Revamping multi-tier distribution: Ensuring consistent availability for India's pharma growth

Chandrachur Datta, Partner, Vector Consulting Group explores how revamping the multi-tier distribution system with a demand-driven approach can optimise inventory, improve stockist efficiency, and ensure seamless access to medicines, benefiting pharma companies, stockists, and patients alike

- Chandrachur Datta

India's pharma market is on a rapid growth trajectory, projected to reach $130 billion by 2030, driven by increasing affluence, improved health-care access and rising income levels. However, despite this significant opportunity, pharma companies struggle to ensure consistent product availability at chemists across the country.

The cost of inconsistent quality

A survey by Vector Consulting Group (n=934 chemists) revealed that even top pharma firms have only 60-85 per cent brand reach at chemists, leading to frequent prescription and substitutions.

This is despite companies carrying high inventory in supply chain to prevent this.

To address these issues, it's crucial to grasp the root cause, which create these inefficiencies. Understanding the intricacies of the multi-tier distribution system is the first step towards identifying and solving the problem.

Understanding the multi-tier distribution system

Pharma companies in India are typically structured into distinct therapeutic areas, each managed as a quasi-business unit with dedicated sales teams and tailored marketing strategies. Products from each division reach chemists through a network that includes company central/regional warehouses, carrying & forwarding agents (C&F), and stockists/sub-stockists. While central and regional warehouses and C&Fs may serve multiple divisions, the further distribution channels are customised to meet the specific needs and dynamics of each therapeutic segment. Additionally, each therapeutic division works with a unique set of stockists across the country. There may be some overlap, but not all stockists handle all therapeutic divisions, and not all divisions engage with every stockist. There are two kinds of stockists in India: