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The Rising Trend Of Consolidation In Indian E- Pharmacies

The Rising Trend Of Consolidation In Indian E- Pharmacies

Healthcare | Jun, 2021

India has one of the fastest growing consumer classes, and the rising internet penetration coupled with government’s effective push towards “Digital India” is dramatically boosting online healthcare platforms. As consumers’ changing attitude took a positive turn, e-pharmacy players managed to build ecosystems that enable people to access many forms of healthcare digitally. Although e-pharmacy is still in its nascent stage in India, the segment is growing big time by addressing the loopholes associated with retail medicine outlets like longer waiting time, limited opening hours, lack of information, selection availability, and high costs of medicines. With exponential consumer demand and tech-savvy clientele, there has been growing interest among investors in the e-pharmacy market, which has led to a flurry of mergers and acquisitions (M&A) in the sector in the recent times.

Consumer Healthcare Journey shifting from Conventional Pharmacies to E-pharmacies

Better discounts, convenience, greater accessibility, and easy home delivery has made online pharmacies a preferable alternative to community brick-and-mortar pharmacies. Going into 2020, e-pharmacies were already making substantial growth with increased smartphone use, rise of e-commerce, and internet penetration, but COVID-19 pandemic created transformative opportunities and challenges that gave a major push to the industry. The stringent lockdown measures forced people to adopt digital route for purchasing medicine online as it was a more convenient and safer option. Currently, India has more than 200 e-pharmacies, most popular among them being PharmEasy, 1mg, Netmeds, and Myra Medicines. Currently, Indian online pharmacies hold around 2-3% of market revenue and are expected to account for 10% of total market revenue by the end of 2021. As technology is becoming ubiquitous and integrated, there has been a convergence of health and wellness platforms, thus online pharmacies are now expanding to telehealth, mHealth, and virtual healthcare. Some of the trends that are dominating the e-pharmacy market are as follows.

·         Shifting Consumer Attitudes

Pharmacies, considered as “essential business” were allowed to remain operational during the lockdown period, but frantic buying led to a high cost of a wide range of items such as disinfecting sprays, anti-bacterial wipes, hand sanitizers, toilet papers, latex gloves, face masks, etc. at retail stores. While the frantic buying has relaxed for a while, the health crisis continues, and consumers remain concerned about their safety. Availability of medicines and other essential items at the convenience of home, and that too, at lower prices have drastically shifted consumer preference towards e-pharmacies, and the emerging trend is likely to contribute to the overall market growth.

·         Emergence of Teleconsultation

Healthcare providers, hospitals and e-pharmacies are integrating to develop teleconsultation platforms to refrain risks associated with in-person interactions as patients continue to explore new channels of reliable acute care. The pandemic highlighted the need to build a holistic teleconsultation and e-pharmacies jumped on the opportunity to provide exactly what the customers were looking for. Teleconsultation overcomes the challenges associated with healthcare infrastructure and reduce the time taken by a patient in getting consultations.  

·         Rise in Direct-to-patient (DTP) Drug Sales

The combination of telemedicine and digital healthcare services has broadened the emerging direct-to-patient sales channel marketing approach, thereby enhancing the product access to more patients. Making it easier for consumers to buy and refill prescription and offer tailored patient programs, the DTP channels reduce patient churn and improve medication adherence. Besides, the direct-to-patient channels can be used to overcome the access barriers created by pharmacy benefit managers.

Consolidation in India Pharma Sector

According to a recent white paper released by the Federation of Indian Chambers of Commerce & Industry (FICCI), 3.5 million households buying online medicines before COVID-19 pandemic rose to 9 million during the pandemic, and the number could go up to even 70 million by FY 2025. As healthcare is gradually evolving from curative to preventive, companies in the pharmacy business are re-initiating strategies to grow from being expansionist to attaining self-sufficiency. Therefore, companies are stitching strategic partnerships to ensure uninterrupted supply line to strengthen their front-end delivery channels in pandemic-like situations. As the online pharmacies are gaining momentum in India, healthcare industry is consolidating rapidly with big corporate giants. Some of the most ground-breaking acquisitions that happened in recent years in e-pharmacy sector are as follows.

·         TATA Digital Acquires Majority Stake in 1mg

Tata Digital, a subsidiary of Tata Sons has acquired 55% shares in 1mg, a digital health company that enables easy and affordable access to health and wellness products, diagnostic services, and teleconsultation. Currently, 1mg is one of the largest players in the digital health space in India with supply chain across 20,000 pin codes across India along with three hi-tech diagnostic labs. The e-pharmacy channel is also engaged in the business-to-business (B2B) distribution of medicines and other healthcare products across South Asian nations through its subsidiaries. Collaboration with India’s most iconic and respected conglomerate, the merger marks a significant milestone in 1mg’s journey. The investment of Tata group in 1mg addresses the consumers’ needs across categories in an integrated manner.

·         Reliance Buys Share in Netmeds for USD83 million

Reliance Industries Ltd. has acquired majority stakes in Netmeds for USD83 million with an intent to provide high quality and affordable health care products and services. The investment is also made in line with the company’s commitment to broaden its digital commerce proposition by including daily essential needs of consumers. Started in 2015, Netmeds is one of the earliest players to venture into e-pharmacy space and has managed to build its nationwide digital franchise in a short period. The health and wellness platform connects customers to pharmacists and enables doorstep delivery of medicines and other healthcare products, serving nearly 4 million customers across 610 cities and towns.

·         PharmEasy Join Hands with Medlife

Indian online pharmacy and telemedicine start-up, PharmEasy has acquired Medlife under USD250 million deal, to form India’s largest online healthcare delivery platform. Under the deal, PharmEasy would acquire 100% stake in Medlife whereas Medlife’s promoters would receive 19.95% stake in the merged entity, valued to be USD1 billion. The combined entity is expected to serve more than two million households across India every month. PharmEasy is dedicated to offer a range of services such as telehealth, medicine deliveries, and other diagnostic interventions, and consists of subscription-based service. Founded in 2016, Medlife started its journey as an inventory-led company, which now currently covers 465+ cities across India.

The trend of M&A deals started right after the global e-commerce giant, Amazon announced the launch of a pilot model of Amazon Pharmacy that allows consumers to purchase prescription-based and OTC drugs from certified sellers. The company’s most recent foray into the fast-growing digital health space has caused friction among e-pharmacy players in the space as the move can squeeze out a huge chunk of market share away from competitors. Amazon’s ability to provide fast home delivery, convenient and seamless online experience will increase competition pressure on other online pharmacies in the country. Amazon Pharmacy also provides Prime prescription savings benefits to Prime members, like huge savings and reduced delivery time of orders.

Can Brick-and-Mortar Pharmaceutical Retail Survive the E-pharmacy Boom?

The rapid shift of consumers towards e-pharmacies shows no signs of slowing down. Pharmacists working independently or with large chains of hospitals are facing the negative consequences of the boom of digital healthcare platforms. Retail pharmacies are experiencing challenges from digital pharmacies such as fast contactless delivery, user-friendly mobile apps, and real-time pricing information. However, retail pharmacies can compete with e-commerce giants by adding a personalized touch in their services, consultations, and more. Offering on-demand solutions, the pharmacies can provide their services to customers, that can add value to the prescription delivery and enhance customer experience. Besides, the modern consumers have become time-conscious, so the retail pharmacies can step up their operations leveraging advanced technology and building custom software solutions to fit the evolving needs of customers.

Way Forward

Door-to-Door Vaccinations

As hospitals are overwhelmed with the COVID patients, most consumers do not want to go to hospitals for vaccine administration. So, online pharmacies are rushing to sign up companies, clinics, old-age homes, residential complexes to provide door to door vaccinations. Many e-pharmacies are in talks with manufacturers of Covaxin, Covishield, and Sputnik V to secure vaccines. Recently, digital health service platform, Practo launched its ‘Corporate Suraksha’ vaccine program to enlist staff and family members for vaccine inoculation. PharmEasy is also taking registrations for corporates, offices, factories, and societies to set up vaccination camps near their institutions for easy vaccine administration.

·         Integrating Diagnostic Interventions

The USD9 billion diagnostic services industry comprises of 35% organized players, 15% hospital-backed diagnostic labs, and standalone, regional, or mom-and-pop labs. The digital healthcare platforms are integrating diagnostic centers so that the consumers find all the medical requirements such as virtual primary care offerings, in-home & in-person diagnostic testing, and teleconsultation along with medication delivery services at a single platform. Utilizing these e-pharmacies, consumers can reduce medical costs and enhance accessibility to medical care from the convenience of their homes. Currently, PharmEasy is in talks to acquire diagnostic services chain Thyrocare, which conducts a range of medical diagnostic tests for the detection and management of various disorders. Besides, Metropolis Healthcare and Dr. Lal PathLabs have offered bids ranging from USD108 million to USD161 million  for buying out Mumbai-based pathology service provider Suburban Diagnostics, seeing a huge spike in pathological tests and home collection of samples.

According to TechSci research report on “India E Pharmacy Market By Drug Type (Prescription Drugs and Over the Counter (OTC) Drugs) By Product Type (Skin Care, Dental, Cold and Flu, Vitamins, Weight Loss and Others) By Operating Platform (App v/s Website) By Business Model (Inventory/Warehouse Based Model v/s Market Place Based Model) By Company, By Region, Forecast & Opportunities, FY2027”, India e-pharmacy market is projected to grow at a formidable CAGR during the forecast period. The growth can be attributed to the preference shift to give e-prescriptions and high proliferation of smart devices. Besides, the rising disposable income among middle-class population and increasing affordability to avail e-pharmacies again are contributing to the growth of India e-pharmacy market.

According to another TechSci Research report on “Global E-Health Market By Product (Electronic Health Records, ePrescribing, Clinical Decision Support, Telemedicine, Consumer Health Information, mHealth, Health Management, Information System), By Services (Monitoring, Diagnostic, Healthcare Strengthening), By End-Use (Hospitals, Home Healthcare, Payers, Pharmacy), By Region, Forecast & Opportunities, 2025”, global e-health market is expected to grow at a robust CAGR owing to growing lifestyle related diseases across the globe and increasing initiatives by governments to provide advanced healthcare services.