What is an OTC channel? OTC Channel Development in the Pharmaceutical Industry

Currently, the pharmaceutical industry’s “big guys” are investing in changing the ETC channel system to the OTC channel. Using DMS software in the process of managing the distribution system. So is this really a smart strategy? What will the OTC channel look like in the coming years?

What are ETC channels and OTC channels?

– ETC channel (Ethical drugs) in medicine means drugs sold by prescription, in addition, in the pharmaceutical industry, ETC channel also means a bidding channel at departments and hospitals.

– OTC (Over The Counter) channel in medicine means over-the-counter medicines through the prescription of a doctor at the point of sale. OTC is also the retail channel of drugstores.

Why are enterprises switching from ETC to OTC channels?

• The first reason is a competitive position: since 2013, the new regulations on selecting winning drugs at hospitals prioritize “low-priced” drugs. The development of the OTC channel in order to strengthen its position and ensure competitiveness in the market has become the top priority of enterprises. According to statistics, in 2016, the proportion of revenue of OTC and ETC channels was approximately 80% and 20%. These are the numbers that led to the dramatic transformation in recent years.
• The second reason for market expansion is that, according to Neilsen Vietnam statistics, there are 50,000 retail pharmacies in the market but only 1,100 hospitals, a significant discrepancy. And the OTC channel market remains a massive pie.
• The third reason is the superiority of the OTC channel compared to the ETC channel
  • Recovery of capital: OTC channel will shorten cash turnover while the ETC channel will recover capital quite slowly.
  • Market: for the OTC channel, the company completely controls the development of the market, increasing the direct influence of the company on pharmacies, and reducing the influence of level I agents. And the ETC channel is limited. Strongly influenced by I
  • Revenue: OTC channel reduces revenue dependence on wholesale points, ETC channel relies heavily on selling points.
• The last reason: is the habits of Vietnamese consumers, they rely a lot on the selling points near their homes, quickly and conveniently is what consumers are looking for instead of having to wait a long time at the hospital, the pharmacy was the best choice at that time.

Challenges in converting ETC channel to OTC channel.

First, management costs and selling expenses will increase because Enterprises will have to invest in a system to submit pharmacists to the market, access pharmacies, and more specifically, they must have sales capabilities. In addition to investing in the pharmacy submission system, the Enterprise has to spend quite a lot of money on the management and control team and a business support system to enter orders, make sales statistics, and make data reports. ,..

The OTC channel market is widespread in all regions, and pharmacists must allocate to niche markets. Since then, the management has encountered more obstacles, and the phenomenon of “cooking data” has increased. Loss of expenses for promotions and discounts is what worries business owners.

In addition, pharmaceutical products are products with strict requirements on preservation procedures and expiry dates. Therefore, the Enterprise is required to have measures to preserve and control according to the rules, in order to meet the product quality when it reaches the Customer.

The answer to the OTC channel problem is

Enterprises that are at the forefront of transformation such as Traphaco, Eco, and Ampharco USA have noticed the difficulties in the operation process and they feel that the management process is still not suitable with the current development trend. Therefore, they have boldly changed the management system of the OTC distribution channel and the management of pharmacy submission.

DMS solution is the answer for Pharmaceutical Enterprises. The application of technology systems has supported pharmaceutical manufacturing enterprises to systematize the entire production, operation, and management processes, bringing specific benefits such as:

– The working route of the pharmacist will be established and managed by the management level on the digital map system.

– Sales will be easy when the data is provided on the device of the pharmacist.

– Limit manual workflow, orders are quickly approved.

– Improve the working capacity of sales and sales support staff

– Reports are updated quickly and promptly for management

– Inventory of goods, expiry date quickly and accurately.

– Measure the effective market to improve the competitiveness of the Enterprise.

Thus, the biggest benefit of applying the DMS software system to the OTC sales channel is the initiative in managing and exploiting the market. Towards increasing the coverage of customers and products by directly approaching pharmacies, shortening the time to bring products to consumers.

HQSOFT with experience in providing distribution system management solutions for businesses in the pharmaceutical sector, understands the process, work, and difficulties in which pharmaceutical businesses have been encountered, since then HQSOFT with appropriate improvements, supports solving difficult problems in Pharmaceutical distribution. DMS Solution will accompany the success of the Enterprise.