy survives by producing goods that are in
demand by consumers. Consequently, ascertaining consumer demand is vital for a firm’s future viability.
Many companies today have a customer focus. In this approach, consumer wants and needs are the drivers
of all strategic marketing decisions. No strategy is pursued until it passes the test of consumer research.
Every aspect of a market offering, including the nature of the product itself, is driven by the needs and
wants of potential consumers.

A need is a consumer’s desire for a product’s or service’s specific benefit, whether that be functional or
emotional. The emotional benefit tends to be a stronger driver for consumers, as functional benefits can be
easily copied by competitors. On the other hand, a consumer want is the desire for products or services that
are not necessary, but which consumers wish for. For example, food is considered a consumer need.
However, a steak dinner or dessert is considered a consumer want, as these things are not necessary in
order to live.

Customer decision process

There is a five step process that consumers can go through in making a purchase decision. These steps
include :
1. Need recognition
2. Information search
3. Evaluation of Alternatives
4. Purchase
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5. Post-purchase
Need recognition
The customer decision process begins with need identification. Whether we act to resolve a
particular problem depends upon two factors: the magnitude of the discrepancy between what we
have and what we need, and the importance of the problem. This involves the concept of
consumer motivation, which is the internal drive consumers experience to fulfill conscious and
unconscious wants and needs. Once the problem is recognized, it must be defined in such a way
that the consumer can actually initiate the action that will bring about a relevant solution.

Information search
After a need is recognized, the prospective consumer may seek information from family, friends, personal
observation, consumer reports, salespeople, or mass media. The promotional component of the marketer’s
offering is aimed at providing information to assist the consumer in their problem-solving process. If the
buyer can retrieve relevant information about a product, brand, or store, he or she will apply it to solve a
problem or meet a need.

Evaluation of alternatives
The criteria used in the evaluation of alternatives vary from consumer to consumer. One consumer may
consider price the most important factor while another may put more weight upon quality or convenience.
The search for alternatives is influenced by such factors as time and money costs, how much information
the consumer already has, the amount of the perceived risk if a wrong selection is made, and the
consumer’s disposition toward particular choices.

Purchase
the consumer may form an intention to buy the most preferred brand because he has evaluated all the
alternatives and identified the value that it will bring him. Anything marketers can do to simplify
purchasing will attract buyers. Providing basic product, price, and location information through labels,
advertising, personal selling, and public relations is an obvious starting point. Product sampling, coupons,
and rebates may also provide an extra incentive to buy.

Post-Purchase
A consumer’s feelings and evaluations after the sale come into play during the post-purchase phase. These
feelings can influence customer retention and influence what the customer tells others about the product or
brand. The marketer may take specific steps to reduce post-purchase dissonance. Advertising that stresses
the many positive attributes or confirms the popularity of the product can be helpful.

*Post purchase dissonance - customer’s state of the mind and perception is quite uneasy
after purchasing the product or service offering of the brand.

The 4Ps of Marketing

Product, Place/Placement, Promotion, Price are the four elements of Marketing

Product
the term “product” is defined as anything, either tangible or intangible, offered by the firm; as a solution to
the needs and wants of the consumer; something that is profitable or potentially profitable; and a goods or
service that meets the requirements of the various governing offices or society. The two most common
ways that products can differentiated are:

1. Consumer goods versus industrial goods, and

Consumer goods - are tangible commodities produced and purchased to satisfy the wants of a buyer

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- finished products that are sold to and used by consumers.

Industrial goods - materials used in the production of other goods
- bought and used for industrial and business use.
- are made up of machinery, manufacturing plants, raw materials, and any other good or component
used by industries or firms
-
2. Goods products (i.e. durables and non-durables) versus service products
Durable goods - have a significant lifespan of three or more years.
Examples: Bicycles, furniture, Cars
Non-Durable goods – are goods for immediate consumption or use.
- generally have a lifespan of fewer than three years
Examples : Food , beverages , clothing
Service products - intangible products or services produced and consumed at the same time
Examples : Haircuts , carwash , and others

Place/Placement
Product distribution (or placement) is the process of making a product or service accessible for use or
consumption by a consumer or business user, using direct means, or using indirect means with
intermediaries.

Distribution types:
1. Intensive distribution means the producer’s products are stocked in the majority of outlets. This
strategy is common for basic supplies, snack foods, magazines and soft drink beverages.

2. Selective distribution means that the producer relies on a few intermediaries to carry their product.
This strategy is commonly observed for more specialized goods that are carried through specialist
dealers, for example, brands of craft tools, or large appliances.

3. Exclusive distribution means that the producer selects only very few intermediaries. Exclusive
distribution is often characterized by exclusive dealing where the re-seller carries only that
producer’s products to the exclusion of all others. This strategy is typical of luxury goods retailers
such as Gucci.

Promotion
The three basic objectives of promotion are:
1. To present product information to targeted consumers and business customers.
2. To increase demand among the target market.
3. To differentiate a product and create a brand identity.

A marketer may use advertising, public relations, personal selling, direct marketing, and sales promotion
to achieve these objectives. A promotional mix specifies how much attention to give each of the five
subcategories, and how much money to budget for each. A promotional plan can have a wide range of
objectives, including: sales increases, new product acceptance, creation of brand equity, positioning,
competitive retaliations, or creation of a corporate image.

Price
The price is the amount a customer pays for the product. The concept of price is in contrast to the concept
of value, which is the perceived utility a customer will receive from a product. Adjusting the price has a
profound impact on the marketing strategy, and depending on the price elasticity of the product, often it
will affect the demand and sales as well. The marketer should set a price that complements the other

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elements of the marketing mix. A well chosen price should (a) ensure survival (b) increase profit (c)
generate sales (d) gain market share, and (e) establish an appropriate image.

From the marketer’s point of view, an efficient price is a price that is very close to the maximum that
customers are prepared to pay. In economic terms, it is a price that shifts most of the consumer surplus to
the producer. A good pricing strategy would be the one which could balance between the price floor and
the price ceiling and take into account the customer’s perceived value.

Topics/Discussions
1.2.1 Pharmaceutical Marketing
- sometimes called medico-marketing or pharmaceutical marketing in some countries, is the business of
advertising or otherwise promoting the sale of pharmaceuticals or drugs.
- Many countries have measures in place to limit advertising by pharmaceutical companies

Functions of Marketing
1. BUYING
2. SELLING
3. TRANSPORTATION
4. STORAGE
5. FINANCING
6. RISK TAKING
7. MARKETING INFORMATION
8. STANDARDISATION AND GRADING

Buying & Selling

- Buying and selling are also called the ‘Exchange functions’
- Markets are people with money and the willingness to spend it
- Market is also defined as the aggregate demand of the potential buyers of a commodity or service
- Market can be classified on a characteristic common to a group e.g. Cosmetic market, luxury cosmetic
market, etc.
- The willingness to buy is market demand
- Drugs market is different from the market of other commodities in the sense that in drugs market
buying is directly influenced by physician and hence the physician becomes the decision maker
- A physician decides what to prescribe but not what to buy ( Thus he selects the product for his client
based on their effect , safety and price. )
- Physicians get the product info through advertisements, sales representatives , promotional literature
supplied by the manufactures and through their colleagues.

Transportation
- It means movement of goods from thr points of production to the points of consumption.

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Storage
-Storage is governed by various factors like Contamination by dust , Microbes, and deterioration by
humidity , temperature etc.

Channel of distribution

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1.2.2 Pharmaceutical Market in the Philippines

The Philippines' pharmaceutical market is expanding at its fastest pace in decades. Its market has been
growing at a rate of 12–14 percent annually. The Filipino drug market is set to reach $4.3 billion by 2014.
This would put the country on par with Taiwan and Indonesia, in terms of size. The value of the
pharmaceutical market in the country amounted to $4billion in 2013, and it is expected to increase at a
CAGR of 9.4% to reach approximately $8 billion in 2020. The positive trend in the healthcare market of the
Philippines can be attributed primarily to the a number of factors 1 It has a 3.93% market share in the Asia
Pacific pharmaceutical market.

Generic substitution in both the public and private sectors, which has been a driver for the manufacture of
generic drugs - Increased expenditure on medicines by Local Government Units (LGUs) - Government
initiatives for the prevention and management of chronic diseases - an improved and updated regulatory
environment. In 2012, foreign pharmaceutical companies captured 70 percent of the Filipino market. That is
less than in previous years, when market share was 80 percent. GlaxoSmithKline, Novartis and Sanofi are
among the largest foreign pharmaceutical companies doing business in the Philippines. Among domestic
drug companies, United Laboratories, Pascual Laboratories, GC International and Natrapharm are the
largest.

The generics segment is increasingly important in the Philippines. In addition to local manufacturers, many
foreign manufacturers have entered the market. Some of the fastest growing companies include Novartis'
generic arm Sandoz, Taiwan's Orient Europharma (OEP) and Getz Pharma of Pakistan. To compete with
these generic and off-brand products, many multinational companies are reducing the prices of some
brand name drugs by as much as 50 percent. Drug pricing levels are higher in the Philippines than in
almost any other Asian country. Poor purchasing practices by Filipino hospitals, high retail markups and
the prohibitive cost of importing pharmaceutical ingredients are just a few reasons for this. Other reasons
include low rates of health insurance and low rates of coverage for outpatient drugs. To increase healthcare
access, the Filipino government has mandated price controls on certain essential drugs. In 2008, it passed
the Universally Accessible Cheaper and Quality Medicines Act. This act granted the president and the
secretary of health the power to impose maximum retail prices on drugs included in the Philippines'
Essential Drug List (last released in 2008)

Product Registration
Companies that are involved in the manufacture, import, export, distribution, retailing, packaging and re-
packaging of pharmaceuticals in the Philippines must obtain a License to Operate (LTO) before they can
register their product with the Philippines Food and Drug Administration (FDA). An LTO takes one to two
months to process.

Pharmaceutical product registration requires the following information:

• Licence to Operate (LTOs) from the manufacturer, distributor and / or importer
• A Certificate of Agreement between the manufacturer and distributor or the manufacturer and importer
for the product being registered
• The Application for Registration of Pharmaceutical form
• Information on product formulation and dosage
• A Certificate of Analysis and Specifications for all raw materials
• Information on the manufacturing process, including procedure, inprocess controls, production
equipment and packaging procedure
• Labelling materials
• Stability studies
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• A product sample (which should include English labels for the product registration number, the generic
and brand names, the name of the product license holder, indications for use, dosage, warnings and
precautions, the batch number and the expiration date).

1.2.2 Health Trends

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1.2.3 Pharmaceutical supply chain

Pharmaceuticals reach consumers via a supply-driven distribution scheme. Among the wholesalers and
retailers, the drugstores have the greatest percentage share in the market at 80.1% (chains have 62.7%,
independent stores have 17.4%) while the hospitals have the smallest share at 9.7% (private 7.4%;
government 2.3%). Others account for 10.2% market share Clinics, NGOs at 9.9%; government agencies at
0.3%)

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Monopolistic pricing exists in hospital drug sales, especially in private hospitals where out-of-hospital
purchases are discouraged. Drug prices in hospitals are reported to be double those of prices in retail
outlets (DOH, 2008).
Half of the 3000 plus drugstores in the country are in NCR while the rest are in urban areas nationwide. As
a result, remote areas suffer from a shortage of drug supply. To address this, some health workers dispense
drugs though their own clinics, RHUs, government hospitals and “Botika ng Barangayas outlets” or
pharmacies that operate without pharmacists. While there is a law mandating a separation between the
prescribing of physicians and the dispensing of pharmacists, this is difficult to implement in practice. In the
Philippines, doctors' prescription must be counter-signed by a pharmacist, despite this, clinics and
Regional Health Units essentially dispense without pharmacies, while BnBs operate as pharmacies with no
pharmacist.

In 1988, the government legislated the Generic Drugs Act in order to make drugs more affordable and
accessible particularly for the poor. However, the Generics Law failed to effectively encourage the
extensive use of generic prescribing by medical practitioners. Generic drugs, though cheaper than their
branded counterparts, do not sell due to customers’ lack of information on generic drugs’ safety and
efficacy

In 1987, the DOH promulgated the Philippine National Drug Policy (PNDP), which had the Generics Act of
1988 and the Philippine National Drug Formulary (PNDF) as its components. The objective o the PNDP
was to ensure the quality of drugs and medicines and make them available and affordable to all sections of
the Filipino people. The Generics Act promoted and required the use of generic terminology in the
importation, manufacturing, distribution, marketing, prescribing and dispensing of drugs. The PNDF or
essential drugs list served as the basis for the procurement of drug products in the government sector. 33
Related to this is the revised Generics Act of 2008 (RA 9502), which strengthened the provision of and

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access to quality and cheap medicines through mechanisms such as compulsory licensing, parallel
importation, price controls and generic substitution at the point of sales.

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1.4 References
• https://doh.gov.ph/
• Krska, Janet. Pharmacy in Public Health First edition
• Pharmaceutical Marketing Latest Edition

1.5 Acknowledgement
The information contained in this module were taken from the references cited above.

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