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Post regulation, e-pharmas may disrupt brick-mortar biz
Last week, the Union Health Ministry had drafted rules on the sale of drugs by e-pharmacies. This was to regulate online sale of medicines across India and provide patients accessibility to genuine drugs from authentic online portals. It states that no person will distribute or sell, stock, exhibit or offer for sale of drugs through e-pharmacy portal unless registered.
This could be the start of a paradigm shift in the delivery of medicines, as experts believe the e-pharmacy business, pegged to touch $55 bn by 2020, will draw the attention of retail giants keen on a share in this space. According to Sivakumar Bellan, Director, Marketing, Simple & Smart Healthcare Solutions, with 25 years of experience in various capacities in pharma, “The pharma business has always been a slow starter.
So, the impact of this development will take a while to trickle down into Tier 2 and Tier 3 cities. Major pharmacists in metros can expect a big hit purely due to the discounting factor. On a chemist level, the discount offered by a drug maker is about 20 per cent, while the stockist is offered a 10 per cent discount. Bring in the big players and we are looking at a flat 30 per cent discount directly to the consumers. A segment that could witness a major uptake in the e-pharma biz is that of nutraceuticals, food supplements and OTC drugs which can be moved in bulk.”
Pradeep Dadha, Founder of e-pharmacy Netmeds, which recently bagged a Series C funding of $35 mn, says, “The way forward seems bright, now that the government has come in with regulations that will moderate the business. We are looking at the government being actively involved in making healthcare more accessible to the masses and the underserved in India. Anybody who needs to set up his or her business online will now have to go through a proper registration process, which doesn’t seem too complex.”
He adds, “Our funding would primarily go into improving procurement and warehousing capabilities and creating a greater market awareness.”
Organised markets like the US offer a completely different model, says a veteran of the medical industry, who believes that replicating US business models in India may not work as expected. “Pharma, unlike other retail businesses, has to do with health of individuals. Also, the culture and behavioural patterns of customers must be considered. Pharma is still a regulated domain and doctors will not be in favour of an online model as majority of the hospitals, be it in the city, or in districts, are owned and run by doctors themselves. So, pharma outlets of the hospitals too belong to the doctors. Adapting to an online model would only jeopardise their revenue stream.”
Interestingly, in June this year, Amazon US acquired a small online pharmacy PillPack, signalling its intent to lock horns with drugstore chains and distributors. The US prescription drug market is pegged to be worth $450 bn. “Amazon’s acquisition of PillPack is a warning shot in what is about to become a major battle within the pharmacy space,” Neil Saunders, MD, GlobalData Retail was quoted as saying in an interview. Amazon can easily scale up given its huge customer base and shipping infrastructure.
Though PillPack has thousands of customers across the US, its expectation of over $100 mn in 2018 revenue pales compared with larger rivals. Last year, CVS had about $45.7 billion in revenue from its mail order pharmacy business, accounting for about 15 per cent of its pharmacy claims.
The veteran goes on to add, “In India, there are over 8,000 factories manufacturing drugs. Of this, more than 6,000 don’t adhere to the WHO GMP or Good Manufacturing Practices. Apart from a drug licence, pharma outlets must undergo monthly checks by drug authorities. How does the verification get covered in the online model?”
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