Skip to main content

E-pharmacies are web or app-based platforms that enable patients to upload prescriptions and receive their medications directly to their doorstep within a specified timeframe. This innovative model seeks to bridge the gap between patients and their healthcare needs, offering convenience and accessibility in a rapidly digitizing world. The Indian pharmaceutical market is valued at around USD 26. 7 billion for FY24, with projections indicating a robust growth rate of 10-12% CAGR over the next decade. This growth is largely fueled by a burgeoning population, an increase in chronic diseases, rising disposable incomes, and ongoing price adjustments within the sector. With nearly one million registered pharmacies in India, the market is saturated with traditional players. However, the last decade has witnessed the emergence of more than 250 online pharmacies, signaling a shift towards digital solutions in healthcare.

A critical question arises: is there a genuine need for e-pharmacies? Understanding the gaps in offline retail pharmacies that e-pharmacies could address is essential. Entrepreneurs typically develop new business models to tackle existing pain points in industries, often focusing on product innovation, streamlining processes, and enhancing transparency. The rapid adoption of models like ride-hailing apps and food delivery services highlights how pain points can drive the uptake of new solutions. One of the primary challenges facing online pharmacies is their ability to make medications more affordable. The distribution channel—from C&F agents to wholesalers—operates on margins of just 28%. While the manufacturing cost of a product is only 15-20%, a considerable portion of the budget is allocated to marketing and generating prescriptions through doctors. Although large online pharmacies offer discounts of 15-20%, many local pharmacies can match these, especially for high-value, recurring orders, thus limiting the potential for e-pharmacies to reduce costs for patients.

The pharmaceutical sector in India is well-established, with large companies ensuring that products reach even the most remote areas, provided prescriptions are available. Unlike many consumer products that can be marketed through online advertising to attract a wide audience, pharmaceutical marketing is heavily localized, focusing on relationships with healthcare providers. Additionally, the urgent nature of healthcare often means that patients cannot afford to wait for online deliveries. Doctors typically prescribe medications based on their availability within a 1 km radius, limiting the effectiveness of online pharmacies in enhancing accessibility. Prescription fill rates—the percentage of items in a prescription that can be provided immediately—are generally better in online pharmacies due to advanced inventory management tools. However, offline pharmacies often have the capacity to source most products within 3-4 hours, thanks to their established connections with local wholesalers. This ability to quickly address shortages gives traditional pharmacies an edge in meeting immediate patient needs.

When it comes to service levels, many patients find their local pharmacies more reliable. Most local pharmacies offer at least a 10% discount and deliver medications within 10-15 minutes, even for small orders. In contrast, online pharmacies typically take 2-3 hours for delivery. Local pharmacies also provide the added convenience of easy returns in case of prescription changes or unused medications. While many quick delivery platforms are looking to enter the pharmacy sector, the transition from FMCG to pharmaceuticals poses unique challenges due to the regulatory nature of the industry, which mandates valid prescriptions for all dispensed medications. Pharmaceuticals are heavily regulated, making compliance a significant hurdle for organized e-pharmacies. Local pharmacies manage to navigate these regulations more easily, as it is challenging for regulatory bodies to monitor small, individual pharmacies effectively. Currently, offline pharmacies maintain records for only certain scheduled drugs, while e-pharmacies must acquire valid prescriptions for every transaction. Additionally, strong associations among retailers and wholesalers in the pharmaceutical industry complicate sourcing for e-pharmacies.

While establishing large private-label businesses in the pharmaceutical sector is difficult due to the influence of pharma companies on doctor prescriptions, e-pharmacies can explore alternative revenue streams. Their advertising opportunities are primarily restricted to over-the-counter products and medical devices. Some online pharmacies have ventured into diagnostics, only to realize that competing in this field requires different expertise. However, e-pharmacies can still target tech-savvy customers by offering health monitoring wearables and other health-related products. They can monetize retail and prescription audits by providing pharmaceutical companies with insights into brand performance at the zip code level. Running patient loyalty programs could also help promote brand loyalty among chronic patients, potentially redirecting pharmaceutical marketing budgets from doctors to patients—especially given the high lifetime value of chronic patients.

In conclusion, while e-pharmacies face numerous challenges, they also have substantial potential to transform the healthcare retail landscape in India. Innovations such as disease management programs and a shift toward doctors prescribing molecules instead of specific brands could greatly influence the market. As e-pharmacies continue to evolve, it will be fascinating to observe how they adapt to meet patient needs and navigate regulatory complexities. The future looks promising, with the potential for significant growth in this sector as both consumers and pharmaceutical companies increasingly recognize the benefits of digital solutions.

About the author

The author currently leads the healthcare practice at AGR Knowledge, bringing 18 years of diverse experience in strategy consulting and operations within the healthcare sector. His expertise spans various functions, including communications, sales, and operations. Notably, he was a founding team member of an online pharmacy startup and served as General Manager at a dental clear aligner company. Connect with him at vikas@agrknowledge.com