With the global pandemic spiraling around the world, the need for online pharmacies has spiked exponentially. It has increased as much as 50 percent in the last three months as people have stayed home, practicing social distancing. The flood of orders has improved its economy and reduced its customer acquisition cost. Taking advantage of the current scenario, E-commerce giant Amazon has launched its online prescription medicine delivery service Amazon Pharmacy in Bengaluru, India. It allows customers to order prescription medicines, over-the-counter drugs, ayurvedic medication, and essential medical devices.
“As a part of our commitment to fulfill the needs of customers, we are launching Amazon Pharmacy in Bangalore, allowing customers to order prescription-based medication in addition to over-the-counter medicines, basic health devices, and Ayurveda medication from certified sellers. This is particularly relevant in present times as it will help customers meet their essential needs while staying safe at home,” an Amazon spokesperson said.
Meanwhile, India needs a future-ready digital health system, and e-pharmacy provides a building block for such a digital health ecosystem to ensure efficient and affordable universal health coverage. “The need for a future-ready digital health system has become even more urgent with the COVID-19 pandemic. A strong health system must have a strong and resilient digital backbone,” the white paper said.
The Indian e-health sector is expected to become a $16 billion opportunity by FY 2025, growing from $1.2 billion, at a CAGR of 68 percent, according to a research firm RedSeer Consulting. It is expected to touch 57 million households, driven by positive reception from both consumers and providers. The overall Indian healthcare industry is set to grow at 17 percent CAGR until FY2025 to reach $353 billion.
Amazon venturing into e-pharmacy might be something India needs, given its vast logistics network and customer reach. It still remains unclear how early Amazon will roll out the service to the rest of the country, and whether it will internally prioritize the business as a significant vertical and engine of growth. In America, Amazon acquired online pharmacy PillPack to deliver medicines to the customers, in a $750 million deal in 2018. Amazon India could also adopt a similar strategy for its e-pharmacy business. A basic review of the service showed us that Cloudtail was selling the majority of the prescription drugs on Amazon.
While Amazon is entering the market, the rest of the established players are folding into larger rivals or being acquired. Reliance Industries Limited is supposedly in advance talks to acquire a majority stake in Chennai-based startup Netmeds. The current valuation of the startup is $80-100 million. If the deal goes through, Netmeds will become the eighth company that Reliance acquired since 2017. PharmEasy, the market leader in the space have also explored merger and acquisition negotiations with Medlife. The deal is likely to be valued at $200-$250 million. 1mg, another player in the market, backed by investors such as Sequoia, also held conversations with these players.
E-pharmacy is the second biggest online sector Amazon has entered this year, after having launched its food delivery service ‘Amazon Food‘ in May 2020. However, it is not going to be a picnic for Amazon to tap into the e-pharmacy space, the reason being, regulatory hurdles, and the never-ending war between online and offline pharmacies. Also, the delay in the finalization of e-pharmacy rules by the government is a great hindrance.
Recently, the All India Organisation of Chemists and Druggists (AIOCD), representing more than 850,000 pharmacy outlets across the country, wrote a letter to Prime Minister Narendra Modi with a petition to ban the activities of e-pharmacies in the country.
Additionally, last December, the health ministry came up with revised draft regulations for online sales of drugs. According to the draft, e-pharmacies cannot stock medicines and will have to operate through retail chemist shops for doorstep supply of medicines, just like food-delivery platforms Swiggy and Zomato. The draft regulations also enabled retail pharmacies eligible to deliver medicines at a customer’s residence.