Market potential of the Ruma© Marker-System in the Canadian market for illicit drug testing


Bachelor Thesis, 2011

56 Pages, Grade: 1,3


Excerpt

Index

1. Introduction

2. Company Information
2.1. Ruma© GmbH
2.2. The Ruma© Marker-System
2.3. Ruma©’s Marketing and Licensing Strategy

3. Analysis of the Macro Environment
3.1. Political Environment
3.2. Economic Environment
3.3. Demographic Environment
3.4. Socio-Cultural Environment
3.5. Legal Environment

4. Market Analysis
4.1. Drug Testing Methods
4.2. Competing Firms
4.3. Ruma©’s Relevant Market
4.3.1. Segmentation Factors
4.3.2. Segments

5. Conclusion
5.1. Macro Environment
5.2. Market Analysis
5.3. Recommendations
5.3.1. Licensing Strategy
5.3.2. Marketing Strategy
5.4. Expectations and Chances

6. Bibliography

7. Annex

List of Figures

Figure 1: How to Pass a Drug Test

Figure 2: You Pass or Money Back

Figure 3: Annual Prevalence of Drug Usage

Figure 4: Dipstick Tests

Figure 5: Handheld Device

List of Abbreviations

illustration not visible in this excerpt

1. Introduction

Illicit drug abuse is a serious problem that does not only affect the users but society as a whole. On an individual level, it causes mental and physical health problems, leading to higher mortality and shorter life expectancy.1 The consequences of illicit drugs for society are immense: loss of productivity, increased health care costs and higher crime rates.2 For 1992, it was estimated that the abuse of illicit drugs cost 1.37 Billion Canadian Dollar (CAD) in Canada.3

To control both drug abuse and trafficking, most countries take a multilevel approach to reduce supply and demand.4 According to the United Nations Office on Drugs and Crime, “the extend and diversity of abuse have put increasing pressure on nations to intensify regulatory effort, in some cases with the introduction of stringent legislation which may have serious consequences for the individual charged with drug offences.”5

One important factor hereby is drug testing. For criminal investigation (e.g. traffic control), drug testing is an important forensic tool and enables punitive actions. For diagnostic purposes, drug tests facilitate the identification of users and help to monitor their compliance to the treatment policies. Therefore, tests are often mandatory for patients in drug treatment programs and inmates in correctional facilities or on parole. They are also common in occupational medicine to ensure safety in the workplace6 and in traffic control.

Objective

The German company Ruma© GmbH (Ruma©) has recognized the large demand for drug tests, and developed a new patented testing procedure, the Ruma© Marker-System (Marker). The firm already operates in eleven countries and is seeking further international opportunities. This thesis will therefore analyze the Canadian market for illicit drug testing, evaluate the potential of the Marker, and give the company a recommendation regarding a possible market entry.

Methodology

The analysis of the Canadian market is based on secondary market research. While primary research collects data firsthand through questionnaires, observation, interviews etc., secondary research analyzes existing information. For many marketing purposes, secondary research alone is often not sufficient due to the lack of availability, reliability, comparability and validity of the data.7 For this analysis, however, it is sufficient since a large part of the market analysis evaluates information about the external environment. Such information is already available in secondary data and the collection of the same material through primary research would be too time-consuming or even impossible (e.g. the Canadian Gross Domestic Product). In addition, most of the external data has been collected by official (United Nations, Canadian Government) or scientific sources and is reliable.

Structure

Chapter 2 of the thesis will commence with a description of Ruma©, their product and their marketing and licensing strategy.

Chapter 3 interprets Canada’s macro environment, determines its stability and identifies risk factors that could prohibit a potential entrance. The analysis focuses on drug abuse and drug treatment rates as well as governmental legislations regarding drug testing.

Chapter 4 evaluates the Canadian Industry for illicit drug testing and identifies Ruma©’s relevant market. It will determine the different customer segments, test methods and firms that currently compete in the market.

Chapter 5 summarizes the findings of the macro and industry analyses and draws conclusions by comparing important factors to the situation in Germany. The chapter will conclude with recommendations in regard to Ruma©’s strategy in Canada, expectations towards the market entrance and further opportunities.

2. Company Information

2.1. Ruma© GmbH

In the late 1990’s, Prof. Dr. Dr. Ruprecht Keller, a specialist for laboratory medicine, developed a urine labeling system with an orally applied marker solution. In 2006, after several years of scientific research and tests, he founded Ruma© GmbH, together with Monika Wetzke as the Managing Director, and the advertising agency Permanent Wirtschaftsförderung GmbH & Co KG to market his invention under the name ‘Ruma© Marker-System’ (derived from Ruprecht’s Marker).

The company started small in terms of staff and customers, but grew very quickly. Within 4 years, Ruma© was able to establish long-term relationships with over 350 customers in Germany and the average number of daily drug tests went up from 10 (May 2006) to over 350 (spring 2010).8 Their two largest customer segments are treatment services and correctional facilities but they also serve, among others, public health authorities, boarding schools and workplace testing programs.

By now, Ruma© has already entered several international markets. The company acquired customers in Finland, Switzerland, Austria, Czech Republic, Spain, Italy, Turkey and New Zealand and signed license agreements with a laboratory in the Netherlands and a clinic in Egypt.

2.2. The Ruma© Marker-System

Urinalysis is by far the most common method for drug testing due to its simplicity and long detection periods. A major disadvantage however is the possibility of sample manipulation. For many patients “…the consequences of a positive test result are often grave, involving corrective / punitive action, loss of job, or even criminal proceedings.”9 As a result, many users take extreme measures to hide their drug usage and to turn a potentially positive test result into a negative one.

On the Internet, there are hundreds of web pages dedicated to this topic and there are numerous remedies for sale that supposedly guarantee a negative result (see Figures 1 and 2). When searching for ‘Drug test’ on Google, the majority of results do not offer tests, but methods to manipulate them.

Figure 1: How to Pass a Drug Test

illustration not visible in this excerpt

Figure 2: You Pass or Money Back

illustration not visible in this excerpt

Source: Passing All Drug Test Source: Pass the Drug Test

“How to Pass a Drug Test” “You pass or Money Back”

For the tester, however, correct results are of high importance. During opiate substitution, parallel usage of the substitution medication (e.g. Methadone) and other substances can be extremely harmful and even be lethal.10 In the workplace, incorrect results cannot only endanger the user but other employees as well.

Sample Manipulation

In general, there are three kinds of sample manipulation: swapping the sample with clean urine, dilution or adding chemicals (e.g. bleach, acid) to hinder the detection of drug traces in the urine.11 To guarantee that no manipulation takes place, many testing facilities supervise the patients while urinating.12 Either one or two staff members of the same sex as the patient accompany him/her to the bathroom and watch the urinating process.

Nevertheless, even with supervision, manipulation is still possible through e.g. injection of clean urine into the bladder or products like the ‘Whizz Kit’. This artificial strap-on penis is filled with synthetic urine and is, due to its natural look (it is available in several skin tones) only detectable when carefully observed.13

Besides the fact that supervision cannot eliminate all manipulation, it has several negative effects. It is an extreme invasion of privacy for both the patient and the supervisor,14 which is especially controversial in workplace testing programs. When used during drug treatment, the physical observation implies that the patient cannot be trusted15 and can negatively affect the mutual trust between the patient and the caretaker and therefore reduce patient compliance.16 From a financial perspective, supervision is unattractive since it increases labor hours and costs. According to a study, the average time required for a supervised urine test is 10-20 minutes in comparison to just 5-10 minutes for the Marker procedure.17 For many patients supervised urination is not only unpleasant but also difficult due to psychological problems (psychogenic retention of urine),18 which explains the relatively long average test times. Supervision can also be an organizational problem since the facilities are obliged to have staff of the same sex as the patients present. As experience in Germany has shown, this is especially problematic for treatment facilities where the staff is primarily female, whereas, many of the patients are male.

The New Method

The Ruma© Marker-System is not a drug test itself but a complex security feature that enables the identification of urine sample manipulation. The Marker could technically be used in addition to any type of urinalysis; however, in most cases manipulation is improbable. When the urine is tested to detect or exclude an illness, both the patient and the caregiver have a mutual interest in a reliable result. The manipulation only occurs, when their interest differs and the patient does not want to reveal the true result e.g. the usage of illicit drugs.

The system uses a drinkable solution that marks the patients urine and can thus identify any form of alteration via laboratory analysis. “The urine Marker method has the advantage that sample swapping can be proven by analytical methods so that there is no need to supervise the patient during the collection of the sample.”19

In the market for urinalysis, the Marker-System achieves “superior performance in an important customer benefit area”20 and is the only product that can clinically prove whether the patient really is the donor of the sample.

Ruma©’s product strategy also includes high quality standards and requires the accreditation of every partner laboratory in accordance with DIN EN ISO 17025 (General requirements for the competence of testing and calibration laboratories).21

The Marker-System is based on a drinkable solution made of liquid polyethyleneglycol, a natural polyether extensively used in the manufacturing of medical, beauty and hygiene products. The type of polyether “is sugar related and cannot be absorbed by the human body. It is therefore excreted in its entirety…”.22 The laboratory analysis can then identify the presence, type and concentration of the Marker in the urine. The solution itself is neither considered a drug nor a medical product and can be used without risk according to the Cologne Municipal Government.23

In 2007, the European patent office granted the patent for the procedure as a “method for sample identification in a mammal as well as kit for performing this method”,24 and in the following years several other countries, including Canada, followed suite.

The Clinical Procedure

1. The staff mixes the Marker solution with a sugary beverage (i.e. sweet tea) and supervises the patient while he or she drinks it. Artificial sweetener cannot be used; it has to be real sugar.
2. After 30 minutes, the patient can collect the urine sample without supervision, either at the facility or somewhere else. Longer waiting periods are possible but the first urine after Marker intake must be used, otherwise the Marker concentration will not be high enough for detection.
3. The urine sample is sent to the laboratory where it is analyzed for drugs and the Marker. In addition, the urine is tested for sugar and creatine and a ‘sample check’ is performed,25 as described by the following paragraph.

The Laboratory Analysis

Initially, the Marker solution was given to the patients pure, but during the trial phase patients were caught keeping part of the solution in their mouth (sometimes with the help of a small sponge) to later spit it into clean urine provided by a third person. To eliminate this manipulation possibility, Ruma adapted the procedure and the Marker is now mixed with a sugary drink before serving it to the patients. Sugar is metabolized by the body and not secreted. The presence of sugar in the urine proofs hence the manipulation of the sample.

The ‘sample check’ searches for potentially added chemicals that destroy the traces of drugs and alter the test result.

Creatine is a natural component in urine and low concentrations are an indicator of dilution with water. Dilution can lower the concentration of the drugs such that they fall below the ‘cut-off level’ (a minimum amount of drug traces or their metabolite to report a test positive). In order to guarantee that negative results are actually negative and not just diluted, the creatine level is measured for every urine sample.26

Ruma© currently uses six different Marker combinations with different chromatographic evidence in the laboratory test. Neither the patient nor the staff at the testing facility know which Marker type is served so patients cannot switch or sell their sample. Only the laboratory and the manufacturer are able to determine the Marker type by scanning the barcode on the bottle.

In Germany, the Ruma© Marker-System is priced at 11.50 Euro and includes the solution, all packaging material and the laboratory analysis. The cost of the drug analysis is not included. Since 2009, German insurance companies pay for the Marker, so there is no additional cost for the patient or the doctor.27

2.3. Ruma©’s Marketing and Licensing Strategy

Ruma©’s marketing strategy uses mainly direct marketing to target is customers. Direct marketing allows for an individual, customized and interactive communication with the selected decision maker of a company at a chosen time and includes e.g. telemarketing, direct mail or email marketing.28 In comparison to advertising, direct marketing can be implemented very quickly and is less expensive, making it the ideal tool for a newly formed company. Ruma© developed a campaign that combines three forms of direct marketing: Individualized telemarketing to establish initial contact with potential customers, mailing standardized promotional material to interested parties as well as participation at conferences and small medical meetings specializing in addiction treatment to become known in its target market.

Ruma© devotes the largest share of its marketing budget to direct marketing but also uses sales promotion to “draw stronger and quicker buyer response”29 and public relations. Public relations refer to the different methods (media, company events, crisis management etc.) that can positively influence the relationship between a company and its stakeholders.30 They offer a high level of credibility, especially when they induce media coverage, since the public sees it as more authentic and unbiased as e.g. advertisement.31

The company drew media attention from the start and dozens of newspapers and magazines wrote about the patented procedure. In addition, several doctors and scientists published study results in the specialist press.32 This media attention increased Ruma©’s visibility and helped the company to become known in its target market.

The License Strategy

Since 2010, Ruma© has license partners in the Netherlands and Egypt.

The license partners have the exclusive permission to use the patented procedure in their respective countries, are responsible for all sales and marketing activities and are required to meet specific sales and growth rates.

Ruma© provides the Marker solution, initial promotional material, training and certification by the Ruma© World Wide Standards (RWWS). The certification is mandatory for every license partner and includes a seminar for laboratory and marketing personnel as well as a practical and theoretical examination.

On April 1st 2011, Ruma© adopted the above-mentioned strategy for the German market. The company has already established partnerships with two laboratories and is currently negotiating with other potential partners. Each of the laboratory companies has the permission to sell the Marker in a defined region, where it will also serve all existing Ruma© customers.

Like the international license partners, the German laboratories have to meet financial goals as part of their contract.

The decision to license operations in Germany will allow Ruma© to withdraw from the operational side and concentrate its resources on foreign markets and further strategic planning. The company seeks to enter the North American market with the same or slightly adapted license strategy that is currently used for its other international markets.

3. Analysis of the Macro Environment

The analysis of the macro environment identifies external influences that can affect the company’s performance.33 Before entering the Canadian market, Ruma© has to understand the important factors of the general environment, anticipate their development and identify possible opportunities and threats that may arise from them.34

Essentially, the environmental factors can be classified into several major categories: Political, economic, demographic, socio-cultural, technological and legal.

Political Environment

The political environment describes the form of government, political party system, fiscal policy, and general political climate and assesses the political risk of a country. Among the common threats to political stability are (potential) changes in the government, shifts in ideology, potential nationalization or expropriation of foreign firms, social tension or unrest, terrorism and corruption.35

Economic Environment

The general economic environment has a large impact on every company since “markets require purchasing power”.36 Among the factors that influence the economic environment are the gross domestic product (GDP), prices and rate of inflation, foreign trade, exchange rates and trade barriers.37

Demographic Environment

The general demographic environment describes the size and growth rates of a population, its age, sex, education, and the distribution of wealth.38 For Ruma©, drug abuse and treatment are more relevant and will hence be analyzed in detail.

Socio-Cultural Environment

The sociological and cultural analysis focuses on social roles, cultural values, and norms and their impact on consumer behavior and business communication.39

Technological Environment

The technological environment describes the current technological level, rate of innovation and how the developments could shape the economy40 and influence a company’s profitability. Since the general technological developments have little effect on Ruma©’s relevant market they are excluded from this analysis.

Legal Environment

The legal environment provides the parameters for acceptable business behavior41 and its analysis enables companies to understand the specific laws that apply to them before entering a market.

Methodology

There are two different methods for evaluating the macro environment of a company: A partial or full analysis. The full analysis seeks to identify and analyze all factors of the environment while the partial analysis focuses on specific areas relevant to the company.42

For this thesis, a partial analysis is adequate. The Ruma© Marker-System is targeted at a very specific market, which is unaffected by many of the general factors that define the macro environment.

3.1. Political Environment

Canada’s political environment is stable with a low risk of a government change or social unrest. The country has low corruption and ranks 6th on the Corruption Perception Index 2010 by Transparency International, 9 places ahead of Germany.43

Political System

Canada is a federation and constitutional monarchy with Queen Elisabeth II as the Head of State,44 represented by the Governor General David Johnston and the ten Lieutenant Governors on the provincial level. However, the Canadian House of Commons, the main seat of legislative power, is in practice sovereign. Canada consists of ten provinces and three territories with substantial power.45

Fiscal Policy

From 2006 to March 2011 Prime Minister Stephen Harper from the Conservative Party was head of a minority government and introduced a five-year plan to decrease corporate taxes to improve Canada’s global competitiveness. The combined federal-provincial tax rate is supposed to drop to 25% by January 2012, the lowest statutory tax rate in the G8 according to the Department of Finance in Canada. In comparison, the tax rates are 39.2% in the United States and 30.2% in Germany.46

Recent Elections

On March 25th 2011 the parliament passed a no-confidence vote since the “government had acted in contempt by failing to disclose the full costs of spending on anti-crime programs, corporate tax cuts and plans to purchase stealth fighter jets”47 and the minority government was dissolved. In the elections on May 2nd, the Conservatives gained 23 seats and won the majority, while the Liberals experienced a heavy loss of 43 seats in comparison to the last vote.48

The Bloc Québécois, the party that fights for the independence of the French speaking Quebec province, was almost eliminated as it lost 45 seats and is now left with only three. The Conservatives now hold a comfortable majority, ending the period of relative political instability, and are able to continue their fiscal program.49 The heavy losses of the Bloc Québécois are an indicator for the decreasing support for an independent Quebec among the population of the province, hence decreasing the risk of political tension.

3.2. Economic Environment

Overall, Canada’s economic situation is stable and the outlook positive. The country has rich natural resources, strong manufacturing and technology sectors and is a major exporter of oil, minerals and manufactured goods.50 It is one of the largest economies in the world (10th in 2009, measured in US-Dollar at market exchange rates) and the most important trading partner of the United States with approximately 75% of its exports going to and over 50% of its imports coming from there.51

General Economic Outlook

The worldwide recession of 2008-2009 had a less substantial impact on Canada than on most other industrialized nations and the economy was able to recover faster than any other G8 country. However, the stimulus package implemented by the Canadian government to induce the economy also resulted in its first fiscal deficit in 12 years.52 Nevertheless, its public debt was still rather low with 34% of the GDP in 2010 (versus 78% in Germany,53 and the world average of 59%54 ) and can therefore withstand a period of deficits according to the Economist Intelligence Unit.55

In 2010, the country’s real GDP grew by 3.1%, after a decline of 2.5% in 2009.56

[...]


1 Tjepkema, Michael, “Alcohol and illicit drug dependency”, p. 9

2 United States Department of Justice, “Impact of Drugs on Society”

3 Health Canada, “Best Practices Methadone Maintenance Treatment”, p. 6

4 United Nations Office on Drugs and Crime, “World Drug Report 2010”, p. 4

5 United Nations International Drug Control Programme, “Recommended Methods for the Detection and Assay of Barbiturates and Benzodiazepines in Biological Specimens”, p. 1

6 United Nations International Drug Control Programme, “Rapid on-site screening of drug of abuse”, p. 4

7 Kotler, Philip ; Keller, Kevin Lane ; Bliemel, Friedhelm, “Marketing-Management”, p. 166

8 Ruma GmbH, “About Ruma”

9 United Nations International Drug Control Programme, “Rapid on-site screening of drug of abuse”, p. 4

10 Modesto-Lowe, Vania ; Brooks, Donna ; Petry, Donna, “Methadone Deaths: Risk Factors in Pain and Addicted Populations”, pp. 305-309

11 Scholer, André, “The Effect of Urine Manipulation on Substance Abuse Testing”, p. 1

12 Health Canada, “The use of opioids in the management of opioid dependence”, p.10

13 ALS, “The Whizz-Kit”

14 Privacy Commissioner of Canada, “Drug Testing and privacy”, p. 1

15 Health Canada, “Best practices Methadone Maintenance Treatment”, p. 48

16 Simojoki, Kaarlo ; Alho, Hannu, “Urine Labeling Marker System for Drug Testing Improves Patient Compliance”, p. 25

17 Simojoki, Kaarlo ; Alho, Hannu, “Urine Labeling Marker System for Drug Testing Improves Patient Compliance”, p. 29

18 Ruma GmbH, “The method 1. The patented procedure”

19 Ruma GmbH, “The method”

20 Kotler, Philipp, “Marketing Management”, p. 106

21 International Organization for Standardization, “ISO/IEC17025:2005”

22 Ruma GmbH, “The Marker 1. Declaration of Agreement”

23 Ruma GmbH, “The Marker 3. Legal Situation/clearance certificate”

24 Ruma GmbH, “The Method”

25 Ruma GmbH, “The Method 2. Instructions for the clinical use of the urine Marker solution”

26 Ruma GmbH, “Die Alternative zur Sichtkontrolle bei der Urinabgabe: Das RUMA-Marker Verfahren”

27 Ruma GmbH, “2. FAQ - Anworten auf die am häufigsten gestellten Fragen”

28 Homburg, Christian ; Krohmer, Harley, “Marketingmanagement”, pp. 787-789

29 Kotler, Philipp, “Marketing Management”, p. 580

30 Homburg, Christian ; Krohmer, Harley, “Marketingmanagement”, pp. 794-796

31 Kotler, Philipp, “Marketing Management”, p. 580

32 Ruma GmbH, “Publication”

33 Grant, Robert, “Contemporary Strategy Analysis”, p. 67

34 Baker, Michael John, “Marketing Strategy and Management”, p. 173

35 Cullen, John; Parboteeah, Praveen, “Multinational Management A Strategic Approach”, p. 288 Deresky, Helen, “International Management Managing across Boarders and Cultures”, pp. 12-13

36 Kotler, Philipp, “Marketing Management”, p. 168

37 Cullen, John; Parboteeah, Praveen, “Multinational Management A Strategic Approach”, p. 288 Deresky, Helen, “International Management Managing across Boarders and Cultures”, pp. 12-13

38 Kotler, Philipp, “Marketing Management”, p. 168

39 Burgess, Steven Michael ; Bothma, Cornelius, “International Marketing”, p. 168

40 Zentes, Joachim ; Swoboda, Bernhard ; Schramm-Klein, Hanna, “Internationales Marketing”, p. 29

41 Burgess, Steven Michael ; Bothma, Cornelius, “International Marketing”, p. 197

42 Zentes, Joachim ; Swoboda, Bernhard, “Grundbegriffe des Marketing”, p. 318

43 Transparency International, “Corruption Perception Index 2010 results”

44 Central Intelligence Agency, “The World Factbook North America: Canada”

45 Canadian Heritage, “Monarchy in Canada”

46 Reynolds, Neil, “Election sealed corporate tax cuts; Canada needs more”

47 BBC, “Canadian Government falls after no-confident vote”

48 Guttsman, Janet ; Ljunggren, David, “Wahlsieg von Kanadas Konservativen erfreut Wirtschaft”

49 Guttsman, Janet ; Ljunggren, David, “Wahlsieg von Kanadas Konservativen erfreut Wirtschaft”

50 Heritage Foundation, “2011 Index of Economic Freedom”

51 Central Intelligence Agency, “The World Factbook North American: Canada”

51 Burgess, Steven Michael ; Bothma, Cornelius, “International Marketing”, p. 95

52 Statistics Canada, “Study: Comparing the 2008-2010 recession and recovery with previous cycles”

53 Central Intelligence Agency, “The World Factbook Field Listing: Public Debt”

54 Central Intelligence Agency, “The World Factbook Country Comparison: Public Debt”

55 Economist Intelligence Unit, “Canada Credit Risk Overview”

56 Statistics Canada, “Canadian economic accounts”

Excerpt out of 56 pages

Details

Title
Market potential of the Ruma© Marker-System in the Canadian market for illicit drug testing
College
Cologne University of Applied Sciences  (Fakultät für Wirtschaftswissenschaften)
Grade
1,3
Author
Year
2011
Pages
56
Catalog Number
V181657
ISBN (eBook)
9783656050018
ISBN (Book)
9783656050278
File size
877 KB
Language
English
Tags
Marketing, Marktanalyse, Marktpotential, Market potential
Quote paper
Caroline Bussenius (Author), 2011, Market potential of the Ruma© Marker-System in the Canadian market for illicit drug testing, Munich, GRIN Verlag, https://www.grin.com/document/181657

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