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In today’s article, let’s see how e-pharmacies are disrupting retail pharma and what helped this space grow at a drastic pace?
Introduction
COVID-19 has challenged the healthcare systems of countries across the globe.
At the peak of this pandemic when there was a huge risk of frontline workers being exposed to the virus, e-pharmacies stepped up and showed huge courage and resolve, and worked tirelessly to keep the essential services in the healthcare space going and ensured that maximum cities were covered.
e-pharmacies are playing a crucial role in bringing efficiency, affordability, and quality in access to medicines for people of India. They align with the objectives of national development and have benefits that are tangible to consumers as well as the industry at large. The E-pharmacy sector has been leveraging technology to a great extent and has the potential of adding huge value to the existing pharmacy retail industry, and the overall healthcare sector.
E-pharmacies disrupting pharma retail?
Indian pharma retail is fragmented & highly unorganized with around 8.5 lakh unorganized retailers contributing more than 90% of the annual turnover of the sector. This unorganized nature leads to a lot of issues – untimely stockouts, sale of spurious and substandard drugs, etc. E-Pharmacies looked to disrupt the market while addressing these pain points:
- Ensuring safer drugs - a WHO report found that about 10.5% of medicines sold in low and middle-income countries, (including India) are falsified. e-Pharmacies ensure genuine drug supply, sourcing it directly from manufacturers and licensed resellers across the country.
- Improving access - the medical needs of India especially the rural parts are underserved due to limited access to traditional pharmacies. With an expanding and improved logistics network propelled by e-commerce over the last 10-15 years, e-pharmacies have an edge in serving the unmet medical needs of a vast population, through its doorstep delivery model. At the moment, e-pharmacies are catering to 20,000+ pin codes, which is expected to increase further going forward
- Making drug affordable - conventional pharma supply chains have several gaps due to poor optimization and lack of tech-enabled integration, leading to wastage and higher costs for consumers. E-pharmacies save costs with better purchasing margins, efficient supply chains and intergarted inventory management thus enabling reduced prices for the end consumer.
- Ensuring drug availability - an average offline pharmacy is limited to 6k-8k SKUs due to limited shelf space whereas, an online pharmacy which can cater 50k+ SKUs, giving e-pharmacies a significant advantage. Powered by a technology backend, analytics and AI/ML, e-pharmacies can better manage their supply chain – ensuring replenishments and avoiding stockouts, something very common in traditional offline pharma retailers.
E-Pharmacy Growth Drivers
- Deepening internet penetration – internet penetration is increasing due to affordable smartphones and 4G internet penetration, especially post Jio’s market disruption. With the Digital India initiatives, the country is expected to have 850 Million internet users by 2025.
- E-commerce adoption – with changing consumer preferences and adoption of the digital channel, e-commerce penetration is expected to reach 11% in 2024.
- Changing illness profile – e-Pharmacies primarily cater to the medical requirements of chronic patients. Changing the lifestyle of the citizens is leading to a rise in chronic and lifestyle related diseases especially in the youth of the country .
- Organized channels - increasing awareness around substandard drugs is tilting people towards organized and digital channels in retail pharamcy that provide assurance against the risk of counterfeits.
Policies to accelerate e-Pharmacy growth
e-pharmacies are improving pharma retail and the growth of the sector will only strengthen the digital healthcare ecosystem at large and help the government’s objectives of affordable health coverage. The space is governed by policies framed before the rise and adoption of e-commerce – namely the Drug and Cosmetics Act, 1940; Drugs and Cosmetic Rules, 1945; Pharmacy Act, 1948.
India recognized the need of sector-specific policies and to send out a affirmative signal to all stakeholders, the process of updating existing laws/ framework governing e-pharmacies was initiated in 2015 by the DCGI. After several rounds of discussions and deliberations with industry experts, the draft rules were released in 2018 and made public to solicit suggestions. With the threat of further waves of COVID-19, it becomes necessary to finalize and notify the policy on a fast-track basis. This will help avoid any uncertainty and bring in investments into the space.
Timeline of e-pharmacy adoption
Change in Consumer Behaviour towards buying Medicines
As the lockdown got extended, there was an exponential surge in e-pharmacy orders and many customers got resorted to buying medicines online with doorstep delivery, as it was now considered the safer option let alone the convenient one. Initially e-pharmacy companies faced significant operational challenges during the first lockdown phase, due to on-ground difficulties. Inter-state border restrictions led to first-mile supply chain issues, thus affecting the pharmacy distributor and pharmacy transport, which ultimately inventory shortage and lower fill rates. Also, delivery manpower difficulty limited the e-pharmacy platform’s ability to execute their doorstep delivery efforts. However, as supply chain and manpower challenges got resolved, the e-pharmacy platforms were able to service the increased demand for home delivery of medicines. The demand for overall medicines category went up during the lockdown period as users resorted to stocking up medicines for emergencies.
Shift towards e-Consultation and the subsequent aid to e-Pharma
COVID-19 induced lockdown also led to a radical shift in consumer behaviour towards consulting doctors, as hospital OPDs and private clinics became unsafe & risky due to chances of contacting the virus and also OPDs were made to operate as COVID wards. Hospitals & Nursing homes also reported a decline in face-to-face doctor consultation in the COVID-19 period.
In addition, doctors also expressed strong desire to provide online /e-consultation, given the demand for face to-face consultation came down. In the some interactions with doctors, they were willing to continue providing consultation over online channel and argued that e-consultation helps them to:
- Reach a wider and frequently transacting patient base
- Strengthen their connect with existing patients
- Derive additional income on top of their regular income
- Save their time & effort
e-Pharmacy Response to COVID-19 lockdown
During the lockdown phase, the e-pharmacy players adopted various measures to deal with the COVID-19 situation and provide safe & good quality door step delivery to the consumers. These measures included collaboration with local district administration, hospitals and neighbourhood offline pharmacies, to ensure constant supplies of quality medicines at the consumer’s doorstep as well as well as leveraging technology to spread accurate and verified information and government guidelines related to COVID-19 to millions of citizens.
These initiatives enjoyed great popularity among the e-pharmacy customers and had a significant impact to basically provide convenient access to affordable drugs and medicines, in the difficult COVID-19 phase.
e-Pharmacy Market performance during COVID
Driven by the significant push towards e-pharmacy from the demand, supply and regulatory ends, the e-pharmacy sector was able to achieve almost 2.5x growth in households in the COVID-19 lockdown period to reach around 8.8 Mn households by June 2020. As a result of increased e-pharmacy penetration especially in tier 2-3 towns, the COVID-19 households had a higher representation from non-metro cities, compared to pre-COVID-19 households. Moreover, in the pre-COVID-19 period, around 70% e-pharmacy households were chronic-first users as they found stronger value in the affordable & convenient service provided by e-pharmacy players. However, during lockdown, equal contribution of chronic-first and acute-first households were brought on board, as e-pharmacy gained prominence and became the need of the hour during the COVID-19 lockdown.
Sources:
1. Invest India, e-Pharmacies – Bridging the gap in Indian healthcare, June 2021
2. FICCI, e-Pharmacies at COVID-19 Frontline, August 2020
3. Praxis, Healthtech Predictions 2021
4. Economic Times, E-Pharmacies V. Retail Pharmacies: The Honest Truth, December 2020
5. Business Line, Regulating e-pharmacies in India, June 2021
6. Economic Times, E-pharmacies need an offline-online model for efficient delivery mechanism: Sumit Goel, July 2021
7. Yourstory, Rise of e-pharmacies: The new normal in the logistics/D2C industry, August 2021
8. EY & FICCI, Indian Pharmaceutical Industry 2021: future is now, February 2021
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