The next online tonic: E-majors, corporate giants eye e-pharmacy business

Amazon, Reliance recently announced their foray into e-pharma sector

When Seattle-headquartered Amazon announced its foray into e-pharmacy in the US recently, traders’ groups, pharma associations as well as big businesses in India took notice. Players with interest in this space are keenly looking out for Amazon’s next move and whether India would figure prominently in its e-pharmacy plans. So far, the American e-commerce major has taken only baby steps in the pharmacy segment in India and Amazon executives have pointed out there’s no timeline for a commercial launch in the country yet.

All that the company is talking about right now is a beta run with a few select customers — mostly friends and families of employees — in Bengaluru. It’s more like an experiment to see how competently medicines can be sold online on the basis of prescriptions.

“As part of our commitment to fulfil the needs of customers, we have an Amazon Pharmacy beta programme in Bengaluru allowing  customers to order prescription-based medication in addition to over-the-counter medicines, basic health devices and ayurvedic medication from certified sellers,’’ a spokesperson said, adding that this is particularly relevant now because it will help customers meet their essential needs while staying safe at home.

In fact, Amazon routinely conducts beta pilots for every new segment ahead of a launch. Recently, it had multiple experiments for foraying into the food delivery business and also before onboarding a large number of  kiranas (mom and pop stores). But executives are tight-lipped about the timeline for e-pharmacy to go live on the company’s marketplace platform.

There’s no formula on the time taken from a pilot to launch, according to insiders. It varies from industry to industry. Then there are cases where a beta never matures into a launch. Some businesses don’t scale up, a person in the know pointed out. Beauty was one such category for Amazon, the person said. But e-pharmacy looks unlikely to fall in that class.

As Ankur Pahwa, partner and national leader (E-commerce and Consumer Internet) at EY India, said e-pharmacy makes sense for businesses, going by the stickiness of the segment. Adoption has only accelerated in the last few months, he said. E-pharmacy in itself is a large spend category estimated at $12 billion in the country at present, though this may even factor in phone buys from local chemists. With multiple avenues, including telemedicine, diagnostics, insurance and loans for hospitalisation, available for branching out besides pure play e-pharmacy, the category is seen as a significant opportunity for industry.

Pahwa pointed at a report done by EY about a year ago where the projection for the e-pharmacy addressable market in India was pegged at $18 billion by 2023. However, he said the projection has been accelerated by 10 to 15 per cent after the post-Covid-19 experience. He’s optimistic that the addressable e-pharmacy market will touch $21-22 billion in the country in the next two years or so. While the ‘’chronic’’ segment is dominant now, the “acute” medicine market is expected to get a leg up with the entry of companies such as Amazon because of their knowhow in fast delivery. 

Meanwhile, some of the biggest industrial houses have joined the game. Reliance Retail bought a 60 per cent stake in Netmeds for a cash consideration of Rs 620 crore in August. The Mukesh Ambani-led group’s announcement that it was buying a majority in the Chennai-based online pharmacy delivery startup Netmeds (Vitalic Health Pvt Ltd) was a sure indication of the value of this space.

The development coincided with Amazon India starting its beta and two prominent players — Medlife and PharmEasy — planning a merger. Reliance Retail’s statement that the addition of Netmeds broadens the company’s digital commerce proposition made it clear that e-pharmacy would witness disruption — just like some other sectors such as telecom and retail. Amazon India’s experiment in online pharmacy, however small in scale, only strengthened analysts’ view that aggressive competition was in the making.   

 That’s not all. The Tata group, too, wants to get active in this category. Recent reports suggest the group is in talks for a deal with 1mg, an important player in the sector. Flipkart, now owned by Walmart, is looking at an entry into prescription-based e-pharmacy as well, sources said. The company’s waiting for the government guidelines to be clearer. It’s currently present in the over-the-counter medicines.

In a statement, Flipkart said, “We at Flipkart have expanded our healthcare portfolio to introduce OTC medicines on the platform which comprises ayurvedic, homeopathy and allopathy medicines. As consumers increasingly look for preventive care in the wake of the pandemic, it was a natural step for us to scale up our portfolio and launch products across categories such as immunity boosters, respiratory care, diabetic care, digestive care and cardiac care, among others.’’ It added that in the last six months, Flipkart has ramped up the offerings in this space and currently hosts more than 8,000 products under the portfolio.

Globally, the projection is that e-pharmacy could possibly cross $177 billion worth of business by 2026, up from around $50 billion in 2018. In most countries around the world, it’s a regulated market for obvious reasons. In India, too, the industry has been complaining of regulatory challenges and ambiguity in guidelines. Perhaps, because of the regulatory challenges, there’s a nervousness in the industry while talking on the subject. Senior executives at Netmeds and Medlife were not available for comment. And Amazon didn’t want to talk about its plans beyond the beta mode.

Analysts like Pahwa believe most of the government guidelines such as mandatory registration, compulsory customer facility, provision for regular inspection, advertising dos and don’ts and data localisation can be followed by industry. In fact, much of this applies to offline players as well. 

If Covid has made a difference in perception about e-pharmacy, will vaccine distribution be a new opportunity, too? “That’s a specialised area with cold chain requirements, we are not in it yet,” said an executive in this business.