A conundrum in the Indian pharmaceutical market

Posted By Damjan DeNoble

A reader from Montreal sent in an email asking for some feedback about a situation involving the import and sale of pharmaceutical products in India.

“… A potential client contact me to support him in a project to get drug (legal one…) from Canada and he can do the distribution in different area in India and also in different territory not ”really” open to pharmaceuticals industry. This maybe potential client will be their distributor, he is a pharmacist. I am still exploring this possible association. If you can give me your feed-back about this, it will be appreciate. “

There are three details that jump out.

1.) This potential distributor is a pharmacist,

2.) He is planning to do business in an isolated area,

3.) He will be doing the distribution himself.

For me, these three details together form a very irregular picture.

To begin with, it is my understanding that drug distribution in India is handled by a specific group of merchants called “stockists”.  I am not sure whether they can also double as pharmacists.

Next, it is true that a majority of the Indian population still has no access to drugs.  Consequently there is a lot of potential to be gained from being an early mover into one of these locations.  That being said, pharmaceutical giants have been in India for several decades now, and there are probably very good reasons, apart from obvious ones of capacity, that certain markets remain “not ‘really’ open” to the big guys.  So, the fact that your potential client wants to take his business here can be the sign of an ambitious entrepreneur, or an overly-ambitious swindler.

Finally, the oddest piece of evidence is that he wants to do the importing and the distribution himself.  Below is the official word on distribution of drugs in India, taken from this article, I have placed bold emphasis on a couple of key statements, and also inserted the chart from the article.

Drug distribution in India is layered and regulated. Unlike in the West, where a manufacturer can directly supply goods at the retail level, products in India move through a chain of intermediaries.

The manufacturer supplies goods to the first layer comprising a clearing and forwarding agent, a super stockist or a company-owned depot. These, in turn, supply to stockist from whose premises goods are routed to wholesalers, medical institutions, hospitals and retailers. The retailer dispenses the drugs to final consumers. Manufacturers can directly supply to institutions and hospitals, but never to a retailer.

What this should basically tell you is that what your potential client is purporting to do for you is illegal, unless he plans to be the middleman between you, a forwarding agent, a large stockist company, and himself, who would, in theory, be the small stockist in this transaction.

As much as I would like to give more in depth feedback, it is hard to give any definitive feedback without more information.  But, as you collect more information, be sure you can answer the following questions;

What kind of drug?  What is the classification?

How did you meet this person?  Did they contact you via internet?  Have you talked to them on the phone?

What is the territory in India?  (this matters anywhere, but India is particularly varied in its regional differences.)

What kind of licenses is this potential client working with?

How large is his company? (Bigger, the better.)  Does it have a physical office?

Who are his other clients?  (Get references.)

Also, if you do decide to move forward, protect yourself and your brand.  I would strongly suggest making a trip out to see your client, but if you cannot do that, secure a signed contract that you look over with a relevant legal authority, and take money up front (especially if dealing with an entrepreneur).

Having said that, beware that even if you do get money up front, opting to simply “make the sell,” you run the high risk of several unintended consequences for your business – the worst of which are brand theft, and the production of generic drug variants.