With its vast size and patient base, India's extra-urban geographies now offer a huge and attractive opportunity to pharmaceutical companies. While some leading players have already moved in and strengthened their presence, an enormous untapped potential still exists for others - especially at a time when the urban markets are experiencing a high degree of saturation and fragmentation. Read this white paper from the IMS Consulting Group which provides insights on the opportunities and challenges of operating in the extra-urban pharma market.

1. Extra-Urban Evolution:
TheVast Potential Outside India’s Cities
By Mahesh Kalsekar and Mamata Kulkarni

2. With more than 5,000 small towns and
some 638,000 villages, India’s vast extra-
urban regions have long challenged a
country eager to fortify its economy and
elevate the standard of living for its 1.1 bil-
lion people.
Widespread illiteracy has interfered with
attempts to educate; a poor transportation
infrastructure has historically impeded
farmers in their efforts to get their produce
to market; inadequate communications
technologies have impaired efforts to get
the news, including basic weather forecasts,
in and out of the smaller towns. Healthcare,
for many,has hung in the balance.
All of that is rapidly becoming history.
Today India’s extra-urban regions boast
a 65% literacy rate, a growing number of
internet users (which already accounts for
39% of Internet users across India)1
, a ris-
ing network of connective roads, new in-
novative communications channels, and
new opportunities for those seeking a
greater quality of life.
This modernization of rural India, which
has accelerated over the last five years, has
had a marked impact on the economy.
According to the Rural Marketing As-
sociation of India, the rural market now
contributes more than half of Fast Mov-
ing Consumer Goods (FMCG) and dura-
bles sales in India and current projections
from the Indian Brand Equity Foundation
(IBEF) suggest that the rural consumer
market of the FMCG goods will reach
US$425 billion in 2010-11.
Government programs aim to further
boost rural economies with programs such
as the National Rural Employment Guar-
antee Act.The Union Budget for 2010-11
has hiked the allocation under the act to
US$ 8.71 billion.This extraordinary allo-
cation aims to guarantee one hundred days
of wage-employment per year to adults
in rural areas—greatly increasing income
levels,consumer activity,and personal pur-
chasing power.
The emergence of new healthcare needs in the
rising rural sector
All signs point to a much stronger extra-
urban economy and, with it, significant
wealth creation. And, as with all strength-
ening economies, there is a greater focus
on health, as consumers, now equipped
with more disposable income, have begun
to demand the best available treatments.
The needs in extra-urban India, however,
are different than those in the urban cent-
ers.While specialty and oncology products
gain ground in the urban Indian markets,
rural India is in particular need of prod-
ucts that offer treatments in the areas of
infection, gynecology, hypertension, and
diabetes. India is, in fact, considered the
diabetes hub of the world, and valuable
contributions to the population’s health
can and must be made by those who can
offer treatments in this area.
Today, some 1,500 brands have penetrated
the rural market, crossing the US$200,000
threshold 2
.At the moment, anti-infectives,
gastrointestinal products, and respiratory
and pain medications are the top-selling
categories in rural India. Cough syrups
such as Phensedyl and Corex are, for their
part, the top-selling respiratory products,
while Taxim (an anti-infective) is the third
largest brand in the extra-urban market
followed by Voveran, for pain manage-
ment. While Indian companies such as
Mankind,Aristo, Piramal healthcare, FDC,
and Alkem have traditionally been more
aggressive in these geographies, recently
a handful of multinational interests—No-
vartis and Aventis among them—have
started to design and test “extra-urban”
strategies.
Nevertheless, urban areas remain the fo-
cus of most multinational companies,leav-
ing opportunities in extra-urban regions
unfulfilled. While 60% of India’s pharma
market is generated from urban markets3
,the
modernizing rural sector comprising some
700 million ever-wealthier people repre-
sents enormous opportunities for pharma-
ceutical companies—especially at a time
when the urban markets in India are experi-
encing both saturation and fragmentation.
Consider this:Today India’s urban doctors
are called upon by pharmaceutical compa-
nies at least 10 times daily 4
. Some 250,000
physicians work 5
in these urban areas of
India. Per capita spend on medicine has
lately reached approximately US$35 6
.And
though the top pharmaceutical companies
are now unleashing an average of 2,000
sales reps on these metropolitan physi-
cians7
, the majority of medicines are more
than ten years old. Even mature products,
in India, are urban centric.
Contrast that to the nearly 400,000 doc-
tors 8
of rural India who continue to work,
for the most part, without the benefit of
consultation with the sales representatives
of pharmaceutical companies. There, in
rural India, the per capita spend on medi-
cine averages just US$2 9
per year and the
large population does not typically benefit
from such necessary agents as anti-infec-
tives. For example, outpatient use of anti-
infective medicines in urban India is 24
DID (defined daily dose per 1,000 inhab-
itant per day) but as low as 3 DID10
among
the rural population. By comparison, out
patient use of anti-infectives in most of the
developed European countries is in the
range of 18- 30 DID.
What We Know
India Town Class Definitions
UrbanExtra-Urban
Metro >= 1,000,000 people
Class I Town 100,000 – 999,999 people
Class II Town 50,000 – 99,999 people
Class III Town 20,000 – 49,999 people
Class IV Town 10,000 – 19,999 people
ClassV Town 5,000 – 9,999 people
ClassVI Town < 5,000 people
Village All unclassified settlements.
1
Summary Report ICube, 2006; 2
IMS Databases; 3
IMS Databases; 4
IMS Doctor Census; 5
IMS Competitive Benchmarking; 6
IMS Analysis; 7
IMS Analysis;
8
IMS Research & Collective experience; 9
IMS Analysis; 10
IMS Analysis

3. With its vast size and demand base, rural
India offers a huge opportunity to pharma-
ceutical companies. And yet, reaching out
to the rural population means overcom-
ing a number of hurdles.Though patients
can seek care at either the government-
sponsored primary healthcare centers or
through individual dispensing physicians
(the latter chosen by some 75% of the peo-
ple), poor diagnosis and disease awareness
remains a critical issue, one compounded
by residual illiteracy. Communications and
transportation are also key challenges—
not just for patients seeking access to care
centers, but for pharmaceutical companies
seeking to build effective sales models and
product distribution systems.
Capitalizing on the rising rural sector in
India means knowing where the consum-
ers are located and where they go to be
treated. It means knowing how far they
will travel and by what means. It means
tapping into technologies and systems that
can reduce the travel distance for patients.
It means recognizing that, while per capita
expenditure in rural India is low, those
that effectively identify those geographies
that have potential from among the 4,500
small towns and 600,000 villages can and
will succeed—especially if they pay atten-
tion to small-scale packaging solutions for
which patients can pay for a day or two of
therapy.
Those who persist—those who enter this
market early—will benefit in a number of
ways. For example:
• Companies stand to gain an early-mover
advantage as the rural consumer is evolv-
ing both as a patient and as a “healthcare
consumer” intrigued by the concepts of
preventive medicine, nutritional supple-
ments, and the like.
• Companies have the opportunity to gain
a sizeable market share from the currently
prevailing local players who primarily op-
erate by incentivizing chemists and dis-
tributors to substitute doctors’ prescrip-
tions or push over the counter medicines
(a “trade push” strategy), rather than brand
promotion.
•Those who enter these geographies early
by using “doctor promotion” strategies
will facilitate faster adoption of brands in
clinics.
• Those who innovatively partner with
some of the allied industries will be in a
position to establish economies of scale for
distribution/logistics.
The keys to success in these extra-urban
geographies, of course, are to remain fo-
cused on branded generics and to recog-
nize all that must be done upfront to build
disease awareness and to support higher
rates of diagnosis. Those pharmaceutical
companies that choose to tap the rural
markets must be willing to stretch—to
enter into dialogues with doctors, primary
health centers, diagnostic facilities, NGOs,
and health workers that ultimately elevate
the healthcare conversation,and outcomes,
across all of extra-urban India.
What We Think

4. For more than ten years, IMS Health has
had a strong local presence in India-analysts
and consultants who have effectively helped
clients navigate this terrain and capitalize
on growth opportunities.
Our clients turn to us for help in designing
optimal portfolios-portfolios based on careful
assessments of the extra-urban therapy markets
as well as the client’s own portfolio.
We are, in addition, frequently commis-
sioned to create in-depth evaluations of
key expansion sites, assessing not just the
demographics and infrastructure of pro-
posed regions, but the healthcare and
pharma potential associated with each one.
Once the most promising regions have
been identified, we design optimal sales
and distribution models that reflect our
knowledge of distribution models from
other industries and a thorough under-
standing of appropriate field force sizes.
We take the next step by developing lists
of opportunity therapies and molecules for
the rural market as well lists of brands most
ideal for extra-urban marketing.
Additionally,our clients rely on us to iden-
tify potential extra-urban clusters in the
nominated states and to make recommen-
dations regarding the size and structure of
the sales force.
Ultimately, we support our clients
throughout the development and imple-
mentation of a strategic plan that enhances
the client’s competitive advantage in extra-
urban markets. Supported by the appro-
priate tools and resources, our clients gain
functional synergies that maximize their
commercial opportunities in extra-urban
markets.
To have a deeper discussion about how
IMS Health can help you capitalize on
the opportunities in India’s extra-urban
regions, contact the authors of this paper.
Mahesh Kalsekar
Principal, Commercial Effectiveness
IMS Health India
mkalsekar@in.imshealth.com
Mamata Kulkarni
Sr. Consultant, Commercial Effectiveness
IMS Health India
mkulkarni@in.imshealth.com
What We Offer