Medical equipment companies face distribution challenge in India

 31-Jan-15, ValueNotes

India has a huge unmet demand for healthcare and consequently for medical devices and equipment. Most global companies, large and small, are either already selling products in India or are planning to enter the market. However, setting up a distribution network for selling in India is no mean task. Distribution systems are complex with multiple layers.

Image: Euro Kerala Tour

A key factor contributing to the complexity of the Indian market is its heterogeneity and diversity. There are 29 states, each with its own set of health policies (Health is a state subject in India), and over a dozen main languages spoken. There are around 50 cities with populations of over a million each and the disparities between the markets in urban, semi urban and rural areas are stark. Companies selling to these diverse set of markets need to customize their strategies for each.

Medical device companies, particularly the smaller ones, often forge “exclusive” relationships with distributors in the regions allotted to them. A non-performing distributor can prove disastrous for the company.

An additional consideration is the existence of unethical practices in the distribution of medical devices. Distributors are known to bribe decision makers and doctors at hospitals to buy their products, which are sold at very high margins.

Availability of good after sales service is very important for hospitals. Medical device and equipment manufacturers have found this to be a big challenge. Having a trained maintenance engineer who can address the issues fairly quickly is expensive unless the installed base of the equipment in a particular area is large enough.

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