“In a way that no spreadsheet or PowerPoint ever could, this experience [a visit to a local pharmacy in Mumbai] drove home to me how crucial it was for us at Abbott to be part of India’s health-care solution.”– Miles White, Chairman & CEO, Abbott Laboratories.
Nothing succeeds like success. And here is a first person account of Abbott Laboratories experience in market entry into India, from the horse’s mouth- the Chairman & CEO of Abbott, Miles White, courtesy McKinsey’s series on Reimagining India. In a series of moves starting with their entry into India, Abbott is in the number 1 position in the Indian pharma industry with a 7 percent market share contributing to over 5% of Abbott’s global profits. Understanding the pivotal role that generics play in the Indian market, Abbott set out to buy Piramal in 2010. Piramal Healthcare, which made generic and branded drugs in nine plants in India, Britain and Canada, had the largest sales force in the country with more than 5,000 medical and sales representatives. Understanding the value that generics had in the Indian market Abbott set out its growth strategy to acquire a key Indian player, giving it the generics leverage and the market width leverage.
Even more telling is the story of how a global major gets under the skin of the local market, learns the nuances and applies the learning to excel in a totally alien market like India- a lesson that every company with global ambitions ought to take heed.
Finding the right prescription [and ‘an immersion course on India’]
In business, sometimes you find the most valuable insights in places you’d least expect them. In my case, it was a crowded Mumbai alley full of “chemist” shops where I went to buy some medicine. That brief visit helped me understand why, after imagining India for a long while, my company had to become an integral part of it.
It was 2009. I had embarked on what might be called an immersion course in India—in particular in its health system. I toured its hospitals and other health-care facilities, at all levels of service. I visited private homes across a broad spectrum of socioeconomic levels. I tried to understand as well as I could what it was like to be an Indian citizen during this extraordinary moment in the country’s history and what it was like to provide and receive health care.
As it happened, in the course of investigating India’s health-care system, I came to need a little care myself. That’s how I found myself in the lanes surrounding Bombay Hospital, where about 30 chemist shops, each with a storefront perhaps three to five meters wide, serve the hospital’s many patients. The scene I encountered was eye-opening. Clerks clamored for my attention as I walked past. Indian pharmacies function as informal doctors as well as medicine purveyors, but the people manning these shops were unexpectedly young and could have been selling any commodity. Once I chose a shop, the young man at the counter asked numerous questions about the malady I wanted to treat. After a loud discussion between him and someone in the back—during which passersby could easily overhear details of my symptoms—I received a small bag of generic medicines. The drugs prescribed were just what I needed, and I was stunned by how little they cost—a fraction of the price I would have paid for them in the United States or almost any other developed country. In a way that no spreadsheet or PowerPoint ever could, this experience drove home to me how crucial it was for us at Abbott to be part of India’s health-care solution.
The medicines I bought that day were what are known as “branded generics,” and their prevalence in India underscores the essence of the country’s health-care system. At the tip of the iceberg is outstanding care for the relatively few who can afford it. But the overwhelming majority of people receive a very different level of care, if any. For this majority, branded generics are appealing because, although their patent protection has expired, they offer the quality of manufacture and trustworthiness of consistency that comes with the imprimatur of a major pharmaceutical firm, at a much more accessible price than newer, patent-protected drugs. India is a powerhouse for these drugs, due to its wealth of scientific and managerial talent and its low production costs. We concluded that securing a major foothold in India would provide Abbott an ideal base from which to sell not only to the 1.2 billion people in India but also to fast-growing markets throughout the developing world.
We made a series of key transactions in 2010, acquiring the pharmaceutical business of Belgium-based Solvay, which had an Indian operation larger than our own, and forming a partnership with a major Indian pharmaceutical maker to market drugs in emerging economies outside India. Then came the deal that was fundamental to our vision: our $3.7 billion acquisition of Piramal Healthcare Solutions, a part of Piramal Group, one of India’s largest companies. These actions made us one of the largest players in the health-care system of the second-most-populous nation on earth. In just four years, we’ve achieved our goal of attaining a number-one position in India’s pharmaceutical sector where we have about 7 percent of the market. India now represents more than 4 percent of our total sales and almost 5 percent of profits—percentages that will surely grow.
[Interview, courtesy McKinsey’s Reimagining India Series. Rmagine, whose sole mission is to help companies reimagine their future growth strategies & craft their market entry strategy, brings this nugget of learning for the benefit of it’s readers. Image Courtesy: Aarogya]