Case Analysis

National Pharmaceuticals Limited

By- Samrat Chatterjee PGMB1941
Evolution of Indian Pharmaceutical sector during Mid 90’s

• Liberalised market
• Indian companies increasingly launch operations in foreign countries
• India a major destination for generic drug manufacturing
• Approval of Patents (Amendment) Act 2005, which led to adoption of
product patents in India
• NPL company was expected to grow at a much faster rate in future years

Source: ibef.org
NLP Product Lines vs Sales % during Mid 90s

NLP Product Lines Overall Industry Sales (%)

antibiotics 24%
vitamin preparations 15%
Leading
sulpha drugs 6.4% Therapeutic
anti-diarroheals 4.10% Segments

tonics and health restorers 11.5%

cough and cold remedies 7.4%

Source: http://docs.manupatra.in/newsline/articles/Upload/28916884-B3B4-4323-A952-5002CDA44686.pdf
 Sales(%) in the top 20 country markets in 1995
90
81.39
80

70

60
54.08

50

40

30

19.78 18.23
20

9.44 8.34 7.97

10 6.88
4.7 4 3.97 2.7 2.66 2.56 2.46 2.42 2.32 2.3 2.21 2
0
0
s
rie
A
US apa
n y
an anc
e l y zil UK ai
n da ea tina um nds alia xico fric
a n
de rlan
d
di
a ey
t Ita Br
a
Sp na or g i a r e In rk
un J r m Fr Ca K e n l
Be ther
l
us
t
M
e
th
A
Sw itze T u
Co Ge u th Arg A u
So Ne So Sw

Source: PMSI International Pharmaceutical Global Review 1996

Exhibit 1- Pharmaceutical Industry Production and NPL Sales
Year Value of Production NPL Sales
(Rs. in Crores) (Rs. in Crores)
1998 3525 705
1999 4725 894
2000 5130 923
2001 5760 978
2002 7200 1152
2003 9000 1350
2004 12600 1764

NPL Sales
Year Growth
(Rs. in Crores)
1998 705 -
1999 894 21%
2000 923 3%
2001 978 6%
2002 1152 15%
2003 1350 15%
2004 1764 23%
2005 1726 -2% Forecasted
 Exhibit IV
Prospect Planning Card (P.P.C.)
Name Doctor’s code:
Address: Specialization
Phone Number:
Practising from: Qualification:
Any vital information: Attachments:

Year
Product
Using (U)
Not Using (N)
Using others (O)
 
 
Cycle 1 2 3 4 5 6 Tot. 1 2 3 4 5 6 Tot. 1 2 3 4 5 6 Tot.

Planned
Distributed
 
Observations by BM/FSO _______________________________________________
 
By MR BY FSO
Visits Planned
Actual visit:
 

Interpretation: As this was carried out to derive the possible reasons not prescribing the products, by understanding the
reasons behind so that MRs can influence more prospects and focus on non- performing products during the cyclic plans
NPL Sales Graph
2000 0.25
0.23
1800 1764 1726.29
0.21
0.2
1600

1400 1350
0.15 0.15 0.15
1200 1152

1000 978 0.1

894 923

800
705 0.06
0.05
600 0.03

400 0
0
-0.02
200

0 -0.05
1998 1999 2000 2001 2002 2003 2004 2005

NPL Sales Growth in %

(Rs. in Crores) Forecasted Year
NPL Market Share

Year Industry Sales NPL Sales Growth in % Market Share

(Rs. in Crores)
1998 3525 705 - 20%
1999 4725 894 21% 19%
2000 5130 923 3% 18%
2001 5760 978 6% 17%
2002 7200 1152 15% 16%
2003 9000 1350 15% 15%
2004 12600 1764 23% 14%

2005(F) 12255 1726 -2% 14%

NPL Organization Structure (HO)
Marketing
Manager

Product Product Product Distribution Advertising Export Manager, Training

Manager 1 Manager 2 Manager 3 Manager Manager Manager Medical Manager

Divisional
NPL Organization Structure (FO) Manager
Representing only one Division

Classification of Doctors
SDM SAM Class A- general practitioners,
consultants, and
Branch specialists
Manager
Class B- Between A & C
Field Sales Class C- old doctors,
Organizer non-clinical doctors, and
doctors involved in admin
Medical
Representatives
NPL Top Down Approach
Forecast relevant external environmental factors
•Changing Patient Demographics
•legal and regulatory health care reforms
Step 1 •Pricing
•Barriers to health care and access to medicine
•Competition from Generics

•Estimate industry sales or market potential i.e. 12255 Crores

Step 2

•Calculate company sales potential = market potential x company share

Step 3 = 12255 * 14% = 1726.29 Crores

•Decide company sales forecast (lower than company sales potential because sales
Step 4 potential is maximum estimated sales, without any constraints)
NPL Bottom Up Approach

Step 1 Salespersons estimate sales expected from their customers

Branch managers of NPL combine sales forecasts received

Step 2 from FSOs and MRs

Divisional managers of NPL combine sales forecasts

Step 3 received from Branch Managers

Marketing Manager at HO combines sales forecasts received from DM

Step 4 into company sales forecast, which is presented to CEO for discussion
and approval
NPL Concerns

1. Was the company setting good enough sales targets through such process or was there room for
improvement? In the opinion of some people who raised this issues the closeness of target and actual
sales was too good to be complacent about the process.

According to my opinion, NPL has set a very good sales target as the sales budget process uses the
following :

• They have Reviewed past, current, and future situations and used Naïve Ratio Method to forecast the

sales

• Communicated information to all managers on budget preparation with proper guidelines, formats,

timetable

• Use bottom up approach, starting with FSO till Divisional Managers

• Took approval of sales budget from top management like Chairman of NLP after reviewing the forecasted

sales and estimated sales given by bottom line stakeholders.

NPL Concerns (contd.)

2. Was the planning process motivating/demanding of the MRs and FSOs to consider most important
factors like effect of changes in (i) call frequency and sampling programme, (ii) non-call time spent by the
MRs, and (iii) planning of call time by MRs?

Yes, as the NLP MRs targeting Class A, B & C doctors. So the calling frequency, non-call time, planning of
call time varies from Class to Class.

A typical plan for MR and FSO should be followed as follows:

Using Time Effectively
• Setting Goals.
• Unit Sale, Number of Calls
Analyze the Territory.
• Collecting & recording customer data, Classifying doctors A, B, C
Planning the Time & Work Plan
• List Activities, Priority and frequency of calling, putting daily, weekly and cyclic plan
Analyze the Results
NPL Concerns (contd.)

3. Was the annual planning, which essentially was sales and expenditure planning on an overall basis, able
to provide good profits to the company? Or was a profit center oriented approach necessary?

According to me, there is no need to go for profit center oriented approach. As NPL is more focused on
restructuring the salesforce by integrating the front line sales people and performing bottom up approach
giving them more motivation to reach their sales target set by them. NPL do not give any thought to sales
potential of territories and past sales. Although compensation plan is often tied to the degree of quota
achievement, sales volume quota should not be based on the compensation plan-alone.
Furthermore, the existing process used by NPL had been in operation for a number of years during which the
company and the marketing division had grown considerably.