Head of Strategy, PharmEasy
In the past few years the Indian healthcare system of patient care has gone through a lot of modernization with deployment of capital, adoption of best practices and technology across the spectrum. But despite this progress, the healthcare spending in India still lags our peers in South East Asia with only 3.9% of GDP spent on healthcare vs a global average of 9% and requires further investments. Accessibility, affordability, and availability continue to remain key challenges faced by the vast patient pool across the country.
Unlike most developed & advanced markets, India’s outpatient healthcare sector is largely out of pocket with no insurance cover. This has led to high share of an avg. household’s income being spent on healthcare related expenses. Around 70-80% of spends on a patient’s treatment goes to medicines & other prescription drugs, making spends on medicines the largest pool of economic value & profit. This large share has created a roughly $20bn pharmaceutical market in the country that today is predominantly offline with a highly fragmented and inefficient supply chain across the country.
We have more than 80,000 distributors; with the top five distributors not having more than 3%-4% combined market share and more than 800,000 pharmacies across the country with average size of a pharmacy being 100-200 sq.ft. Such fragmentation coupled with low adoption of technology& digital tools and poor inventory management across the supply chain has resulted in the average prescription fill rate in the country to be ~70% with ~25% of drugs in the market estimated to be spurious in nature. Another challenge for the sector is the lack of digital prescriptions where it is estimated that less than 1% of prescriptions are digitised in the country today, resulting in extreme challenges for patients & doctors to maintain adequate health records & patient history to improve delivery of care.
E-Pharmacies are playing a crucial role in modernising the healthcare delivery framework in the country and have taken on the challenge of bringing technology to each step of the supply chain. They have invested heavily in building technology systems, digital tools and best practices to digitise prescriptions, launch tele-consultation services and create an extensive marketplace network to empower local neighbourhood pharmacies with tools to take advantage of a strong digital supply chain network, improved customer engagement and reliable last mile delivery infrastructure. These capabilities have allowed pharmacies to have better demand forecasting and just in time procurement leading to customers experiencing far superior fill rates, genuine medicines, and extensive product catalogue.
In a short span of five years E-Pharmacies have created a considerable shift in consumer behaviour and delivered exceptional value to their partner pharmacies and marketplace sellers. Continued investments by E-Pharmacies in growing the market, acquiring customers across the country and delivering superior customer experience has led to an estimated share 2% of the OPD pharma market moving online.
With changing lifestyles and urbanisation, chronic ailments are expected to be a growing share of overall disease profile across the country. India is estimated to have 72M diabetic people in 2015 which is expected to almost double in the next two decades. Chronic patients have high monthly spends on medicines, regular & predictable purchase behaviour, making them the target customer segment that E-Pharmacies have acquired and today large share of E-Pharmacy sales are in the chronic segment.
The tailwinds brought about by the pandemic have quickened the pace of consumers moving online resulting in wide adoption of E-Pharmacies. They are now expected to capture 5-10% of total pharma sales over the next five to seven years and as this market continues to grow at 12-15% annually, we are looking at multi-billion-dollar market that is for the taking and adds to the attractiveness of the space for investors.
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