With PharmEasy acquiring MedLife, the e-pharmacy sector to see a paradigm shift

The acquisition of Medlife by IPO-bound PharmEasy will make the latter, the largest player in the domestic online pharmacy sector. The combined entity will have over 2 million customers per month. The acquisition and the covid-19 induced lockdown have ignited the question on the future of e-pharmacy and the entire MedTech sector. The MedTech sector broadly comprises three parts – e-pharmacy, diagnostics, and medical equipment. Further, the Indian Economic Survey of 2021 revealed that the Indian Pharma market would value at an estimated US$ 41 billion by 2021 and US$ 65 billion by 2024. Now, enter e-pharmacy. Only 25% of the pharmaceutical sector fell under the e-commerce branch - e-pharmacy. Despite the pandemic, the market is still highly unorganised.

One of the noteworthy moments of the acquisition is that the combined entity of PharmEasy and Medlife will have a foothold of almost 70% of the e-pharmacy market. Despite the surge, the domestic e-pharmacy market is still in its infancy and offers significant growth potential. Thus, as e-pharmacy matures, smaller players will merge into larger players; that is the norm of every industry. Further, the threat of the bigger fishes taking a chunk of the pharma sector is so high, companies like Apollo Pharmacy are also moving to a hybrid brick-and-mortar-and-online model.

Further, in the e-pharmacy sector, apart from PharmEasy, the list of "larger players" comprises Amazon, Tata and Reliance. The latter three, with their capital and India-wide presence, pose a market paradigm shift.

Three trends that will disrupt e-pharmacy in India

The Indian e-pharmacy market shows trends that will change the mindset of the local population about ordering medicines online. Promising growth prospects in online pharmacy have attracted some big names such as Amazon, Reliance, and Tata. PharmEasy acquisition with Medlife and the government's entry into regulations and last-mile delivery has ensured that some trends are here to stay. An overview:

1. Omnichannel Delivery Ecosystem, Customer Engagement, Building Trustworthiness

The Indian e-pharmacy market is still in its infancy. Customers fear receiving counterfeit medicines. The pandemic-aided slow support response and the ineffective delivery system, hurt the consumers. The companies have resolved to reach a large consumer base in a shorter span. For example, most online pharmacies provide FAQs and they have huge marketing campaigns. But the ultimate conversion occurs after a satisfactory user experience.

Thus, moving forward, the e-pharmacy will have to establish logistics channels to reach customers in remote areas. They will need to achieve significant growth potential to support the e-commerce boom and a secure and quick delivery channel. On the other hand, user experience largely depends on the interface and data security. Thus, moving forwards, online pharmacies need to be able to address the consumer concerns around health records and prescriptions and take stringent measures to ensure the data privacy of customers.

About interface, since posy-pandemic, most of our conversations have moved online, conversations and customer engagements will be digital for online pharmacies too. Not just digital, but through calls, video, text messages, emails, and WhatsApp. That is, if despite low trust, slow services and unavailability of personalisation, the market boomed, in a few years, it will definitely flourish in the growing digital/hybrid ecosystem.

2. Government Support

As online portals encroach upon brick and mortar businesses, the Pharmacy sector is next to complain about illegal online sales of drugs by such companies. The government sees e-pharmacies as critical in the last-mile delivery of affordable medicines to all, even in remote areas. But for offline retailers, that isn't the case.

To bridge the gap, the National Digital Health Mission (NDHM) aims at improving the country’s digital health ecosystem. It will also boost growth in the online pharmacy segment via Government brick-and-mortar pharmacies. The Jan Aushadhi Program is an essential part of the government’s initiative to ensure the general population in the country has access to quality and affordable medicines. This, coupled with the Digital India Program, will allow Jan Aushadhi stores to be accessed through an application on mobile phones, which would benefit consumers significantly.

3. Mergers and Acquisitions

The pandemic changed the game of the e-pharma players in India. From the last mile-delivery system to providing health checkups, diagnostics and free doctor checkups, every startup in the e-pharmacy is expanding horizontally. In such a time, when people have moved to online purchase of medicines and medical devices, PharmEasy's vertical expansion only boosts its standing. In September, CCI approved the merger of online pharmacy Medlife with PharmEasy. This was the first major consolidation in the sector since the entry of big players like Reliance Industries and Amazon.

Later, the company raised $350 million from Prosus Ventures and TPG Growth LLC at a $1.5 billion valuation and became the seventh unicorn in 2021. With the MedLife acquisition, it aims to add more teleconsultations to link up customers with the 60,000 brick-and-mortar pharmacies and 4,000 doctors, that it already has on its books. Now, the company is looking to go for a public IPO by 2021.

Lately, Tata, Amazon, and Reliance have also entered the market. Tata acquired 1mg; Amazon opened Amazon Pharmacy and Reliance acquired a majority stake in NetMeds for Rs 600 crore. The market, apart from these big companies, is also home to many small e-pharma companies. Some names include EasyMedico, Practo, mFine and Myra. After a few stages, in every industry, the smaller companies join hands with the bigger ones, till there is an oligopoly market. . PharmEasy's acquisition is one of many in the line.

The Reliance-Tata-Amazon fight for a Super app

The addition of online pharmacy to all three of the organisation looks like a step forward in the one-place-sells-all model. Reliance has its claws in deals with Future Retail, UrbanLadder, Milkbasket, Zivame, Haptik, Embibe and Reverie; a wide variety of products integrated into a larger digital ecosystem. Thus, with Netmeds, Reliance plans to take on Amazon India and Flipkart in the e-commerce sector in India.

Read More: Reliance Jio: Mapping Mukesh Ambani’s Unparalleled Ambition

Competing with Reliance is the decade and half old Tata Group. It already has its presence online with Tanishq jewellery stores, Titan watches, Star Bazaar supermarkets; a joint venture with Starbucks. It also has Taj Hotels, Westside, Tata Cliq, Tata Sky, Croma, StarQuik, and now BigBasket and 1mg. Thus, Tata Group might club all of these under the online “SuperApp” platform by onboarding Tata Teleservices for providing technical solutions.

Although Amazon does not look at the Super App concept via mergers and acquisitions, its continuous self-expansion in Digital payments, grocery e-commerce, and now pharmacy, makes it look like Amazon will give a tough fight to domestic Super-Apps globally. Except, China of course.

Thomas George, President - CMRSL>