Janifha Evangeline | Monday, 09 January 2023
The Indian pharmaceutical industry was ripe for disruption, & the exigencies built by the covid-19 pandemic provided the e-pharmacy format the highly required push.
E-pharmacies can now be seen slowly moving into the role conventionally played by the local chemists by rendering over the counter medicines for general kind of ailments, chat bots for instantaneous 1st aid, review of local doctors and assistance in finding doctors, also the suggestions for labs for taking tests, and many others. Furthermore, they are also slowly eroding the box at present that are enjoyed by local doctors, by rendering services that include consultations & diagnostics, and others such as referrals to other specialist doctors, health advice & tips, alternative medicines like ayurveda, suggestions for health check-ups and many others. They are also reaching far beyond the services that are typically associated with chemists by rendering services which include booking of appointments, reminders about pills, check-ups, quick delivery of online reports and several others.
With growing customer patronage, e-pharmacies like Tata 1 mg, Medlife, Netmeds and many others, today are aggressively aiming for a large share of the country’s USD 42 billion pharmaceuticals market. At present, while there are close to fifty e-pharmacies in the country, the market is anticipated to register a CAGR of forty four percent in order reach USD 4.5 billion by 2025. The business & distribution model of these E-commerce companies render a sharp contrast to that of the current chemist network.
Comparison among the e-pharma model & the conventional chemist model The traditional pharma distribution model of pharma firms built of a multi-echelon network of Carry & Forwarding Agents, depots, stockists & sub-stockists, unlike the direct-to-customer model of e-pharmas. The representatives of pharmaceutical firms educate doctors regarding their brands & lobby hard with them with gifts, conference grants, trips and various other expensive tokens to prescribe their medicines & not that of the competition. The patient show these prescriptions to one among close to eight lakh and fifty thousand unorganized chemists/hospital that are linked chemist counters, who then fill them. This incumbent distribution model most often suffers from numerous disadvantages when compared to the business model of the new e-pharmacies.
Poor reach The supply chain network of several pharma firms tends to be fragmented & unorganized. As smaller towns as well as villages across the hinterlands of India do not possess adequate number of chemists & continuous availability of medicines, it is shown that more than 3/5ths of the citizens should be doing without consistent access to modern medicine. Furthermore, in most of the smaller Tier 2 & tier 3 cities, most of the consumers have awareness as well as purchasing power, however lower access to major brands. E-pharmacies are also making efforts to reach out to such customers. Hence, this could be a major reason why more than 45 per cent of the new users onboarded during the covid outbreak that were based out of non-metros.
Poor availability & infiltration by spurious drugs A fragmented & unorganized supply chain, with persistent unavailability of in-demand medicines at local chemists, can lead to encouraging spurious drug makers to try to take in this demand. A report by the World Health Organization stated that about 10.5 per cent of medicines that were sold in low & middle-income countries, including India are substandard & falsified and this at times leads to distrust of chemist outlets among the customers. The new e-pharmacies are taking huge advantage of this mistrust of these local chemists, & are wooing customers by promising to provide genuine drugs sourced directly from manufacturers & license resellers.
High inventory carrying costs One of the challenges for conventional channel is the multi-echelon distribution network should be able to manage upwards of 250000 stock keeping units with differentiation of brand preferences across countries. Maintaining the availability at several points in the network is difficult & involves huge investment in inventory for channel partners.
Ramification on the competitiveness of the conventional distribution model The one & only way for the pharmaceutical firms to support the viability of the high-cost conventional model is to make sure that the drug prices are buffered with huge trade margins. An e-pharmacy operating in this segment with not as much costs however the same margin is at a greater advantage & can provide huge advantage.
In a nutshell If pharmaceutical firms shift from a forecasting & push-based operations to pull mode of inventory creation as well as distribution, these companies can stop the lead time of manufacturing, reduce costs & significantly increase sales.
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