The Rise of e-Pharmacies in India: An Emerging Healthcare Economy
The biggest trends happening in India's digital health space
Global pharmaceutical markets are in the midst of major discontinuities. While growth in developed markets will slow down, emerging markets will become increasingly important in the coming decade. The Indian pharmaceuticals market, along with the markets of China, Brazil and Russia, will spearhead growth within these markets.
Source: McKinsey, 2020
If you’ve been an OG reader of this blog, you’ll know that I’m incredibly bullish on emerging markets. Specifically India, Southeast Asia, parts of Africa, and South America. India itself has the second largest population on the planet, with 1.3 billion people, and almost all of them have access to mobile phones.
More than 700 million Indians are online, which makes India’s online population larger than that of any other nation except China and the United States - transforming every industry from entertainment to finance.
But one of the largest markets being affected right now (hinted here), is the healthcare and digital pharmaceutical market. An increase in telemedicine services across the country via. mobile phones and an increase in health insurance coverage has allowed access to larger patient pools in Tier 2 and Tier 3 rural India to become a reality - where roughly 60% of the 1.3B population lives.
This opens up a massive market opportunity that companies like Amazon, Reliance, and Tata are all trying to enter.
In 2018, around 18 percent of the Indian population lived in urban areas. Over 60 percent people live in rural areas with limited access to pharmacies.
Traditional pharma retail in India is highly unorganized and fragmented, with close to 1M unorganized retailers contributing more than 90 per cent of sales. The unorganized nature of the space tends to a host of issues – frequent stockouts, sale of spurious and substandard drugs, and limited access in sparse rural areas where most of the population lives.
With the large spike in mobile internet adoption, COVID placing an emphasis on digital health, and most importantly changes in India’s health regulation (Unified Health Interface - UHI) to enable the interoperability of health services - e-Pharmacies began to explode and tackle the following issues:
Ensuring safer drugs – a report by the WHO found that about 10.5 per cent of medicines sold in low and middle-income countries, including India, are substandard and falsified. e-Pharmacies ensure a genuine drug supply, sourcing it directly from manufacturers and licensed resellers.
Improving access - the medical needs of rural India are underserved due to limited access to pharmacies. With an ever-expanding logistics network propelled by e-commerce over the past decade, e-pharmacies have an edge in serving the unmet medical needs of a vast population. At the moment, e-pharmacies are catering to 20,000+ pin codes, a number expected to increase further going forward.
Making drug affordable - conventional pharma supply chains are not optimised and have several gaps, causing wastage and greater costs for consumers. e-pharmacies save costs with better purchasing margins, efficient supply chains and inventory management leading to reduced prices for the end consumer.
Ensuring drug availability - an average offline pharmacy is limited to 6,000-8,000 SKUs in contrast to an online pharmacy which can cater 50,000+ SKUs, giving e-pharmacies a significant advantage. Powered by a digital backend, analytics and AI/ML e-pharmacies can better manage their supply chain – ensuring high fill rates of 95 per cent and avoiding stockouts common in traditional offline pharmacies.
Source: Invest India, 2021
As a result, e-pharmacy start-ups are contributing significantly to the growth of organized pharmacy retail in India, which is expected to increase from $0.5 billion in 2019 to $4.5 billion by 2025.
With this almost 10x growth in market over 6 years, large conglomerates are starting to take stakes of the major players in the market, and new smaller startups are popping up.
Companies like Tata, Flipkart, Reliance, and Amazon themselves have made large investments in the region. Mainly by acquiring local market leaders like 1mg, SastaSundar, Netmed’s and Apollo Pharmacy respectively to capture a piece of the $42B spent on pharmaceuticals in the country.
Along with increasing customer adoption, there has been a rise in investor interest in e-Pharmacies, with the sector garnering $ 700M in investments in 2020 alone.
There are a few different categories for e-pharmacy startups that have started to emerge.
Horizontal Service Providers
These startups are some of the largest healthcare startups in the world, offering a full range of services from telemedicine to digital pharmacies to lab tests. They specialize in different areas (ie. region or entry point) but ultimately accomplish the same goal of expanding vertically within their market.
Some examples include
Funding: $1.6B (Private Equity) - Surgeries, Pharmaceuticals, Lab Tests, OTC drugs
Business Model: Marketplace & Distribution Network
What they do: PharmEasy delivers medicines and other medical accessories across Indian towns and cities. It is like Grofers for medicine. The pin codes maintained by PharmEasy are used to identify pharmacies closest to the customers. Customers can either access PharmEasy's website or use its mobile app to order items.
Cult.Fit - Personal Fitness, Lab Tests, Supplements
Funding: $624M (Series F)
Business Model: Subscription to fitness and coaching program, upsells through food, additional add-ons, and healthcare services.
What they do: Cult.fit has 4 main businesses. Fitness, Food, Yoga, and most recently, Healthcare. They are the largest and fastest private fitness class provider in India and expand vertically within their user base. Most recently getting into healthcare in 2018 with care.fit, the company is leveraging telemedicine, and analytics to offer preventive healthcare solutions to complement its other fitness and wellbeing offerings further.
Medibuddy - Inpatient hospitalization, Outpatient hospitalization, prescription drugs
Funding: $192M (Series C)
Business Model: Marketplace & Distribution Network Focusing on Tier 2 & 3 cities. Has a network of 90,000 doctors, 7,000 hospitals, 3,000 diagnostic centres and 2,500 pharmacies across multiple Indian cities
What they do: MediBuddy provides its users with 24x7 access to specialist doctors via video calls, doorstep medicine delivery, at-home lab tests, mental health support, and other integrated healthcare services; all in one place.
Vertical Niche-Specific Providers
With the rise of digital healthcare aggregators above, new market opportunities have risen up focused on specific verticals. Many of the startups to watch are focused on specific niches within the healthcare sector to accomplish a similar vertical supply model with. Here are a few startups to watch in the region
Gynoveda - Focused on Womens Health
Funding: ~$1M (Seed)
Business Model: Software to examine womens health conditions, consultation with doctor, subscription to medication.
What they do: The tech-enabled platform, which focuses on women’s menstrual health, claims to have built the world’s first gynaecology robot that uses artificial intelligence (AI) to identify menstrual abnormalities and prescribes Ayurvedic supplements.
CureSkin - Focused on Skincare and Dermatology
Funding: ~5.5M (Seed)
Business Model: Software to examine skin conditions, consultation with doctor, subscription to medication.
What they do: Founded in 2017, CureSkin is a dermatology app that uses AI to provide expert and personalised treatment plans for skin, hair, body and other personal care concerns. Through the app, users can get their photos analysed for skin conditions such as acne, dark spots, pigmentation, and wrinkles. From this, a personalized treatment plan is recommended and provided by doctors.
FitterFly - Focused on Diabetes and Weightloss
Funding: 12M (Series A) - funding from Amazon
Business Model: Subscription for therapeutical programs and supplements.
What they do: Offers personalised digital therapeutics programmes for diabetes, pregnancy, PCOS, and obesity to deliver health outcomes. The startup says it has managed over 20,000 patients until now through a 360-degree care approach and clinically prescribed therapy by more than 200 doctors across India.
Whats next and why should you care?
Healthcare in India will continue to evolve as the countries GDP continues to grow. We’ll start to see the evolution of it in a few different ways.
Larger conglomerates will continue to enter the space to provide more personalized healthcare recommendations. Similar to what Apple, Google, and Amazon are all doing today. These companies will mostly likely acquire or purchase stakes in the large horizontal solutions in India.
This creates a wide variety of acquisition opportunities for feature or solution specific services.
Verticalization of healthcare will be the next frontier of growth. Problem or demographic specific providers will start in Tier 1 cities and expand to neighbouring regions or to Tier 2 and 3 cities once the ARPU starts to rise in those areas. We’ll see the first unicorns focused on womens health, or eye care, or diabetes in India and southeast asia.
There are a wide number of verticals to be explores. Each one will have its own winner that may be pursued by or acquired by the larger conglomerates.
Data privacy and security will become a hot topic. Anchoring on the rise in e-commerce, digital delivery and personalization will become more of a need within India and the broader southeast asian region. With this, the need for data security, privacy, and cyber security will start to rise.
Consumer facing data privacy solutions will take a foothold in Tier 1 India, then expand into Tier 2 and 3 as consumer education and willingness to pay starts to grow.
If you want to get a bit deeper onto this, I’d recommend reading this report in 2020 by McKinsey that explains some of the factors driving the growth of the overall market and shooting me a follow on twitter @tubadsouza or LinkedIn.
That’s all for this week - hopefully I’ll see you all soon when I get another change to write!
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