A Billion-Pill problem: the supply chain dilemma at Davaindia generic pharmacy
Vandana Pareek, Arzoo Gupta, Prateek Jain, Shubham AggarwalResearch methodology
The case has been anchored on secondary data that is taken from publicly available sources, such as the annual reports of different companies, official websites, industry and government publications and reliable media coverage of the pharmaceutical and retail industry in India. This study aims to add value to teaching and maintain confidentiality; some of the operational details and performance indicators are aggregated or disguised to some extent. There are no fictional events or speculative descriptions; the case is an authentic reflection of a decision situation in the classroom.One of the most significant price differences in household health care in India is the price difference between branded medicines and generic medicines. Several studies have been conducted to assess the price of medicines in various Indian states and have shown that originator brand medicines are generally 4–10 times the price of the lowest-priced generic alternative at retail pharmacies (Kotwani et al., 2007; WHO/HAI, 2008). For a patient managing Type 2 diabetes, the monthly cost of a branded product of metformin and glimepiride is more than INR 800–1,200, while the same combination can be purchased at a lower price, like Davaindia, the therapeutic equivalent product, which costs between INR 150–250 per month (Prime Insights, n.d.). The difference in the price of insulin analogue and biosimilars is even more prominent when it comes to insulin-dependent patients, where the retail price of insulin analogues is 300–500 percent higher than that of the biosimilars authorized to be marketed in India. Given that rural per capita household health expenditure in India averages INR 2,000–3,500 per year (National Health Accounts, 2021), a single monthly chronic medication bill at branded prices can consume a substantial fraction of total annual health spending. For instructors, these figures help contextualize why Davaindia’s supply-chain reliability – not just its price positioning – is mission-critical: a stock-out at a rural franchise is not merely an operational inconvenience but may directly cause a low-income patient to miss a dose.
Case overview/synopsis
The teaching case examines the strategic supply-chain prioritization problem experienced by a Chief Operating Officer (COO) of an initiative, Davaindia Generic Pharmacy, which is a retail venture of Zota Healthcare Ltd., India. In August 2022, Davaindia aggressively entered Tier 2 and Tier 3 markets and offered its own-label generics at deep discounts. The growth was, however, rapid and put more pressure on the supply chain network. The board has provided INR 200 crore as a supply-chain investment in the next two years and hopes that the COO will prioritize one strategic area. Ketan Zota will have to consider which aspect of the operation is the most dangerous to both the competitive position and franchise network of the company in case it is not addressed. It has been reduced to three options: increasing capacity in cold-chain operations to deliver chronic insulin and biologics; strengthening logistics in rural and semi-urban regions with weak infrastructure; or investing the funds in digital systems and sustainability projects that could boost efficiency and compliance. The case takes the students through the operational, financial and strategic tradeoffs in each direction in the context of the fragmented pharmacy market in India, the tightening regulations and unequal infrastructure. Students are asked to operate within such restrictions and advise on which one should be financed initially and the reasons.
Complexity academic level
The case and teaching note target the graduate and postgraduate students in operations management, supply chain strategy, entrepreneurship, healthcare management, marketing management and strategic management. The case was quite suitable for the participants of executive education who were working in the areas of logistics, pharma, healthcare and retail. It will be placed under operations strategy, supply chain management, emerging markets strategy, franchising and retail operations and sustainable business practices. It is designed to be delivered in the form of discussions and would be appropriate to be used in a 90-minute session.