text: Growth of E-Pharma Sector in India - Possibilities and Challenges
  Dec 22, 2020 7:27 PM 5 min read
  5 min read101.4K views
  There is an old Nigerian proverb that says,
  "If you want to give a sick man medicine, let him first be really ill — so that he can see how well the medicine works!"
  As perilous as this strategy may be, millions of people actually lose their lives because they do get really ill before the medicine reaches them.
  This is where online medicine aggregators/distributors toot their horns announcing their relevance and practicality in present times. After all, if one can get pizza delivered to his doorstep, why not get a strip of paracetamol delivered as well, notably because as far as immediacy of concern goes, sickness trumps starvation any day.
  Let's see what stands in the way of this realisation.
  A Quick Run of Current Events
  Hustling-Bustling Pharma Town
  State of Our Pharmaceutical Industry
  Factors Inhibiting the Growth of E-Pharmacies
  What Can Be Done to Enable Growth?
  According to reports, India's second-largest pharmacy retailer (after Apollo), MedPlus is inching closer to a deal that bags itself an investment in the amount of ₹1,500cr ($203.7m) from Warburg Pincus.
  The news is of particular importance for two reasons: First, this is the latest instance of a prospective investment in the busy-of-late Pharma industry. Second, it signals that e-pharma players are shoring up their capabilities in the sector by forming well-rounded strategies and partnerships.
  But we'll get to that in a little while.
  Warburg Pincus is a major global private equity behemoth which has invested more than $50bn in more than 720 companies in over 35 countries worldwide.
  It is most notably known for its exit from Bharti Airtel in 2004-05 when it cleared out its $292m investment over the course of five years (which by the way, fetched a 6.6x return). The firm has a reputation as a growth investor so by virtue of this investment, it goes without saying that it is putting its money where its mouth is.
  Regardless, it has emerged above rivals like Temasek and Amazon (which expressed an interest in MedPlus back in 2018) to become a potential minority shareholder in Medplus and join a portfolio consisting of fellow investors like Goldman Sachs, Edelweiss and PremjiInvest.
  Back in August 2020, Reliance Retail picked up an effective 60% stake in the pharmaceutical startup Netmeds by paying ₹620cr ($84.2m) for a majority equity position in Netmed's parent Vitalic. Around the same time PharmEasy merged with Medlife. Furthermore, Tata group is reportedly in talks to acquire a majority stake in online pharmacy 1mg. Amazon has also launched online drug delivery services and rumour has it that it is planning a $100m investment in Apollo.
  The spur of these investments by big players can be attributed to promising growth prospects in the industry. The Indian e-pharma space is expected to grow at a five-year CAGR of 18%, driving the market to a lofty $18bn by 2023, up from $9bn in 2019. The global Pharma market is expected to witness a somewhat similar trajectory, pegged at $69.7bn in 2019, it is expected to grow at 17% CAGR to $244bn in 2027.
  Our major players in the e-pharma segment are mostly young with a hardly decade-old business history like Netmeds, EasyMedico, MedLife etc. Or startups like 1mg, Myra, Practo etc. Although, traditional chemists like Apollo, Emami Frank Ross, Global Healthline etc. Have maintained a firm foothold in the retail segment, they are yet to make a significant mark in the online market.
  On top of that, India's pharmaceutical market is immensely fragmented. There are approximately eight lakh pharmacies in the country often managed by local distributors who run their business through the marketplace or inventory-led supply.
  This has limited the expansion of franchise-led pharmacies, until now, when there is a rising demand for e-pharmacies catering to last-mile supply and the burgeoning growth of remote-access opportunities via wireless medium. Not to forget, the impending distribution of the much-awaited COVID-19 vaccine has set the primer running on the hands of top business players who wish to benefit from the same.
  The capex required to engineer robust delivery networks coupled with strong industry growth outlook are perhaps key considerations prompting elevated investments in the space.
  As of June 2020, e-pharmacies constitute only 3% of pharmaceutical sales in India. In December 2018, the Delhi High Court banned the online sale of medicines across the country by largely accepting the premise of traditional pharmacies who attacked the credibility of e-pharmacies citing lack of safety, dosage and potentially unregulated sale of prescription drugs. (Which is an irony considering the rampant excesses committed by retailers in issuing Schedule H, H1 and X drugs over the counters allegedly without prescriptions).
  Next issue is with regard to technology. Protection of patient-data is the hallmark of safe medical practice, which is why, enabling data sharing online without accreditation can be tricky. Microsoft, Yahoo and Google, have protocols in place to permit only VIPPS-accredited (Verified Internet Pharmacy Practice Sites) pharmacies to advertise but inadequate consumer awareness can easily slip through those checks and result in ordering the wrong or illegal medication in an instant.
  We still don't have proper EHR/EMR (Electronic Health Record/Electronic Medical Record) infrastructure to store digital medical records. The proposal for establishing a National Digital Health Blueprint (NDHB) in 2019 seems to have faded out and with it, the capability to enforce robust e-pharmacy regulatory measures.
  Without digitally-compatible patient data, the security, privacy and interoperability required to obtain drugs can't be ensured. Structuring healthcare information is the precursor to consolidating the pharmaceutical industry.
  Unlike in the West (where credit card transactions can be instantly disabled if e-pharmacy is not VIPPS-certified), we have a far flexible regulatory environment. But mind you, it is not necessarily a good thing as far as enforcement goes. It just means we have a small window to build up technical infrastructure and encourage new entrants into the e-pharmacy business before we tighten the rules around their neck and ensure disciplined growth.
  It is a mistake to assume that e-pharmacies can replace retail ones altogether because the former can't ensure supply of medicines in large quantities during emergencies. Moreover, traditional pharmacies have shorter lead times from ordering to delivery.
  Having said that, the success of online pharmacies depends on how effectively they are adapted to serve the needs and dynamics of the Indian market. Developing strong logistics to ensure accurate, safe and timely delivery is a key central objective. While passing on cost benefits by offering discounts and promoting consumer awareness could certainly help in the process but the long term sustainability of such tactics which are abundantly seen across new-age Indian e-commerce plays, is perhaps still debatable.