This took place even as regulatory challenges posed a threat to the business model towards the end of the year. These, however, are seen as temporary, with the central government working on notifying of rules for the sector. The industry is expected to again see growth in the near future, say experts.
The sector saw 10 deals worth $140 million (Rs 8.8 billion) during the year, as compared to five deals worth $37 million in 2017, according to data from Venture Intelligence, a research and analysis entity. In 2016, there were around 10 deals and the total amount infused by PE/VC investors was $56 million, so far the highest investment since 2013.
The highest investment in 2018 was a total of around $65 million (Rs 450 million) in PharmEasy, from investors including Think Investments, Fundamentum, Bessemer, Eight Roads Ventures, Trifecta Capital, Orios VP, Aarin Capital, JM Financial and others.
Netmeds attracted $35 million from Sistema Asia Fund and others, the second largest deal. The others include one of $11 million by Nexus Venture Partners, IIML and SAIF Partners in LifCare and of $10 million by IIFL VC, Sequoia Capital India and others in Healthkart.
Very recently, however, a single judge’s bench at the high court here had directed that online sale of medicines be stopped till the central government notified the rules referred to earlier, to be done by January 31. This was on a petition from the Tamil Nadu Chemists and Druggists Association. The petition had argued that prevailing regulations have no provision for online selling of medicine -- prescription drugs could only be sold by a registered pharmacist against a prescription and only from premises for which a licence had been issued by the drug regulatory authority.
Online pharmacy firms have argued to the contrary, contending they sell only on prescription and through registered pharmacists. There are various types of online pharmacies — some are aggregators which connect between registered pharmacists and the consumer; others have their own registered pharmacists and medicine stock. The single judge’s order was stayed, son after, by a larger bench of the same court. A similar suit is before the high court at Delhi.
"What we are seeing is an evolving phase in the industry, towards the right kind of regulation," said Sudarshan Jain, former managing director of Abbot Healthcare. "The government is working in the right direction on this. It will help patients and help the industry to grow in the right direction. More investment will come into the sector."
"PharmEeasy is solving a real customer problem, by providing genuine medicines at a fair price, along with the added convenience of home delivery. We were early investors here and remain excited to partner with a phenomenal team," said Vishal Gupta, managing director at Bessemer Venture Partners of his investment.
He and others point to the strong penetration of smartphones and fast-growing access to the internet. "We strongly believe in the substantial potential of the sector," said Akarsh Bharadwaj. Strategy head at PharmEasy.
There are around 20,000 people working in this sector, with 1.5 million customers buying medicine online, according to a senior member of Digital Health Platform, the combination of online sellers.
ResearchAndMarkets.com estimates the e-pharmacy market potential at over a billion dollars, with sector giants such as Amazon and Flipkart trying to get in. The Indian e- commerce sector is expected to see a compounded annual growth of over 20 per cent in the coming years, crossing $3 billion by 2024.