oubts aroused in the mind of Dr. Samita Getwani when she received the request from Regional Manager for Quetta. The note requested funds to be transferred to the RM’s account to compensate 3 doctors of Quetta region in regard to the

sales they were providing to Biogenics for their 3 important brands, In-Helezole (Omeprazole Infusion), Helezole Capsules (Omeprazole capsules) and Fibrocol (Psyllium Husk & Wheat Bran).

DThe newly appointed Senior Brand Management, Dr. Samita knew she had to coordinate with the distribution department before granting any such request, so as to check whether these sales really existed or these monthly re-numerations of PKR 10,000 given to each doctor were no more than revenue leakages.

BIOGENICS PAKISTAN (PVT.) LTD.Biogenics Pakistan Pvt. Limited is a national company which produces and markets Pharmaceutical and consumer products. It was founded by Mr. Haider Karrar, a renowned marketer in the Pharmaceutical industry. Mr. Haider Karrar established Biogenics in 1997 with a vision to build a company which would have a strong standing in the Pharmaceutical industry on ethical grounds and a mission to provide World Class products at affordable prices.

This mission statement became the corporate tagline of the company and Biogenics emerged in the Pharmaceutical industry as small yet ethically sound organization. Biogenics initially was on a partnership basis with a Multi-national organization. It started working as a Private company in 1999 and launched a variety of its products which mainly involved the cardiovascular portfolio and General medicine products.

In 2002, Biogenics Pakistan Pvt. Limited expanded its business from Pharmaceutical products to a consumer division as well. The consumer division has a factory of its own and launched a variety of consumer products which included Dietary fiber and Low sugar products.

After the untimely death of Mr. Haider Karrar in 2004, the company was then headed by his wife Ms. Azra Karrar who is till date the CEO of the company.

As per the IMS (Intr Statistics) rating for 3 rd Quarter of 2010, Biogenics’ annual turnover is 0.105 billion and is growing at the rate of 35%.

Biogenics ranks 14th in non-manufacturing pharmaceutical corporates of the country and 102 amongst the overall 600 pharmaceutical companies of Pakistan.

Biogenics Products & PricesTill date, Biogenics has only about 8 Pharmaceutical products and 8 consumer products, the sales of which are spread throughout the country.

The complete range of Pharmaceutical and Consumer Products with their prices and SKUs are shown in Exhibit-I

The Pharmaceutical segment of the company is responsible for about 70% of the company’s overall profitability.

Pharmaceutical Product PortfolioThe Pharmaceutical products of Biogenics are divided into two different categories namely Cardiovascular portfolio & General Medicine portfolio. Based on these two categories, the sales team of the company is divided into two teams, Discoverers & Innovators respectively. (Exhibit-II)

The General Medicine portfolio is looked upon by the Discoverer team of the company. The most important brand Helezol (Omeprazole Capsules and infusion) comes in this group. Along with Helezol, the team promotes other products related to General medicine namely Fibrocol (Laxative), Delergic (Desloratadine) & Artonec (Diclofenac Sodium).

The Cardiovascular Portfolio specifically includes products for the Cardiology segment. This portfolio is promoted by the Innovators team. It includes Angiocard (Anti-anginal), Neopres (Anti-hypertensive) and EsGERD (for heartburn).

Given below is the overall contribution of each product in the Pharmaceutical portfolio of Biogenics:

S. #. PRODUCTS SALES CONTRIBUTIONHelezol 20mg 46,010 39.0%

Helezol 40mg 6,188 5.2%

IN Helezol 9,455 8.0%

1 HELEZOL GROUP 61,652 52.3%Angiocard 2.5 mg 12,792 10.9%

Angiocard 6.5 mg 4,660 4.0%

2 ANGIOCARD GROUP 17,452 15.8%

Fibrocol Sachet 12,120 10.3%

Fibrocol Straw Sachet 1,392 1.2%

Fibrocol Jar Orange 3,132 2.7%Fibrocol Jar Straw 1,328 1.1%

Fibrocol Jar Plain 399 0.3%3 FIBROCOL GROUP 18,371 15.6%

Neopres 5mg 3,384 3.9%

Neopres 10mg 2,311 2.0%

4 NEOPRES GROUP 5,695 5.8%Esgerd 20mg 1,462 1.2%

Esgerd 40mg 3,847 3.3%5 ESGERD GROUP 5,310 4.5%6 DelerGic 2,877 2.4%

Artonec 50mg (GR) 1,126 1.0%

Artonec 100mg (SR) 767 0.7%

7 ARTONEC GROUP 1,893 2.6%

GRAND TOTAL 117,869 100.0%

Sales DepartmentSales department for both the divisions is headed by the Chief Operating Officer. The sales hierarchy starts with GM-Sales who heads the sales team. Further down in the sales hierarchy, comes the Zonal Sales Manager. There are 3 ZSMs for the 3 Zones of the country, namely Karachi, South & North. The ZSMs report directly to the GM-Sales.

Each Zone is further divided into Different regions. There are a total of 9 regions Pan-Pakistan. These regions are looked upon by the Regional Sales Managers who report to their concerned ZSM. The RMs are in turn responsible for the Field force of that region, the number of whom varies depending upon the size and profitability of the region. (Exhibit III).

Sales RepresentativeSales Team is considered as the most important asset of a Pharmaceutical company.

Hiring:The hiring of Sales Representative involves a series of interviews from the concerned Regional Manager and Zonal Sales Manager. The final interview with the GM-Sales decides who should be hired and who not. The criteria for the hiring of sales representative includes:

A Science graduate (Pre-Medical) Minimum 1 year experience in sales in a reputable pharmaceutical company Young, dynamic personality with good communication skills

Salary StructureThe salary structure of the sales team comprise of basic salary along with the incentive. The incentive is based on secondary sales achievement and is divided from product-to-product. Each representative is awarded a certain amount of incentive for a product based on the percentage achievement of his targets for that product.

The regional manager is liable to win the incentive when his region as a whole achieves 100% or more for a particular product. The same criterion for incentive is on the ZSMs, who win the incentive when the Zone achieves 100% of the target of any product.

The incentive scheme which is currently practiced in the organization is given in Exhibit

Incentive CalculationAt the end of every month, the regional manager sends a sales report with the product-wise sales achievement of every sales representative of his area. The sales report also includes the incentive amount which is won by each medical rep for a product.

(Exhibit)

Performance MeasurementThe performance of medical representative is measured on the basis of:

100% target achievement

Customer development (development of Key Opinion Leaders)

Over all development of the territory

Active participation in the implementation of marketing strategies

Marketing DepartmentThe marketing hierarchy starts with the Marketing manager who directly reports to the COO. Reporting to the Marketing manager are the Product Managers who are responsible for:

Developing Marketing strategies of the related products Annual budgeting and target settings of each product Facilitating the sales team by providing their marketing expertise in order to

increase liaison with the target customers New product development & market research

Development of the sales team through regular product trainings

In the current scenario, there are two Product Managers working, who are responsible for all the Pharmaceutical products of the company.

Distribution DepartmentThe distribution department of the company is headed by Senior Distribution Manager who reports to the GM-Sales and 2 distribution officers who are reporting to the Senior Distribution Manager.

The distribution and channel management policies of Biogenics Pakistan are made and managed by the General Manager Sales, Mr. Shahid Samad. These policies were designed back in 1997 when the company was formed, with minor changes being done over the period of time as per requirement.

The main function of the distribution department is to monitor the Inventory in the company’s warehouse as well as order booking and order transferring from various distributors Pan Pakistan.

WarehousingThe company’s warehouse is located at Mehmoodabad, Karachi. The products are transferred from the company’s warehouse to the concerned distributor’s warehouse as soon as the Head-office distribution department intimidates the Warehouse incharge.

Transportation in Karachi:

Transportation in Other regions:

DistributorsThe company performs its distribution function through different distributors and sub-distributors throughout Pakistan in different cities. (list in exhibit)

Majority of the company’s dealings are being done through these distributors. For Institutional sales and in certain cases, the order is supplied directly from the company’s warehouse to the respective client.

Distributor’s sales is not monitored and evaluated on a daily basis. And monitoring the distributor’s sales from the head-office is not done in a brick-wise pattern. There is a need to speculate the overall distribution management of the company and the impact of these practices on the sales and profitability of the organization.

Institutional Business

Biogenics also provides its products to major Institutions of Pakistan which include:

Aga Khan Hospital

Fauji Foundation

WAPDA

PTCL

Special distributors are appointed for these institutional sales. These institutional distributors are compensated by the Company at a rate of 12% of sales upon trade price to institutions.

These distributors on company’s behalf take part in bidding and fill tenders for sales to these institutions.

List of Institutional distributor

Terms & Policies of Distributors’ Appointment Trade margin 7% Return policies (FMR) Cash Other policies

Distribution Cycle at Biogenics

At the end of the month, the distribution department of the head-office situated in Karachi receives Sales statement from all the distributors. This Sales statement includes the quantity being dispatched to various retailers during the month.

The sales statement is then transferred to the marketing assistant who divides the distributor’s sales into individual sales for each medical representative according to the retail shop’s bill where the products were supplied as per the territory assign to each representative. This is the method to prepare the secondary sales upon which the achievements of medical representatives are calculated.

The distribution department prepares a proposed order statement by calculating the sales average for last 3 months for each particular distributor and subtracting the existing stock. (Exhibit) The proposed quantities are then dispatched to the concerned distributor. The distributor after verifying the quantities dispatched it back to the Head-office.

Once the advance payment of the required quantities is received, a delivery challan and invoice (Exhibit) is prepared. The goods are then transferred from the company’s warehouse to the concerned distributor.

Sales Monitoring IncompatibilityTo take a closer look into the matter the newly inducted Senior Product Manager Dr. Samita went to the distribution department to ask for the detail of sales made by each sales representative in Quetta’s territory under the concerned RM.

She was quite surprised to know that there was no record of secondary sales and the only way to access that detail was via the Regional Manager of Quetta. In order to get the information without involving the Regional Manager, a special request had to be made to the Distributor to provide the sales of those particular areas. The distribution department informed her that the concerned distributor would be intimated for the required records.

Dr.Samita was already skeptical regarding the whole scenario and also disappointed at her company’s sales monitoring system, while reviewing the primary sales of her company which was done over the past 6 months to the Quetta distributor, she found a peculiar pattern in the stock booking to the distributor.

For a single product whose average sale in the area was 500 packs/month, the quantity dispatched in the past 6 months was as follows:

Inv. Date Product Title Pack Size Trade Price Net SalesQty Value

15th May, 10 In Helezol 1’s 212.50 525 111562.528th Jun, 10 In Helezol 1’s 212.50 1000 21250025thJul, 10 In Helezol 1’s 212.50 - -23rdAug, 10 In Helezol 1’s 212.50 250 5312518thSep, 10 In Helezol 1’s 212.50 1500 31875027thOct, 10 In Helezol 1’s 212.50 - -

On observing these discrepancies, the whole matter was investigated to the depth, and the company discovered the involvement of the GM-Sales in preparing false orders from the head-office every once in a while in order to complete the month’s targets.