Acetanilide, an aniline derivative was introduced to therapeutic usage in 1866 and used to treat mild fevers. Despite its therapeutic potency, there were apprehensions due to its side-effects and it wasn’t until 1948 that it entered mainstream usage with Healthcare Practitioners (HCPs) across the world. This might seem like an obtuse bit of trivia, until we correlate that Acetanilide is more popularly known in India by its trade name Paracetamol – a name that sparks instant recognition and serves as the first line of treatment to a wide variety of ailments.
The fact that lay-people recognize technical names like Paracetamol, Ibuprofen, Aspirin and other analgesics points to their ubiquitous usage across the board and the name recall becomes even stronger in the branded territory with popular brands like Crocin, Saridon and Combiflam being nearly household names.
From an Indian perspective, these popular drugs along with a diverse set of therapeutically-driven products that operate in the ‘non-prescription’ space are termed as Over the Counter or OTC drugs. As the name suggests, these products can be sold without a prescription and function in the spectrum between pure-play prescribed pharmaceutical molecules and fast moving consumer goods.
An Idea Whose Time has Come
India’s huge population base with tremendous aggregate market potential has traditionally served as a strong consumption base for most sectors – notably retail, FMCG and electronics. And yet, despite having a highly sophisticated and mature pharmaceutical industry, the per-capita spending on healthcare in India continues to be amongst the lowest in the world predominantly due to majority of the spending being out of pocket .
On the other hand, more Indians are climbing out of the proverbial bottom of the pyramid, and consequently displaying greater awareness about health, becoming increasingly vulnerable to lifestyle diseases and fortunately, possessing the purchasing power to act on it.
Despite these broadly favorable demographic factors driving demand, the key players in the pharmaceutical industry have faced significant headwinds in delivering the returns to their shareholders and stakeholders. In the last half-decade, faced with growing uncertainty over pricing power in both lucrative developed markets and in domestic pharmaceutical markets, in addition to increased regulatory scrutiny, the industry CAGR has slipped into single figures. On the other hand, for the consumer industry, well entrenched in managing brands, retail channels and an increasingly attritional market place, OTC products provide an avenue for organic extensions and exponential returns.
Therefore, both these sectors, with their already intensive and geographically well spread sales forces, have an inherent ability to extend their play from core sectors, onto the lucrative OTC products.
The OTC Umbrella
While defining OTC products as a non-prescription therapeutic formulation is accurate, it is also a little simplistic when we factor in the sheer diversity of the constituents to this industry.
If we had to define the two ends of the spectrum, on one end, we have the brand-driven product portfolio with relatively lesser therapeutic value – and yet are health focused products. These are typically characterized by pain relief, cosmetics, lozenges, etc. On the other end of the spectrum, we have the wholly therapeutic property based products, that while OTC, are often driven through a healthcare practitioner’s prescription. Examples of these are nutraceuticals, laxatives, dietary supplements, etc. Straddling these ends of the product-property spectrum a variety of products exist where purchasing decisions depend on the need & awareness of the consumer.
With the assortment of products, nascent portfolios, an unchartered market and the challenge of fledgling sales structures – the people function in the OTC industry is confronted with a variety of challenges, ranging from the routine to the truly strategic.
In its endeavor to serve as the HR fraternity’s foremost partner in empowering organizational results, Aon conducted the first-ever rewards and talent study dedicated to the OTC industry, excerpts from which are captured below.
Structure Follows Strategy
Consistent with its products being an amalgamation of pharmaceutical and consumer industries, the sales structure too mirrors best of both the worlds, but in differing proportions. In order to serve the channel strategy chosen by the business, OTC organizations have three distinct sales structures:
Type A – HCP targeted | Complete medical representative hierarchy | Supported by an allied ‘trade’ arm
This structure is very prevalent in standalone OTC organizations that have a product portfolio that is therapeutic property-driven.
The medical team works on visiting HCPs and creating a pull for the products and disseminating product information. Therefore, the medical team is also typically a very lean one with majority of its footprint focused on Metro/Tier 1 locations.
Type B – Retailer/Chemist targeted | Complete staffed sales hierarchy | Supported by a limited ‘medical information dissemination’ team
This structure is very prevalent in standalone OTC organizations that focus on non-therapeutic products, but which still fall in the OTC space.
The sales/trade structure is well evolved with all layers of management widely prevalent and consisting of >90% of the total headcount under these divisions/product lines.
Considering that the strategic advantage for the product is derived from the ‘brand’ and direct consumer focused activities, there is a clearly earmarked trade-marketing job family.
Type C – Hybrid structure for emerging OTC BUs dependent on parent organization for either medical representative/sales hierarchy
Typical of emerging OTC organizations from pharma organizations, their sales structure is very similar to a pharma organization more than others.
In this, the OTC products ‘pull’ via medical information dissemination is typically banded together with the existing therapeutic portfolio (instead of it being distinct).
For example, a pain drug and related HCP visits are performed by someone who handles their larger pain/ ortho portfolio.
In line with the business model that is a hybrid of FMCG & pharmaceutical sectors, the OTC industry focuses on maintaining a compensation level that is lucrative enough to attract talent from consumer organizations and yet, balances organizational cost priorities.
In order to analyze this, we plot the consumer industry compensation levels as the base and compare how pharma & OTC industry compensation levels stack up:
A clear inference is the extent of lead & lag OTC has over pharmaceutical & consumer organizations respectively. At the lower levels, OTC organizations have a fair degree of gap versus FMCG industry, but progressively, this gap gets bridged, especially at AH 7 & AH 8, which constitute functional leadership for OTC organizations.
Also, majority of the OTC organizations, in order to maintain a lower cost base, have adopted a clear ‘cash-first’ strategy, leading to relatively lesser focus on benefits like car at the middle management level onwards. This also makes broader sense in the GST regime with limited tax benefit for ownership.
In addition to this, the expectation from young to stabilizing organizations would be to focus on market capture and create clear-cut brand recall. This is seen in the compensation philosophies of these organizations, which are fairly decoupled from the parent entities.
If we had to analyze the target variable pay for the OTC industry as a percentage of the total cost to company on offer, the OTC industry does not leverage performance-pay as aggressively at lower levels. This is in line with the market maturity of these organizations as on date. But as we move up the AH level hierarchy, the variable pay target is at par with the two allied sectors.
While some of the insights that we found in our industry study are summarized above, what remains a distinct finding – one that could prove to be as impactful is the mindset change these organizations have undertaken versus their respective parent entities.
When both consumer and pharma sectors took the leap to formulate an OTC business unit, the initial people strategy revolved entirely around replicating or at best extending the parent entity’s practices. But the hard lessons that companies learnt in the initial phase have led to a lasting change in the way OTC organizations approach talent – especially on two fronts – sales capability and their employee value proposition.
With the average OTC frontline salesman expected to sell a therapy-driven product, organizations stumbled either in leveraging the therapeutic nature or providing the channel push required to sell a typical consumer product. Gradually, this stumbling block was overcome when organizations invested significantly in attracting the right talent, training & retaining them, aiding them with necessary sales support systems and building capability to develop an authentic set of homegrown leaders who are accelerating their businesses today. Additionally, most of them have crafted a distinct internal & external employee value proposition that leverages on their young, fast growing environment to attract best-in-class talent and provide them a platform to attain mutual success.
With these two factors in place and a host of external tailwinds, the OTC sector is set for a rather smooth sail ahead. In this context, the success of an individual organization or cumulatively, a sector, need not necessarily have far reaching ripple effects – but au contraire, in the case of OTC industry its sustained success in the coming years, could lead to an immense impact on the health of our society at large.
 = http://www.oecd.org/els/health-systems/Briefing-Note-INDIA-2014.pdf
 = http://rchiips.org/nfhs/pdf/NFHS4/India.pdf (S.No 75 to 78)
• AH 2 – Entry Level | AH 3 & 4 – Junior Management
• AH 5 & 6 – Middle Management | AH 7 & 8 – Senior Management
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