Owing to its large consumer base, the Philippines has always been an attractive market for consumer goods, and medicines are no exception. Since World War II, the local pharmaceutical market has grown tobecome the ninth largest in the Asia Pacific region, with an estimated current value of $2.6 billion (P117 billion).
With the exception of local drug maker Unilab, theso-called “big pharma” companies-multinational wholesalers, importers and distributors—have dominated the market over the last 50 years. According to the Philippine Pharmaceutical Industry Factbook 2008, 16 of the top 20 drug companies in the country by value are foreign-owned, and they account for over 80 percent of the market. Meanwhile, entrepreneur Mariano Que steadily built what became Mercury Drug, the country’s preeminent pharma retailer that in its 65 years has put up over 700 branches.
Owing to the dominance of Mercury and the multinationals, the cost of medicine in the Philippines is the second highest in Asia after Japan, according to a World Health Organization report. The same report says medicine sold in the country is four to 18 times higher than comparable drugs available internationally. As a result, as many as 90 percent of Filipinos fail to buy the proper amount of medicine prescribed to treat or prevent illness, it adds.
Despite the passage of the Philippine Generics Act in 1988 (the first in Asia) and the Cheaper Medicines Act of 2008, generic drugs were generally little known by Filipino consumers—or worse, mistrusted by the doctors who are required by law to prescribe them. Moreover, local companies who dealt with generics at the time only sold them to wholesalers or pharmacies, which would still resell drugs with a markup.
TAKING THE RISK FOR CONSUMERS
Although generics drugstores existed in the country before the The Generics Pharmacy (TGP) came into the scene in 2007, it did what its forerunners could not: bring down prices, challenge the establishment and bring generics closer to the masses through rapid expansion behind a franchising model.
The Generics Pharmacy president Benjamin Liuson willingly engaged Mercury Drug in a price war, especially in the products that sold briskly—for example, pain relievers like paracetamol and anti-hypertension drugs like amlodipine, popularly known as the Pfizer brand Norvasc. A paracetamol tablet that used to retail of as much as P44, now can be had at The GenericsPharmacy for as low as P6.50.
Then, seeing the need to expand faster and reach more customers than it could do on its own, Liuson hired a franchising consultant and TGP began offering franchises for as low as P700,000, which includes a store’s franchise fee, operating capital and initial monthly expenses. Audaciously, the company advised its franchisees to find locations near Mercury Drug stores—even those directly in front or beside the rival store, confident that consumers would rather buy generics from them.
Also, stocks are given to its franchisees entirely on consignment—an unusual move for most wholesalers but not for The Generics Pharmacy, says Liuson, because “we are so sure the stocks will sell that the franchise (TGP) is taking the risk for them.” Pacific Pharmaceutical Generics Inc., the company behind the brand, has been in the wholesale medicine businesssince 1949, and Liuson says their existing distribution network as a wholesalermade it easier for them to go into franchising.
Skirting the influence of big pharma, The Generics Pharmacy has also built a network of 50 local laboratories— all CGMP-accredited, the acronym standing for Current Good Manufacturing Practices—that make generics drugs and act as its main suppliers. (One notable exception is Sandoz, the generics arm of world pharmaceutical giant Novartis.) These are the same sources that TGP has tapped since Pacific Pharma began selling generics wholesale in 1982.
In just under four years, The Generics Pharmacy has grown to become the biggest drugstore chain in the country in terms of number of outlets. It currently has 930 outlets and will open its 1,000th store in December—an outstanding feat considering that Liuson hoped TGP would open a thousand outlets in 10 years.
What’s more, all its outlets except the very first are franchised, and 80 percent of The Generics Pharmacy franchisees own two or more outlets. With a 90-percent success rate, the only reason an outlet fails is because of a bad location, says Liuson.
SERVE FILIPINOS FIRST
The Generics Pharmacy will probably hit 1,400 outlets by 2012, says Liuson, although that would likewise mean the local market would already be saturated. Still, he is not in a hurry to branch out overseas because his company’s mission has always been to serve Filipinos first. “Nakita ng masa na ganito, kaya click kami (The masses have seen us as we are). That’s why we had fast acceptance.”
Liuson would rather see TGP branch out to the provinces and to the poorer towns across the country, even those classified as 2nd to 4th-class municipalities. “Rent is usually low in these towns and labor is cheaper, so franchisees will have smaller sales but still make money,” he says.
Meanwhile, local competition in generic medicine retail is growing (with eight other generic drugstore brands in business), but to Liuson, “It’s no problem to us, because everybody knows who the first mover in this industry, and we have credibility.”
He also believes The Generics Pharmacy has a higher calling. Liuson says the best comment he’s received about the company is that to Filipinos who were unable to afford the proper medicine in the past, TGP is hulog ng langit— a gift from heaven. —Jimbo Owen B. Gulle