Indian Institute of Management Ahmedabad

Case Western Reserve University, US IIMA/MAR0422

Revised on February 12, 2015

Prayas by Sanofi-Aventis in India: Making Healthcare

Accessible to the Bottom of the Pyramid
It was April 25, 2011, barely two years since Sanofi-Aventis launched Prayas, an initiative to
promote better healthcare among India’s low-income population. The program had captured
the attention of both the media and competitors to such an extent that Shailesh Ayyangar,
managing director, and Pratin Vete, senior director, Commercial Operations (Tier II and
Internal Medicine), Sanofi-Aventis, called an urgent meeting with their senior management
team in Mumbai to discuss the way forward. The team consisted of Ashish Talele, associate
director, Marketing and Business Development, Viraj Rajadhyaksh , associate director, Medical,
and Kavita Chaudhary, senior manager, Strategic Initiatives. On the agenda were the attempts
by competitors to entice Prayas’s doctors with lucrative offers to associate with their companies,
as indicated by Sanofi-Aventis’s market intelligence. Prayas’s model, which leveraged the
expertise of leading doctors from urban areas to educate doctors in rural areas to improve
healthcare among India’s low-income populace, had suddenly caught the media’s fancy. Prayas
sparked the envy of major pharmaceutical companies across the country. Eager to grab a share
of the publicity wave, competitors were actively developing and implementing similar models.
In Vete’s view, Prayas was still in its infancy; it had been rolled out only in selected
geographies, with plans for a phased launch in other areas. However, with competitors
aggressively and rapidly scaling up their copycat initiatives, Ayyangar and Vete felt compelled
to rethink their strategy for Prayas.

They understood the risks involved. There was a real danger that Sanofi-Aventis might not be
able to fully exploit the payoffs of the program. After a long development period, Prayas was
gaining traction, but it was still far from establishing a firm footing in the low-income markets

Prepared by Harit Palan, Research Associate, Indian Institute of Management, Ahmedabad, Professor
Anand Kumar Jaiswal, Indian Institute of Management, Ahmedabad, Professor Jagdip Singh,
Weatherhead School of Manag ment, Case Western Reserve University, US and Garima Sharma,
Doctoral Candidate, Weatherhead School of Management, Case Western Reserve University, US. The
authors wish to thank Dr. Shailesh Ayyangar, Managing Director, and Mr. Pratin Vete, Senior Director,
Commercial Operations (T er II & Internal Medicine), Aventis Pharma Limited (Group Sanofi-Aventis),
India, for support and cooperation while writing this case. They are also grateful to Mr. Ashish Talele,
Associate Director, Marketing and Business Development, Dr. Viraj Rajadhyaksha, Associate Director,
Medical, Dr. Kavita C audhary, Senior Manager, Strategic Initiatives, and Ms. Aparna Thomas, Director,
Communications, for providing useful inputs.
This case was r nner-up in the EFMD Case Writing Competition in Indian Management Issues and
Opportunities category and also received a special 'Highly Commended' mention in 2013.
Cases of the Indian Institute of Management, Ahmedabad, are prepared as a basis for classroom discussion.
They are not designed to present illustrations of either correct or incorrect handling of administrative
problems.
© 2011 by the Indian Institute of Management, Ahmedabad and Case Western Reserve University, US.
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in India. In 2010, Sanofi achieved early success from Prayas, registering a sales turnover of
nearly INR 200 million by operating in two geographical clusters in each of the states where the
company operated.a It wanted to double that figure by 2012 and had set a long-term sales target
of INR 5.5 billion by 2016. These payoff projections rested on a strategy of phased expansion
from awareness to advocacy to subsequent adoption, involving thousands of doctors and
eventually covering all the states in India. Now, faced with serious challenges from compe itors,
Sanofi-Aventis would need to rethink its geographical expansion plans, leverage techn logy to
protect the Prayas advantage, and re-evaluate opportunities for engaging patients and chemists.

INDIA AND THE PHARMACEUTICAL INDUSTRY

India was one of the pharmaceutical industry’s fastest growing markets world ide. The Indian
pharmaceutical industry consisted of more than 23,000 companies and around 60,000 brands.1
With an estimated valuation of around US$12 billion, the industry growth rate exceeded 21% in
2010.2 Projecting forward, the industry was expected to grow at a compounded annual growth
rate (CAGR) of 12.3% over the next few years, reaching nearly US$20 billion by 2015 and
entering the league of the world’s top 10 pharmaceuticals marke s.3 It was projected to grow to
US$55 billion by 2020 and become the second biggest pharmaceu ical market in the world in
terms of volumes, after the United States.4

This industry growth was expected to be unevenly distributed among markets in India. In 2010,
metros and Tier I cities contributed 45% to the industry revenue while the peri-urban markets
comprising of Tier II to Tier VI towns contributed 38%, and rural markets accounted for only
17% (see Exhibit 1 for an explanation of the Tier classification system).5 Going forward,
however, rural markets were expected to emerge as the next frontier of growth. Factors
contributing to the growth in rural markets included rising income levels, the growing patient
base, improvement in healthcare infrastructure and wider health insurance coverage. With
72.2 % of India's total population living in r ral areas,6 there was a significant untapped
opportunity at the bottom of pyramidb for pharmaceutical companies to provide quality

a For Prayas, Sanofi-Aventis created a headquarters-cluster system. Under this arrangement, the company divided
each state into a number of headquarters. A headquarter was the town in which a medical representative lived.
The number of headquarters in each state depended largely on the total number of medical representatives
available in that state. Each medical representative looked after one or two districts. The company created three
clusters by carving out geographical areas adjoining each headquarter. The basic criterion for a cluster
formation was the
availability of a minimum number of 20-25 qualified doctors recognized by the Indian Medical Association.
Workshops for doctors practicing i a cluster were held at the cluster center. The geographical area of a cluster was
determined by ensuring that doctors wouldn’t need to travel more than 15 km to attend a workshop. There were
generally four or five medical representatives under one area manager, who held on to the workshop kits and
mobilized mentor doctors for the workshops.
b The bottom of the pyramid (BoP) approach calls on MNCs and local companies to tap the collective market
potential of low-income consumers. Typically, MNCs viewed the target market for their products and services as a
relatively small, high-income population in developing countries. This ignored more than four billion consumers
earning less than US$2 a day and constituting Tiers 3 and 4 of the world’s economic pyramid, known as the bottom
of the pyramid. Bo is argued to be a win-win model for MNCs and the world’s poorest population—a potentially
profitable market that is huge and largely untapped and offers opportunities to participate in eradicating poverty
and improving the living conditions of two-thirds of the human population. For more details, see C. K. Prahalad and
Stuart L. Har , “The Fortune at the Bottom of the Pyramid,”Strategy + Business, 26 (2002): 1-14.
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healthcare at affordable prices to low-income consumers in small towns and villages.7 The
industry was expected to exploit this opportunity over the next decade.

Many pharmaceutical multinational companies (MNCs) had started looking to expand into
India and other emerging markets. With the patents on many drugs expiring and the slowing
down of the new drug development cycle globally, many top ranked pharmaceutical companies
were also facing serious threats from branded generics. Pharmaceutical MNCs wer under
growing regulatory pressure worldwide to make drugs available and accessible to large
swathes of people living in developing countries. International provisions such as “ ompulsory
licensing” under the Trade-related Aspects of Intellectual Property Rights (TRIPS)
agreement allowed developing countries to produce generic versions of life-saving paten ed
drugs, and “parallel importing” permitted governments to procure generic drugs from the
cheapest source anywhere in the world. These provisions had been successfully used by the
governments of South Africa in 1997, Brazil in 2001 and Thailand in 2007.8 This forced many
MNCs to look beyond their traditional markets in developed economies.

GROUP SANOFI-AVENTIS

Sanofi was founded in 1973 by the French oil company Elf Aquit ine when it first ventured into
the pharmaceutical industry with the acquisition of the Labaz group. Sanofi-Synthélabo was
established in 1999 when Sanofi merged with Synthélabo. Aventis was formed in 1999 as a
result of the merger of France-based Rhône Poulenc and Hoechst Marion Roussel. Later, in
2004, Sanofi-Aventis came into existence when Sanofi-Synthélabo acquired Aventis. Over the
years, Sanofi-Aventis established itself as a diversified global healthcare company with a
notable presence in the areas of diabetes, cancer, thrombosis and cardiovascular diseases,
human vaccines, consumer healthcare and animal health. In 2010, Sanofi-Aventis had revenues
of €30,384 million (US$40,684 million)c and was one of the top four players in the chronic care
drug category. It also ranked sixth worldwide in the consumer healthcare segment. Eight of its
flagship over-the-counter (OTC)d brands cum latively accounted for nearly 46.1% of total OTC
sales in 2009.9 Sanofi-Aventis was a leading MNC in emerging markets, with these markets
contributing €9,075 million (US$12,151.4 million)e or 30% to the group’s sales in 2010. For
Sanofi-Aventis, emerging markets were critical since it generated more sales in these markets
than in mature markets such as the United States and Europe, where it employed more than
40,000 people and manufactured products at 38 different plants.10

Sanofi-Aventis in India

In the Indian market, the company operated under four separate business units, namely,
Aventis Pharma Limited Sanofi-Synthélabo (India) Limited, Sanofi Pasteur India Private
Limited and Shantha Biotechnics. The company managed its drug sales through Aventis and
Sanofi-Synthélabo, while its vaccines division was looked after by Sanofi Pasteur and Shantha

c Based on the exchange rate as on December 31, 2010.

d OTC or over-the-counter drugs are drugs that can be procured without a prescription from a medical practitioner.
Contrary to prescription drugs, OTC drugs are permitted to be lawfully sold over the counter in pharmacies.
e Based on the exchange rate as on December 31, 2010.
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Biotechnics. Sanofi-Synthelabo (India) Limited and Sanofi Pasteur operated under the Sanofi-
Aventis group as their wholly owned subsidiaries. Sanofi-Aventis, together with Hoechst
GmbH, another subsidiary of the company, were the majority shareholders of Aventis Pharma
Limited, jointly holding 60.4% of the company’s paid-up share capital. With an employee base
of 2,300 people and two technologically advanced manufacturing plants located in the states of
Gujarat and Goa, Aventis Pharma Limited and Sanofi-Synthélabo (India) Limited pro uced
active pharmaceutical ingredients and formulations across various therapeutic areas such as
cardiology, thrombosis, oncology, diabetes, central nervous system (CNS), and internal
medicine.

Following the merger, Sanofi-Aventis consolidated its brand in the Indian pharmaceutical
market with quasi-OTC brands such as Combiflam, Soframycin, Avil and Allegra in a rich
portfolio of acute care drugs and vaccines. The cardio-metabolism segment contributed nearly
33% of the company’s total sales in India. Diabetes was a high-growth segment for Sanofi-
Aventis, for which it established a separate vertical across the organization. With an aggregated
growth rate of 30% year on year, Sanofi-Aventis’s insulin bra d Lantus was acknowledged as
the fastest growing insulin brand in the Indian market 11

Sanofi-Aventis enjoyed a robust competitive position in Tier I markets across the country (see
Exhibit 2 for sales of leading pharmaceutical companies). Despite its significant market share in
niche therapy areas, Sanofi-Aventis was not among the top 10 companies in the overall
pharmaceutical market (see Exhibit 3 for the relative per ormance of various pharmaceutical
companies). None of Sanofi-Aventis’s brands featured in the list of top 20 selling brands in the
market. Fully aware of its soft competitive position, the company became increasingly keen to
strengthen its market position by looking beyond Tier I markets. This involved serving the
larger mass of consumers that constituted the middle and lower tiers of the economic pyramid,
known as bottom of the pyramid (BoP) markets ( ee Exhibit 4).

Vete commented:

Essentially, Sanofi-Aventis is a company with premium brands. Over a period of

time, we decided to achieve lea ership in chronic care drugs for diabetes, CNS,
hypertension and oncology. O r domestic market growth is driven chiefly by
volume growth and product mix and not by price. Owing to our limited geographic
reach, ours was not a company which was in the top 10 list. When we started
thinking about leadership in the market and making our presence felt in the top 10
slot, we realized that we had leadership in niches but did not have mass. We
evaluated various alternatives to put us in the top 10 slot. During this process we
realized that more t an half of India’s mass still comprised of the rural population.
Post-evaluation, we concluded that we could never achieve leadership with an
insignificant pre ence in rural markets.

Sanofi-Aventis commissioned a study to understand rural markets and consumers’ buying

behavior for pha maceutical products. Vete summarized the results as follows:

We conducted a detailed study to understand these markets. After understanding

[exploring] various parameters at the grassroots level, what I observed was that
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there is a customer who can pay in these markets. Although his usage quantity was
low, the frequency of purchase was much higher. Secondly, I observed that there
are departmental stores flourishing in these markets and foreign consumer durable
brands reaching these consumers. From the market study, I was able to conclude
that even in these markets, there is scope for quality medicines at a slightly higher
price. Although in terms of medical infrastructure these markets were not ideal
there was a clear demand.

BoP MARKETS

Traditionally, healthcare for the low-income and rural populations in India had been left to the
government and social sectors, with limited private participation. However, in the last decade,
with the economy recording robust growth across all economic sectors, many MNCs started
viewing India as a promising emerging market.12 As part of their emerging market strategies,
MNCs initially largely targeted high-income and upper middle-income consumers. Only a few
MNCs realized that consumers at the BoP could be a significant source of growth and profit.
Many fast moving consumers goods (FMCG) and consumer durable goods companies took the
lead and were successful in increasing their penetration in these markets and exploiting their
business potential.

Slow growth in urban markets and the growing importance of rural markets prompted many
MNCs to develop a viable model for profitably serving BoP consumers. Rural markets in India
constituted around 40% of the total market by value and presented untapped opportunities for
large pharmaceutical companies.13 The rural population in India was widely dispersed across
nearly 600,000 villages. There were over 20,000 o erational primary healthcare centers in
various states.14 Despite this potential, large companies serving BoP consumers faced significant
challenges. Factors such as low government spend, poor healthcare infrastructure, limited
affordability, poor basic hygiene and living conditions, and the extensive availability of
spurious drugs were among the many hurdles facing companies interested in participating in
these markets (see Exhibit 5 for the healthcare penetration in the country and Exhibit 6 for key
characteristics of semi-urban and rural markets versus metros and Tier I markets).

Sanofi-Aventis’s Entry into BoP Markets in India

Stagnant growth in urban markets coupled with an increase in public awareness and
governmental efforts to improve healthcare in rural areas generated ample opportunities for
large pharmaceutical companies to serve the rural markets. For a player like Sanofi-Aventis,
which predominantly opera ed in Tier I markets, the emerging set of consumers at the lower
tier of the market opened up an altogether new business opportunity. The company anticipated
acquiring a 1.5% to 2% share of India’s rural market by 2015.15 Ayyangar explained:

The rural push in India is in line with the company’s global strategy of becoming a
fully integra ed healthcare company involving partnerships with other service
providers such as clinicians, diagnostics services and even non-profit organizations
for value-added services to improve the quality of healthcare by
bridging the gap between treatment and diagnosis along with better access to
medicine.16
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Although BoP markets comprised more than three-fourths of India’s population, their monetary
contribution to the overall pharmaceutical market was far from proportionate. For the top
management at Sanofi-Aventis, exploiting opportunities at the BoP was rife with challenges.
Vete noted:

As the Indian arm of an MNC, there always are expectations of meeting the parent's
ambitions of growing faster in emerging markets. To attain this, the strategy usual y
involves launching new products, expanding market coverage, exploring
opportunities in new consumer segments, spending more on marketing and hiring
more people to drive this effort. When I was exploring opportunities in low income
markets, I observed that these markets were not untapped. There was a significant
presence of players who offered a variety of products and enjoyed high cost
advantage and many who had very high penetration, reach and coverage. Also,
they offered handsome margins to doctors and chemists. My internal evaluation
suggested that we could never match this costing b cause, as an MNC, we had our
own inherent higher outlay. Also these companies often engaged in unorthodox
promotional practices,f which could be unethical for us [to engage in] owing to our
company’s statement of purpose (SoP) and guidelines on medical ethics.

For Sanofi-Aventis, the challenge was to indigenously develop an innovative business model
for BoP markets that would open opportunities for creating and appropriating value despite the
cost disadvantages, growing competition, access difficulties and challenges of coming up with a
unique value proposition. Fundamental to developing an innovative business model was the
challenge of reconciling the seemingly contradictory objectives of making profits and providing
affordable and accessible drugs to BoP consumers. The existing players integrated their profit
and social responsibility goals by packaging product offerings in quantities that would be
affordable for BoP consumers. Sanofi-Aventis aimed to develop an innovative approach.

PRAYAS: CONCEPTION AND INCEPTION

Opportunity Analysis

To understand BoP markets and identify opportunities, company executives visited a large
number of doctors and chemists in rural areas. In addition, the company’s internal research
group analyzed market data and executive reports related to such markets. Useful insights
about the physicians and medical practices in rural areas emerged from this exploration.

Most physicians in rural are s lacked both cutting-edge medical knowledge and the resources
to periodically or routinely refresh and upgrade their knowledge. While physicians in urban
areas had numerous o portunities for continuing medical education through seminars,
conferences, get-toget ers and other professional meetings, their rural counterparts did not
enjoy such opportu ities. Lack of computer access and skills combined with low Internet
penetration posed challenges for self-learning. Here was an opportunity for major
pharmaceutical companies to facilitate a platform for medical education, but most remained

f Unorthodox promotions or transaction-based practices are often observed in rural geographies in India. It is a
business pra tice wherein a company offers perks and gifts to doctors in return for prescribing its drugs.
7 of 30 IIMA/MAR0422

uninterested in doing so because rural physicians were perceived as having low business
potential.

Vete understood this latent demand for a knowledge infrastructure in BoP markets. Bridging
this infrastructural gap was likely to be challenging and expensive. The company’s explora ory
efforts highlighted that a viable avenue for the education of rural physicians existed in the form
of professional meetings among doctors in a territory at district level centers established by the
Indian Medical Association (IMA). This gave the company an anchor for its foray into BoP
markets. Vete explained:

After studying this market, I told myself that although there was a more than 50%
market at the bottom, it would not be mine if I were to chase these consumers
through the traditional route of selling only medicines. I observed that in these
markets there was no gap of products, but there was a large gap of knowledge.
Essentially I am a pharmaceutical company and my aim should be to sell medicines
and not knowledge. But when I went deeper, I realized that if I integrate this
somewhere with my products, then there is a new and much stronger business
model waiting to unfold for us.

Vete and his team also observed the dominance and Godlike power that physicians had over
their patients. Patients almost never questioned physicia s and religiously followed their
advice. Unfortunately, these doctors relied on traditi nal and often outdated medical
knowledge and practices and were unaware of new d velopments in medicine. As a result,
doctors often misdiagnosed medical problems and consequently recommended inappropriate
treatment. It was also common for BoP patients to receive symptomatic treatment from doctors
(i.e., based on their symptoms rather than diagn sis of the cause), resulting in sub-optimal
disease management. This eventually led to the recurrence of diseases, faulty treatment and a
greater economic burden on the individual and society at large. Vete recalled:

I said to my management that there is market out there but you can’t be in it in the
usual way. Availability of medicines is not an issue in these markets but there is a
clear gap in the knowledge infrastructure. There is a possibility of creating a
medical university for doctors where they can meet in an organized and structured
way on a regular basis to exchange knowledge with the help of senior doctors and
specialists. Unlike in the metros where you have specialist doctors, in rural areas
you have an all-in-one kind of a doctor setup. Basically it’s about selling my
products through a socially sustainable model that will be efficient and capable of
fulfilling the latent needs of doctors in Tier II and rural areas. It is about making
these doctors my representatives who will prescribe my medicines in return for us
providing them with appropriate and unbiased medical knowledge on a timely and
continuous basis.

Vete and his team designed a healthcare initiative that they named Prayasg with the overall aim
of making quality healthcare accessible to the BoP population. Prayas aimed at bridging the
diagnosis-treatment gap through a knowledge-centric platform founded on the idea of

g Prayas is a Hindi word meaning “endeavor.”

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providing continuing medical education (CME) to rural doctors and providing quality
medicines at affordable rates to BoP patients. For a private company in an industry tightly
controlled by the government, launching an unconventional initiative and simultaneously
achieving its commercial and social objectives was no easy task.

“Workshop” Solution

Executing a grassroots program for the CME of rural doctors involved several challenges. The
first was to identify an educational platform with a structured format that could b replicated
and scaled up. After looking at various alternatives, the Prayas team selected w rkshops as a
viable platform. This platform involved three steps. The first step was to select a pool of doctors
specializing in different therapy areas from the Tier I markets. They were called key opinion
leaders (KOLs). Next, the KOLs imparted training to a cadre of expert docto s, also from Tier I
areas, known as “mentors”. In the third step, the mentors travelled to s ecific rural areas to
interact with and train local physicians. These rural physicians were referred to as “mentees”.
The selected mentors volunteered to participate in CME workshops for mentees in small towns
and rural areas. The KOL-mentor matching facilitated the flow of current state of knowledge
and practice from super specialist “experts” from Tier I markets to rural doctors through the
active involvement of mentors. For the KOLs, the attraction of Prayas was having their name
associated with an initiative focused on the social objective of reaching beneficiaries through a
broad platform. For the mentors, the motivation was the opportunity to network and
collaborate with KOLs. For mentees, this program gave them a much-needed opportunity to
upgrade their medical knowledge and practice. Thus, Prayas created a win-win situation for all
involved (see Exhibit 7).

Vete’s team collaborated with external and inter al sources to create training modules for
Prayas workshops. These training modules included the following:

 Facilitating knowledge developme t in various therapy areas, thereby enabling

doctors to diagnose diseases based on sound clinical judgment and helping them
strengthen diagnosis through up-to-date clinical tools.
 Sharing current medical information along with practical insights through the use of
charts, algorithms, tables, case studies and quiz-based modules.
 Providing knowledge and information on accessing medical portals for medical
knowledge and facilitating a mentor-mentee linkage so that mentees could approach
mentors for consultations as needed.

After completing four to five sessions on a particular ailment or topic, the mentee doctors
received certificates of participation, acknowledged by global boards such as the American
College of Physicians (ACP), with which Sanofi-Aventis was associated for providing
knowledge-based training programs. The process was designed in such a way that there was
some benefit for everyone involved at every level. Rajadhyaksha commented:

Prayas is a platform where we provide unbiased knowledge that is scientifically

validated. Our workshops are accredited by globally reliable bodies. Basically, we have
created a system wherein a link is established between primary, secondary and tertiary
level physicians, designated as mentee, mentor and key opinion leaders, respectively.
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The tailor-made training modules for Prayas workshops are prepared by incorporating
the opinions and feedback of KOLs, mentors and mentees.

The purpose of the workshops was primarily to share contemporary medical informati n
(Exhibit 8 shows a Prayas mentor-mentee workshop in progress). Although the larger objec ive
of the company was to stimulate business for its products in BoP markets, Prayas workshops
focused exclusively on knowledge sharing. Specific brands were never promote . This
emphasized the unbiased nature of the knowledge exchanged through the works ops and
fostered trust in the program. The company appropriated commercial value f om Prayas
through post-workshop visits by its representatives to doctors who partici ated in the
workshops. Talele explains:

When we decided to launch Prayas, all pharma companies were providing disease
education but no one was in the field of health education. What used to happen was
that a representative from a company would go to the doctor and talk about the
diseases that his drug was able to cure. So what these other companies created was
a tangible brand while what Prayas provided was intan ible—it was a service
brand in its own way. This was a differentiator for us. In our workshops, brands are
never discussed. The primary thing we wish to create is value, a true learning value
for these small town doctors. In return we get trust from these doctors. Typically,
what happens is when people start seeing value in the program, a reciprocal feeling
of gratitude starts building up. So in this subtle way, Prayas’s objectives are aligned
with our business objectives and that is where the b siness link comes in for us.

Phase I of Prayas was rolled out in May 2009 in a single geographical cluster comprising five
states—Uttar Pradesh, Bihar, Jharkhand, Uttaranchal and West Bengal. Phase II was launched
by the company in January 2010 across Madhya Pradesh, Chhattisgarh, Andhra Pradesh and
Maharashtra. In phase III, which started from July 2010, the company covered Tamil Nadu,
Gujarat, Rajasthan, Orissa and the Northea tern states of India. In these three phases, the
company provided training to nearly 9,600 medical practitioners registered under the Indian
Medical Association.

Product Portfolio and Branding

After creating an intangible brand through medical education, the second challenge facing Vete
and his team was to develop a product portfolio suited to the needs of the BoP market. To
design an ideal product portf lio, Sanofi-Aventis relied on its in-house research and on data
from organizations such as the World Health Organization (WHO) and the United Nation
Children’s Fund (UNICEF). The research revealed that out of the total 1,963 million estimated
prescriptions generated by doctors in low-tier markets, the majority were for ailments related to
respiratory, gastrointestinal, infectious and nutritional diseases, showing the clear domination
of the acute care seg ent among BoP patients (see Exhibit 9 for prescription behavior in value
and volume terms across low-tier markets). The Prayas team decided to design an acute care
product portfolio (see Exhibit 10 for details of Sanofi-Aventis’s commercial operations).

The next ch llenge involved building an identity for the product portfolio with careful
branding. Sanofi-Aventis was predominantly known as a player in Tier I markets and its
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presence in BoP markets was negligible. A strong brand identity was needed to secure doctors’
participation and patronage and to achieve rapid market penetration. The choice facing the
company was to associate Prayas with one of its three business units, Hoechst, Roussell or
Sanofi, in order to achieve the desired goals. Market research conducted by the company
indicated that Hoechst was a more popular and valued brand among doctors in BoP markets.

Vete and his team realized that their key advantage was the Hoechst legacy. The company had
many brands in the acute care segment from the erstwhile Hoechst brand. Over the years, many
of these brands had been phased out as the company went through multiple mergers. However,
those brands still enjoyed the respect and patronage of doctors. Therefore, the com any decided
to leverage the Hoechst brand for the Prayas product portfolio.

Product Manufacturing

Another challenge before Vete and his team was to organize a manufacturing system for the
product portfolio so that the product offerings were affordab e for BoP patients. The company’s
in-house manufacturing was not suitable for producing low-cost drugs in the acute care
segment as it was geared towards producing expensive drugs in the chronic care segment for
Tier I markets. The company needed manufacturing alterna ives that could support the
production of affordable drugs without compromising quality. Its manufacturing plants were
set up on stringent Western drug authority norms as they catered to domestic and international
businesses. After contemplating various options, the company decided to use third-party
manufacturers, a move which resulted in significant cost efficiencies.

Sales and Distribution

Although the Indian pharmaceutical market presented lucrative opportunities, the fragmented
distribution system, comprising of nearly 60,000 distributors and 800,000 retailers combined
with numerous small pharmacies, posed grassroots level challenges for large companies to
effectively manage their sales operations. The Indian pharmaceutical industry was
characterized by the presence of a very strong distributors’ association, which, unlike its
consumer goods counterpart, was not easily convinced to work in tandem with the industry’s
ambitious growth and expansion plans. Moreover, poor road and transport infrastructure in the
BoP markets were major impediments to developing efficient distribution networks. Ensuring
product availability in these markets was full of complexities and could result in significant
additional costs, hurting product affordability. This lack of distributional access was one of the
key reasons pharmaceutical companies hesitated to participate in BoP markets.

Sanofi-Aventis faced problems when it tried using its existing distributors for Prayas (see
Exhibit 11A for the company’s distribution structure). Those distributors were unwilling to
supply products to remote locations and to adhere to the company’s schedule and budget
expectations. The delay in supplying products to rural markets resulted in a time gap between
Prayas workshops and the actual availability of the products at pharmacies in those locations.
Although the mentee doctors prescribed the company’s medicines after participating in Prayas
workshops, poor distribution meant that the drugs were not always available at the pharmacies
on time, resulting in loss of business for the company.
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To address this challenge, Vete and his team contemplated various alternatives to ensure t e
easy and timely availability of their products without upsetting the distributors’ association.
Appointing new distributors would require the permission of the distributors’ association,
making this choice impractical. The Prayas team decided to add a new sub-channel to its
distribution network that did not come under the purview of the association. As per the norms
set by the association, channels at a level lower than the distributor did not requi e the
association’s approval.

The team identified a sub-channel comprising of cluster stockists. The cluster stockists worked
for the company and were appointed to supply the range of Hoechst products for the BoP
market to retailers in small towns and rural areas. The business associates or cluster stockists
were located at the talukah level in each district. To manage the cluster stockists in various
territories, the company, under a special arrangement, appointed some of its existing territorial
distributors as super distributors. Under the new arrangement, the super distributors were
responsible for supplying Hoechst products to cluster stockists in their respective territories,
and for this added responsibility, they were given an extra commission (see Exhibit 11b). Talele
explained:

A consumer goods company works with not more than 400-500 distributors while a
pharma company deals with 1,500-1,600 distributors, out of which only 400-500 are
active and the rest are all inactive. So what is the point in appointing many
distributors who are not going help in augmenting sales? Under our new
distribution arrangement, we are circumventing the existing problems. Essentially a
super distributor is a regular Sanofi-Aventis distributor, but for the additional
Hoechst drugs that he supplies to the cluster stockists, we give him an additional
margin of 5%. In this new role as a super distributor, what he cumulatively gets is
his 8-10% routine margin plus the additional 5% for supplying our goods to the
cluster stockist. In exchange, just like oth r carrying and forwarding [C&F] agents,
we use his space to store our goods—the Hoechst range of products—for two to
three months, which we were not all wed to do earlier. Apart from that, unlike the
case with earlier models, he himself remains motivated and active in supplying our
goods to retailers in the interiors on a timely basis, making our work easier.

GROWING COMPETITION

Sanofi-Aventis was not alone i identifying a business opportunity in the BoP markets. The
slowdown of the Indian economy as result of the global economic crisis further contributed to
pharmaceutical companies’ growing interest in rural markets, which were largely unaffected by
the downturn. Many Indian pharmaceutical companies such as Lupin, Elder Pharmaceuticals,
Ajanta Pharma, Himalaya Drug Company and Piramal Healthcare were aggressively targeting
rural markets (see Exhibit 12) and beginning to generate revenues from these markets (see
Exhibit 13). Different companies adopted different approaches for penetrating rural markets.
Some chose to modify their product lines, some used smaller packs and others strengthened the

h A taluka is an administrative division in some parts of India. A taluka is a city or town that serves as the
headquarters for neighboring small towns and villages. It is also a unit of local government and has powers to
exercise certain fiscal and administrative decisions over the villages and municipalities in its jurisdiction.
12 of 30 IIMA/MAR0422

reach of their distribution network. Like Sanofi-Aventis, some companies chose to leverage the
medical education approach. For instance, Lupin used a business model very similar to Prayas.
Commenting on this, Shakti Chakraborty, president, India Region Formulations, Lupin, said:

The company has a very strong below-the-line programme reaching out directly to
doctors—specifically in rural areas—aiming to educate them on best practices,
technological developments, benefits and new age treatments.17

Elder Pharmaceuticals also had plans to promote doctors’ education in rural m rkets. An
August 2009 Express Pharma article reported that:

Going ahead the company would definitely be looking at smaller pac sizes for
rural markets. For example, plans are already made to launch [a] topical pain
reliever called Ontac Gel in a small C pack. Outreach techniques to
target [the] rural audience would include Mobile Health Clinics [and] Continuous
Medical Education Programmes for healthcare professionals.18

Among pharmaceutical MNCs, Sanofi-Aventis had shown better competitive performance in

recent years than its counterparts. However, the rapid growth of some Indian companies in
low-income markets posed a more serious challenge to the Prayas team. For instance,
companies such as Mankind Pharma and Macleods Pharmaceuticals had been very successful
in gaining share in low-tier markets.19 Although Sanofi-Aventis had anticipated intense
competition in the BoP markets, the aggressive posture adopted by some of its global peers in
these markets had been unexpected. For instance, Switzerland-based Novartis entered the low-
tier markets in India through a medical awareness platform by focusing on directly serving end
consumers under its Arogya Parivar initiative.

On the other end, Novo-Nordisk and Eli Lilly, Sanofi-Aventis’s major competitors in diabetes
care, entered BoP markets with their well-established chronic care portfolio. To capitalize on the
anticipated growth and opportunity in the chronic care segmenting low-tier markets, Novo-
Nordisk focused on its core portfolio of diabetes care (see Exhibit 12 for market approaches and
promotional initiatives of various multinational and domestic pharmaceutical companies in BoP
markets). According to a Medi-Source India report, chronic care was one of the fastest growing
therapeutic segments in India. For example, the anti-diabetic category in India grew 29%
annually in 2010, while cardiovascular and nervous system disorder drugs witnessed 22%
growth in the same period. With 199 million Indians expected to reach the critical age of 60
years and above by 2028, the Indian geriatric population was another key segment that held
the potential to influence the sales of chronic care drugs in the coming years.20

IMPORTANT ABOVE
THE ROAD AHEAD FOR PRAYAS

The success of the Prayas model in its initial phase gave Vete and his team members the
confidence they needed. 2010 was a particularly good year for Prayas. Operating in just two
geographical clusters, the initiative registered a sales turnover of nearly INR 200 million.
Having demonstrated the business viability of the model to the top management, the next task
for the Prayas team was to scale it up and expand it across the country. The company had set
the sales target for Prayas at INR 5.5 billion by 2016. However, with competition intensifying in
13 of 30 IIMA/MAR0422

the BoP markets and rival companies imitating the model, it now appeared that achieving that
target would be more challenging than anticipated.

Facing Competition

Prayas’s competitors were fast catching up by making aggressive resource commitments to

their initiatives. Major challenges before the team were responding to the competition, making
the Prayas advantage sustainable, and retaining and adding more KOLs, mentors and mentees.
Vete commented:

While we were working on channelizing doctors and rural patients through the
medical education concept, some of the rival companies started aggressive efforts to
imitate our model. To checkmate us, some of the companies even met every mentor
of Prayas and made lucrative offers. Not only that, they got h ld of all our
education material and content. With all this, my competitors will enter the market
with four times more resources than us.

The other significant challenge confronting the company was retaining the sales force associated
with Prayas. Contrary to established industry practice, Sanofi-Aventis had created an external
sales force for Prayas. However, with competitors launching s milar initiatives in the wake of
Prayas’s success, their well-trained sales force suddenly became an easy target for poaching.
Vete said:

We opted for an external field force model, which was not successful in the pharma
industry. Going against the set rules, we actually took a calculated gamble and
decided to work significantly towards improving the efficiency of our sales force.
Despite the fact that it was an outsourced external field force, we increased their
salaries and incentives and also provided them with superior training on a timely
basis from our end. With the increase i salary, greater training and the success of
Prayas, this sales team became m re competent. The majority of them had
developed cordial relations with rural doctors due to our training. Owing to these
qualities, they suddenly became hot property in the market for competitors to
poach. We had anticipated this situation, but that it would happen so soon and in
such magnitude surprised us.

Building a Digital Interface

Sanofi-Aventis had primarily developed two capabilities through Prayas—one in the form of
collaborative partnerships or networking, and the other in the form of a medical knowledge
platform. Going forward, Vete wanted to develop a third capability: a digital interface that
could further enhance the ability to forge partnerships and extend the medical knowledge
platform. The first s ep in a building digital interface was to create a Web portal that would
serve as a single s urce for all the information needs of doctors. Vete was fully aware of the
challenges invol ed in developing a digital platform. He knew it could be a prolonged and
expensive affair, given the poor infrastructure in BoP markets and the lack of technology
awareness among users.
14 of 30 IIMA/MAR0422

Prayas for Patients and Pharmacies

Vete also planned to extend the Prayas model to the patient and pharmacy levels. He felt that
updating the knowledge of chemists/ pharmacists and imparting relevant medical education to
consumers could be another innovative route of increasing the company’s sales, sustaining its
existing market position and keeping competitors at a distance. On the pharmacy front, the
team began by pinpointing problems at the pharmacists’ level and through this e ercise,
identified opportunities to address those problems. Vete noted:

I went to various pharmacies and looked at the consumer behavior there. What I
observed is that people were asking for medicines in small quantities, for example:
“5 rupees kadena ya 10 rupees kadena” [give me 5 rupees’ worth of this medicine or 10
rupees’ worth of that medicine]. It all depended on how much money they had with
them. The chemist would ask them about their ailments and accordingly
recommend medicines. We found that beyond a certain level, people did not go to
doctors because they couldn’t afford prescriptions; so they took medicines from
chemists. We studied what the chemist was doing, who the chemist was, how
educated he was, whether he was giving quality medicines and how he spoke to
these people. All this provided an entirely different level of opportunity. We also
found that at the chemist level in rural areas, product by local companies were
being sold in greater quantities, so quality was also compromised.

Expanding Product Portfolio and Increasing Prescriptio s

Going forward, Vete and his team were rethinking their choice of therapeutic segment for their
product portfolio. They had to decide whether the company should stick to its present acute
care product portfolio in low-tier markets or expand it by including chronic care drugs. Owing
to India's rapid economic growth and changing lifestyles, even among the low-income
population, there had been a gradual shift in disease patterns in lower-tier markets. Along with
this, a growing awareness of health issues and superior diagnosis made the chronic care
segment a promising area for pharmaceutical companies in the long run (see Exhibit 14 for year-
on-year contribution and CAGR of various therapy areas in Tier I and II markets).

Although the change in disease pat erns in low-tier markets indicated significant opportunities
for Sanofi-Aventis in chronic care, it was not easy for the Prayas team to effectively manage
both acute and chronic care portfolios. Vete and his team members were aware that, going
forward, they would face com etition from two different sets of pharmaceutical companies, one
with a strong presence in acute care and the other with a product portfolio that was equitably
balanced across major the apy areas (see Exhibit 15 for the relative contribution from major
therapy areas for various pharmaceutical companies). The Prayas team had to make a crucial
decision: Should they remain focused on the acute care segment for the next few years,
consolidate their position and gain a firm footing in that segment in low-tier markets or should
they expand their product portfolio by adding chronic care products for balanced growth?

Another challenge before the team was making Prayas self-sustainable while achieving
significant growth. Although the sales contribution from Prayas had almost tripled since its
launch, registering 100% growth year-on-year, sustaining that momentum was not a simple
15 of 30 IIMA/MAR0422

matter. The company’s management believed that although Prayas’ knowledge-centric

approach was gaining acceptance among doctors in semi-urban and rural areas, translating it
into substantial prescriptions and business was still a challenge. Although the social value o
Prayas was immense, its commercial feasibility remained to be convincingly proven. Sanofi-
Aventis’s top management was still wondering whether business models based on s cial
themes could really yield profits similar to mainstream business models.

Vete had to compete with other business units within Sanofi-Aventis for the capital resources he
desperately needed for the rapid expansion of Prayas. He had to strike a balance between
expanding the program geographically and consolidating its market position i the existing
clusters to generate the economic rents needed for expansion. Prayas’s con ribution to the
company’s revenue was rather small. He was well aware of the company’s performance in the
Indian market in 2010. In 2010, the company’s sales grew by 11% to INR 10.89 billion (see
Exhibit 16) against the 16.5% growth of the domestic market.21 To extend the Prayas initiative,
he would need significant resources and capital investment, which could burden the company’s
profitability.
 16 of 30 IIMA/MAR0422

EXHIBIT 1: DEFINITION OF TIER-WISE MARKET SEGMENTATION AND

PERCENTAGE CONTRIBUTION

Class of Population Number of % Market Type of Type of

Towns Cities/Towns Contribution Cities/Towns Market
Class IV <20,000 --- 19 Rural Tier II
and >
Class III >20,000 944 10 Urban Type Tier II
<50,000
Class II >50,000 345 10 Urban Type Tier II
<100,000
Class IA >100,000 246
<0.5 million
33 Pure Urban Tier I
Class I >0.5 million 41
<1 million
Metro >1 million 23 28 Pure Urban Tier I
Note:
- Definition of Tier II by the Indian government is for 2009 and based only on demographic criteria.
- There are villages beyond Class IV towns that are scarcely populated. Villages are not defined in terms of
population, but by “non-urban” status.
Source: Company records.
17 of 30 IIMA/MAR0422

EXHIBIT 2: SALES TURNOVER OF LEADING PHARMACEUTICAL COMPANIES

IN TIER I MARKETS

Company Sales Turnover For Year 2009 (in INR millions)

Ranbaxy Laboratories Ltd 12,246
Cipla Ltd 12,390
GlaxoSmithKline (GSK) Pharmaceuticals Ltd 9,056
Sun Pharmaceutical Industries Ltd 9,722
Zydus Cadila 8,763
Piramal Healthcare 7,902
Lupin Pharmaceuticals Ltd 6,635
Alkem Laboratories Ltd 6,181
Sanofi-Aventis 6,446
Abbott Laboratories 5,731
Pfizer Ltd 5,587
Emcure Pharmaceuticals 5,300
Dr. Reddy’s Laboratories 5,282
Aristo Pharmaceuticals Ltd 4,526
Wockhardt Ltd 4,331
Mankind Pharma 4,616
Micro Labs Ltd 3,751
Alembic Pharmaceuticals 3,735
Macleods Pharmaceuticals Ltd 3,775
FDC Ltd 3,651
Source: Company Records (ORG IMS Data).
18 of 30 IIMA/MAR0422

EXHIBIT 3: RELATIVE PERFORMANCE OF SELECTED PHARMACEUTICAL

COMPANIES IN INDIA
(In INR millions)

Company Sales Sales Sales Sales

(2006) (2007) (2008) (2009)
Cipla 13,840 16,060 18,270 21,550
Ranbaxy (Daiichi)** 40,587.1 41,844.9 43,083.6 45,21 .8
GSK India** 14,120 15,040 14,770 17, 30
Nicholas Piramal India 15,040.2 17,032.8 19,974.2 2 ,839.4
Zydus Cadila 13,082 15,014 17,191 17,374
Sun Pharmaceutical 13,530.1 17,221.3 24,273.5 28,336.5
Lupin Pharmaceuticals 17,503.4 20,716.5 26,098. 29,419.4
Abbott Laboratories* 5,405.0 6,361.2 7,051.0 8,002.8
Pfizer India* 6,510 7,060 7,510 9,030
Dr. Reddy’s Laboratories 6,400 7,250 33,865 40,419
Wockhardt** 17,290 24,909 35,898 45,014
Sanofi-Aventis** 9,366.61 9,316.98 10,294.48 9,957.88
Torrent Pharmaceuticals 5,240 6,380 6,700 8,040
Notes:
* Sales figures for the financial year ending November.
** Sales figures for the financial year ending December.
The remaining sales figures are for the financial year ending in March.
Source: Featured companies’ websites.
19 of 30 IIMA/MAR0422

EXHIBIT 4: ALL INDIA POPULATION CITY/ TOWN-WISE

Note: In the above graph, the percentage signifies population. Metros and Tier I cities are classified as
urban markets, Tier II to Tier VI are classified as peri-urban, and villages are classified as rural markets.
Source: Confederation of Indian Industries-PricewaterhouseCoopers (CII-PwC) Report, “India Pharma Inc.:
Capitalising on India’s Growth Potential,” Pharma Summi 2010, November 27, 2010.

EXHIBIT 5: HEALTHCARE PENETRATION IN INDIA

Indicator Rural Population Urban Population

Hospital % 31 69
Hospital bed % 20 80
Doctors % 08 92
Doctors/100,000 people 05 50
Spurious pharmaceutical sales % 75-80 20-25
Source: CII-PwC Report, “India Pha ma Inc.: Capitalising on India’s Growth Potential,” Pharma Summit 2010,
November 27, 2010.
20 of 30 IIMA/MAR0422

EXHIBIT 6: KEY CHARACTERISTICS OF SEMI-URBAN AND RURAL

VS. METROS AND TIER I MARKETS

Particulars Semi-Urban and Rural Metros and Tier I Markets

Therapeutic mix
Doctor population*
Local competition
Markets
Chronic therapies (10-20%) Chronic therapies (35-40%)
Acute therapies (70-80%) Acute therapies (65-60%)
Specialists (5-10%) Specialists (50%)
GPs (MBBS) and RMPs (90-95%) GPs (MBBS) and CPs (50%)
Very high Relatively low

Distribution setup Hub and spoke Multi-layered appropriately

(Tier III and IV towns form the hub structured and well connected
while surrounding small towns are
supplied from the hub)
Field force Shortage of quality field force Availability of better quality field
force with superior product
k owledge
* GPs are general practitioners, RMPs are rural medical practitioners and CPs are consulting physicians.
Source: Manoj Garg and Perin Ali, “India Pharma Sector – Delving Deeper,” Edelweiss Securities Limited, April, 26,
2011, http://www.scribd.com/doc/54137140/Pharma-Sector-Edel, accessed on December 3, 2014.
21 of 30 IIMA/MAR0422

EXHIBIT 7: EDUCATIONAL STRUCTURE OF PRAYAS

KOL

Mentors

Flow of
Education
Mentees

Patients
(Ultimate Beneficiary)

Source: Company records.

EXHIBIT 8: PRAYAS WORKSHOPS

A Prayas mentor-mentee workshop in Hyderabad, Andhra Pradesh, India

Source Com any records.
22 of 30 IIMA/MAR0422

EXHIBIT 9: PRESCRIPTION BEHAVIOR ACROSS LOW-TIER MARKETS

Chronic Acute
Market Value of Prescriptions 23.1 104.3
(in INR millions) *
CAGR (in %) ** 20.5 14.7
Number of Prescriptions 90 1873
CAGR (in %) 2.9 4.5
Notes:
* The market value signifies the revenues generated from prescriptions prescribed by the doctors in low-
tier markets.
** CAGR signifies compounded annual growth rate.
Source: Company records.

EXHIBIT 10: SANOFI-AVENTIS PRODUCT SEGMENTS FOR U BAN AND RURAL MARKETS

Commercial Operations (1) for Tier I and Commercial Operations (2) for Prayas markets
Metro Markets (population above 500,000) (population less than 100,000)
Cardiology/ Cardiovascular Drugs Internal Hoechst Channel
Medicine Business Unit Business
Hospital Care Pain Portfolio All Hoechst OTC drugs
range of
products (mix of
all)
Diabetes Care Allergy Mass care,
Portfolio traditional
Hoechst
products range
On-site (Central Nervous System) (Neuro- Gastro-andro Rx (prescription
psychiatric) portfolio drugs) for Tier II
sold through
Prayas
Anti-infective Future Launch
Oncology Future Launch
Bone and Joint Future Launch
Source: Company records.
23 of 30 IIMA/MAR0422

EXHIBIT 11A: EXISTING DISTRIBUTION STRUCTURE OF SANOFI-AVENTIS

Sanofi-Aventis Distributor Wholesaler Pharmacists

warehouse (gets 8-10% (gets 6-8% (gets 16-20%
margins) margins) margins)
margi s)

Source: Created by the authors based on discussions with executives of the company.

EXHIBIT 11B: NEW DISTRIBUTION FORMAT FOR HOECHST BUSINESS U IT

Sanofi-Aventis Distributor Wholesale

er Pharmacists
warehouse

Super
Distributor Cluster
(additional Stockist
margin paid at
5%)

Source: Created by the authors based on discussions with executives of the company.
24 of 30 IIMA/MAR0422

EXHIBIT 12: PROMOTIONAL APPROACHES OF VARIOUS PHARMACEUTICAL COMPANIES FOR

LOW-INCOME MARKETS

Company Market Approaches and Promotional Initiatives

Novartis Arogya Parivar (Health for the Family) is Novartis’s rural marketing initiative, where the
company markets its portfolio of drugs for common ailments such as diarrhea. Nutrition
for women and children is sold in smaller packs at affordable rates. The compa y also
organizes camps to increase health awareness. Through low-priced products and a
variety of packages (SKUs), this model catered to more than 16,000 pharmacies.
Pfizer Pfizer’s Sanjeevani targets Tier II, III and rural consumers. Under Sanjeevani, the
company primarily promotes its mature portfolio comprising of well-known brands with
the objective of extending it to low-income patients in a customized f rmat to suit their
requirements.
Novo-Nordisk Novo-Nordisk’s rural venture promotes its diabetes drugs through mobile clinics, by
launching public awareness campaigns on diabetes prevention and control and by
providing practical training to medical professionals on issues such as improving
diabetes treatment and reducing complications.
Eli Lilly Eli Lilly promotes tuberculosis education, diagnosis and treatment through its
association with the Self Employed Women’s Association (SEWA) in Gujarat.
Nicholas The company partnered with Sorento Healthcare Communications on an epilepsy
Piramal outreach initiative.
Ajanta Pharma Promotion is largely through participation in regional fairs, slides in local movie halls and
mobile vans.
The Himalaya The company launched a separate business unit, Zera, for its rural foray. Zera focused
Drug exclusively on expanding the company’s reach in Class II, III and IV towns and in
Company villages. Through Zera, Himalaya planned to reach out to more than 200,000 doctors
across the country.
Strepsils Created brand awareness using outdoor media, including hoardings at bus stands,
lozenges advertisements on buses, local billboards, advertising and promotional events at
bazaars and fairs in rural areas.
Sources:
Arshiya Khan, “Greenfield for Pharma Companies,” Express Pharma, August16-31,2009,
http://www.expresspharmaonline.com/20090831/market01.shtml, accessed on April 12, 2011)
IDFC-SSKI India Research, “MNC Pharma—New Avatar,” March,11,
2010,http://xa.yimg.com/kq/groups/8518353/118663540/name/MNC%20PHARMA%20IDFC%20SSKI.pdf, accessed
on April 15, 2011).
25 of 30 IIMA/MAR0422

EXHIBIT 13: SALES TURNOVER OF LEADING PHARMACEUTICAL COMPANIES

IN EMERGING URBAN AND RURAL MARKETS

Company Sales Turnover for 2009 (in INR millions)

Cipla 8124
GSK India 6541
Ranbaxy (Daiichi) 6673
Piramal Healthcare 6350
Alkem Laboratories 5202
Mankind Pharma 5748
Zydus Cadila 4754
Aristo Pharmaceuticals 4345
Sun Pharmaceutical 3533
Lupin Pharmaceuticals 3579
Wockhardt 2956
Dr. Reddy’s Laboratories 3118
FDC 3306
Alembic Pharmaceuticals 2824
Abbott Laboratories 2796
Pfizer India 2738
Macleods Pharmaceuticals 2517
Emcure Pharmaceuticals 255
Micro Labs 2 37
Sanofi-Aventis 2060
Source: Company records (ORG IMS Data).
26 of 30 A00008

EXHIBIT 14: CONTRIBUTION OF VARIOUS THERAPY AREAS

Therapy Year-on-Year Contribution—Overall Year-on-Year Contribution in Tier I Year-on-Year Contribution in Tier II

Areas (in%) (in%) (in%)
2004 2005 2006 2007 CAGR 2004 2005 2006 2007 CAGR 2004 2005 2006 2007 CAGR
Grand 213.6 232.6 273.7 310.9 131.2 141.7 161.7 183.2 82.4 90.9 112.1 127.4
Total
(in INR billions)
Anti-Infective* 19 20 20 19 13 18 19 19 18 11.1 21 21 21 21 15.5
Gastro* 12 12 12 12 13.3 11 12 12 11 11.9 13 13 13 13 15.2
Cardiology/ CV 11 11 11 11 15 12 12 12 13 13.1 8 9 8 9 19.5
Vitamins/Minerals/ 12 11 11 10 9.8 11 11 11 10 8.1 12 11 11 11 12.3
Nutrients*
Respiratory* 10 9 9 9 10.8 9 9 9 8 8.3 11 10 10 10 14
Pain/ 9 9 9 9 11.9 9 9 9 9 10.5 10 9 10 9 13.8
Analgesics*
Dermatology* 5 5 5 5 14.1 5 5 5 5 13 6 6 6 6 15.7
Neuro-psychiatry 5 5 5 5 15.5 6 6 6 6 14 4 4 4 4 18.8
Anti-diabetes 4 4 4 5 19.1 5 5 5 6 17.2 3 3 3 4 23.6
Gynecology 4 4 4 4 15.9 4 4 4 4 14.2 3 3 3 4 18.8
Others 2 2 2 2 14.2 2 2 2 3 14.1 2 2 2 2 14.4
Ophtha/Oto 2 2 2 2 14.9 2 2 2 2 14.5 2 2 2 2 15.7
Hormonals 2 2 2 2 14.4 1 2 2 2 14.5 2 2 2 2 14.3
Anti-parasitic 1 1 1 1 12.5 1 1 1 1 10.3 2 2 2 2 14.5
Vaccines 1 1 1 1 9.3 1 1 1 1 8.7 1 1 1 1 10
Stomatology 1 1 1 1 13.3 1 1 1 1 10.9 1 1 1 1 17.4
Anti-cancer 0 0 0 1 32.3 0 0 1 1 28.4 0 0 0 0 47.2
Hospital Solutions 0 0 1 0 1 .7 0 0 0 0 7.7 1 1 1 1 19.5
Note:
*Therapy areas that fall in the acute care category.
Source: Company records.
27 of 30 A00008

EXHIBIT 15: RELATIVE CONTRIBUTION ACROSS MAJOR THERAPY AREAS FOR VARIOUS PHARMACEUTICAL COMPANIES
(in %)

Company Anti-Infective Gastro Vitamins/ Respiratory Pain/ Dermatology Chronic Others

Minerals/ Analgesics
Nutrients
Sanofi-Aventis 4 1 0 12 23 5 33 29
Wockhardt 10 12 25 16 10 6 6 18
Alembic Pharmaceuticals 51 12 7 14 6 1 5 13
Dr. Reddy’s Laboratories 9 27 5 5 21 3 23 16
Lupin Pharmaceuticals 42 8 6 11 5 1 20 4
Sun Pharmaceutical 0 10 2 4 6 0 33 26
Pfizer India 9 9 20 32 9 6 6 23
Aristo Pharmaceuticals 46 19 5 4 9 1 10 7
Mankind Pharma 33 19 7 3 7 3 5 10
Zydus Cadila 9 16 5 11 7 2 21 47
Alkem Laboratories 60 11 11 4 10 0 1 5
Nicholas Piramal India Limited 18 10 6 19 10 6 15 7
(Piramal Healthcare)
Ranbaxy (Daiichi) 42 9 3 3 10 7 10 8
GSK India 16 8 14 11 10 20 3 16
Cipla 25 6 2 33 5 2 10 10

Source: Company records.

28 of 30 A00008

EXHIBIT 16: STANDALONE PROFIT AND LOSS ACCOUNT STATEMENT OF SANOFI-AVENTIS

(in INR millions)

Particulars 2010 2009 2008 2007 200

INCOME:
Sales Turnover 11072.6 9957.9 10294.5 9317 9366.6
Excise Duty 223.1 213.8 340.8 676.6 545.6
Net Sales 10849.5 9744.1 9953.7 8640.4 8821
Other Income 2674.2 1673.5 1254.3 9 6.4 712.09
Stock Adjustments 120.3 234.6 -223.6 182.60 223.6
Total Income 13644 11652.2 10984.4 9819.4 9756.7
EXPENDITURE:
Raw Materials 5510.2 5054.2 465 .9 4407.8 4509.9
Power and Fuel Cost 210.8 195 204.2 155.9 133.8
Employee Cost 1612.5 1410.3 1163.7 1008.3 758.8
Other Manufacturing Expenses 469 397.1 541.7 499.1 337.9
Selling and Administration Expenses 2141.6 1806.1 1442.9 1177.2 924
Miscellaneous Expenses 376.19 200.7 191 157.8 416.5
Less: Pre-operative Expenses Capitalized 0.00 0.00 0.00 0.00 0.00
Total Expenditure 10320.3 9063.4 8203.4 7406.1 7080.9
Operating Profit 3323.7 2588.8 2781.0 2413.3 2675.8
Interest 28.9 0.70 3.4 1.9 1.8
Gross Profit 329 .8 2588.1 2777.6 2411.4 2674.0
Depreciation 197.4 173.4 182.1 184.5 178.5
Profit Before Tax 3097.4 2414.7 2595.5 2226.9 2495.5
Tax 742.7 812.4 904.4 724.3 836.3
Fringe Benefit Tax 0.00 20.69 56.1 44 40.19
Deferred Tax 47.2 7.4 -27 14.4 -73.9
Reported Net Profit 2307.5 1574.2 1662.0 1444.2 1692.9
Extraordinary Items 755.3 -1.6 -3.7 5.69 -4.7
Adjusted Net Profit 1552.2 1575.8 1665.7 1438.5 1697.6
Figures are for the financial year e ding in December.
Source: Created from data extracted on Sanofi India Limited from Indiainfoline.com, accessed on April 12, 2011.
29 of 30 A00008

Notes

1P. T. J. Datta, “MNC Drug-makers Allay Fears of Rise in Price,” The Hindu Business Line, Mumbai edition, August 4
2011, 4.
2 “Capitalising
on India’s Growth Potential: Medical Device Industry Will Not Be Left Behind,”Media Source Asi ,
Market Trendz & Analysis, 2010, accessed April 15, 2011,
http://www.medisourceasia.com/markettanalysis%5C12_2010_1.htm.
3 GautamKumra, Palash Mitra, and Chandrika Pasricha, “India Pharma 2015—Unlocking the Potential of the Indian
Pharmaceuticals Market,” McKinsey and Company, accessed May 31, 2011,
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19 Manoj Garg a d Perin Ali (2011), op. cit.

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