Over the last two decades, rising Internet and mobile phone penetration have changed the way consumers communicate with a brand or take purchase decisions in India.
From travel, movies, hotel reservations, books, matrimonial services, electronic gadgets, fashion accessories and even groceries, technology has disrupted every aspect of the consumer’s journey with convenience trumping price. Just like all these sectors, another industry that witnessed Internet disruption has been the pharmacy sector.
Over the last two-three years, India has seen a clutch of e-pharmacies start-ups including 1mg, netmeds, and Pharmeasy, among others, aiming to take the hassle of buying medicines and replicate the success of the Flipkarts and Snapdeals of India, in the Rs 80,000 to Rs 90,000 crore a year drug market of the country.
However, the realities have been quite different in this sector.
Since the start, fledgling companies have drawn the ire of Indian regulators and thousands of traditional mom-and-pop pharmacies, have accused them of illegality in their mode of functioning disrupting traditional business, given the discounts and ease of purchase they offer.
For instance, in October last year, members of the All India Association of Chemists and Druggists closed their shops for a one-day strike to protest against Internet pharmacies, businesses that they claim are illegal and pose a significant threat to patient health.
Before that in May last year, the Food and Drug Administration (FDA) of Maharashtra had filed a case against e-commerce major Snapdeal, its distributors and officials for selling prescription drugs online. Then earlier this year, Maharashtra FDA raided the offices of Pharmeasy, an online pharma which relies on traditional stores for supply of medicines, while authorities had also sent warnings to Netmeds, another e-pharma company.
These opponents of online drug businesses have raised various points. They say that there are no well-defined, dedicated laws for online ventures, though pharmacies in India are governed by the Drug and Cosmetics Act 1940, Drugs and Cosmetic Rules 1945, Pharmacy Act 1948 and the Indian Medical Act 1956. Laws related to e-commerce are defined under the Information Technology Act, 2000 but those are also silent on e-pharmacies.
Though the Drug Controller General of India (DGCI) had set up a sub-committee to deliberate over the issue, the final decision has yet to be taken which will decide the fate of various online pharmacies trying to change the conventional way of buying medicines and in return, organising the sector.
In order to understand the challenges plaguing the industry and how has it been for these online players to operate in such environment, Indiaretailing Bureau chatted with CEO and co-founder of 1mg Prashant Tandon. 1mg is one of India’s leading online pharmacy start-ups. Tandon is now also President of the recently formed Indian Internet Pharmacy Association (IIPA).
The company, which started as HealthKartPlus, the generic drug search business of Healthkart, an online vendor of health products in the year 2012, spun off into a separate entity and rebranded itself as 1mg, a marketplace for medicines, in the year 2015. Despite various resistance and challenges, 1mg has managed to raise Rs 100 crore ($15 million) funding from Maverick Capital Ventures this year, the venture capital arm of US-based hedge fund Maverick Capital and has been growing by double digits.
Today with 7.1 million downloads and 9.5 million monthly visitors to its platform, 1mg has successfully created a database of about 100,000 medicines with detailed information on their side-effects and composition and also allows consumers to do a price comparison among multiple brands of medicines with the same composition. Excerpts from the interview:
The battle between traditional chemists and onlne medicine retailers is known to all. In fact, the Government also interviened raising concerns on selling medicines online. How difficult it is to run a business in such a scenario?
We are disrupting a pretty large and unorganised industry that holds no accountability today. This is making them uncomfortable and they are trying to find reasons to come up with faults in our model. However, thankfully, the latest news about the recommendation by a health ministry sub-committee to set-up a national portal for registration of e-pharmacies is fantastic and a great positive for us. I feel they have realised that more and more consumers are willing to buy medicine online and It’s imperative for everyone to provide these options to succeed in the long run. It will definitely help things get better in future.
But, since the beginning, there are a lot of concerns against e-pharmacies from the safety and viability perspective. What do you think about that?
I think the overall confusion is actually misinformation, which has been spreading since the start. If you look at the eight points that the association (Indian Medical Association) has come out with are actually from the lack of information that has been spreading. A lot of the accusations have been around the fact that offline chemist stores say we have no prescriptions. However, not a single order on our portal can be placed without an authentic prescription. Anyone can try and place an order.
Secondly, there have been allegations that e-pharmacies lead to habit forming drugs being used and abused, leading to the drug adoption problem in country. My counter to this is that we are less than the 0.5 per cent of the total pharmacy market and second we don’t have a single habit forming or psychoactive drug on our platform. We just don’t sell these products.
Third, we have been told that e-pharmacies don’t have any licensed pharmacists, which is also incorrect. I have five doctors and 35 pharmacists working in my team. Every prescription goes through three levels of check, the first being technology. So if the prescription contains a schedule X medicine or a habit-forming drug or anything that can be misused, we just don’t allow it to go through our platform.
And finally, we are a simple marketplace model – a consumer gives us the prescription and we pass it on to a third-party pharmacy. We are not even technically an e-pharmacy, just a platform connecting the consumer to the pharmacy. So, all these allegations are based on and spreading misinformation. They are not based on rationale or logic.
Having said that, we are now educating regulators about our model and why it is a better model and how it is actually helping the market. Hope for better days in the future.
Nonetheless, all this bruhaha must have impacted the consumer’s trust. How are you working to maintain that?
So, trust cannot be built overnight. There’s no shortcut to it. It’s product, services working together and something which is very difficult to build and easy to lose. It depends a lot on end experience and we are very committed to that part. We literally work as a marketplace that brings people to the platform for information as well as purchase.
Online pharmacies are able to sell medicines on much lower prices and then there are additional discounts. How do you manage to extend such offers?
If you look at the margin profile of pharmaceuticals and overlay on it the cost structure of a brick-and-mortar format you’ll understand how we are in a position to pass on discounts to consumers. While there is sufficient margin in the supply chain, for a brick-and-mortar model the retail cost, real estate, and rentals come out to be extremely high. On the other hand, online models don’t have these limitations and that is what has really helped us. So the margins in the industry are pretty good. And that is where we have sufficient margins to pass on to the consumers.
You are also planning to start a subscription model. Tell us something about that?
So the bulk of our consumers are chronic patients who need regular supply of medicines for diseases like diabetes, and arthritis, among others. These patients were already buying from us and we are just trying to give them a more convenient option which is easy for them and good for us. With this, we will be able to plan our inventories well in advance and can offer them better deals for subscribing out offerings. But, it will take atleast next quarter to go live with this.
How has your month-on-month growth been? What is the average order size currently?
We have been witnessing healthy double-digital growth consistently every month since our inception. Month-on-month we are growing by approximately 15- 20 per cent. And as an app we have seen 7.1 million organic downloads. The average order size currently is around Rs 1000-1200.
Finally, how many cities you currently deliver to? Any plans to expand?
Our transaction services in pharmacy exists in 14 cities and diagnostics in a little more than 20 cities. We have raised an additional round of funding from HBM Healthcare Investments post the earlier round of Rs 100 crore in April this year and we are certainly using this money to expand in other cities.