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Addressable Market for e-pharmacies

  • 30 May 2019
  • 5 min read

As per the report 'E-pharma: Delivering Healthier Outcomes' by consultancy firm EY, the addressable medicine market for e-pharmacies in India stands currently at USD 9.3 billion and is estimated to grow at a CAGR of 18.1% to reach US$18.1 billion by 2023.

  • The key growth drivers for e-pharma market in India are increasing internet penetration and smartphone ownership along with the ease of ordering medications through an e-commerce platform.
  • Besides, the increase in chronic diseases, rising per capita income and resultant healthcare spend will also aid to its growth.
  • At present 35% of domestic pharmaceutical market relates to chronic medications and the remaining 65 per cent to acute medicines. Out of this, e-pharmacies are expected to target 85% of the chronic market and 40% of the acute medicine market by 2023 (up from 25 per cent in 2019).
    • This expected rise in the acute target market by e-pharmacies, can be attributed to an improvement in last mile logistics through collaboration with local pharmacies and integrating into existing hyperlocal models.
  • The report also pointed out there is a lot of cash burn (describes the rate at which a new company is spending its venture capital to finance overhead before generating positive cash flow from operations) in e-pharma industry, mainly for offering discounts to gain scale. Discounts have to come down to reasonable levels to achieve break-even and any meaningful profitability.
  • Fintech and healthtech players can look to expand offerings by getting into the e-pharmacy segment. Hyperlocal players (food tech, grocery, delivery only companies) can also add on this segment to their existing portfolio to build efficiency on the delivery side.
  • Indian players with deep omni-channel presence especially in emerging tier 2/3 towns, with growing healthcare spends, can make a deep impact in the e-pharma sector.

The Government proposed following rules and guidelines for e-pharmacies in the year 2018:

  • It will now be mandatory for e-pharmacies to register with a central authority.
  • e-pharmacies will be restricted from selling drugs covered under the categories of the narcotic and psychotropic as referred to in the Narcotic Drugs and Psychotropic Substances Act, 1985 as well as tranquilizers and the drugs as specified in the Schedule X of Drugs and Cosmetics Rules, 1945.
  • e-pharmacy registration holders shall have a customer support facility and grievance redressal for all stakeholders. The facility shall be available for 12 or more hours each day throughout the week.
  • The premises of e-pharmacies will be inspected every two years.
  • The information received by the e-pharmacy registration holder from the customers by way of prescription or in any other manner shall neither be disclosed by the e-pharmacy registration holder for any other purposes nor shall the same be disclosed to any other person – rendering it impossible for them to share data with agencies like life insurance companies to supplement their business. Any violations could lead to either suspension or cancellation of licenses.
  • e-pharmacies are ordered to keep the data localized i.e., they cannot store it on international servers. They are not allowed to share the patient’s data with anyone but the central/state governments.
  • e-pharmacies are prohibited from advertising any drug on radio, internet, print or any other media for any purpose, thereby eliminating a possible source of revenue for them.

Hyperlocal Model

  • The term 'hyperlocal' refers to 'a small area' or 'a very specific demography'. Hyperlocal on-demand delivery model is defined as a business model in which the service provider acquires requested product(s) locally and delivers the same to the customer in the same geographical area.
  • The aggregator drives the entire system and earns a commission for the role it plays.
  • The model is applied to products as well as services like plumber, electrician, beautician etc. Examples of the hyperlocal on-demand business model are UberEATS, Zomato, BigBasket, Postmates etc.
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