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Are E-pharmacists in the Best of Health? Biggest play is about large data volumes, which these start-ups get from customers to analyze for driving more customers

By Sandeep Soni

Opinions expressed by Entrepreneur contributors are their own.

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After an FIR being ordered against e-tailer Snapdeal's CEO Kunal Bahl in April this year by Maharashtra's Food and Drug Administration for illegally selling prescription drugs such as Viagra on its platform, the sale of prescription medicines through e-commerce channel has caught the wrath of offline pharmacists. Now whether the opposition is in view of the larger public interest as these offline retailers claim or it is a possible disruption of their businesses because of online channels stand contested; disruption also occurred because of the e-pharmacy model's potential to create next unicorn just like Flipkart, which disrupted the traditional retail.

Out of $49-74 billion size that Indian pharma market is expected to be by 2020 as per accounting firm PwC India's report on Indian pharma industry, the market for prescription medicines, and over-the-counter (OTC) and herbal products that start-ups in e-pharmacy space are aiming at is around $12 billion and $4 billion respectively.

The focus is on e-tailing medicines for chronic ailments, such as heart disease, stroke, diabetes and kidney disease, that tend to have repeat value where customers have to take medicines for at least three months and hence can wait for a day or two for home deliveries vis-a-vis medicines for acute diseases like backache, headache and burn that are immediately required.

"At mom and pop pharmacies, stock keeping unit (SKU) availability is a challenge as often one has to go to different pharmacies to find a medicine that is not quite convenient particularly when a person is sick. Also authenticity and quality is a significant issue because of fake and subpar medicines that are close to expiry or expired being sold," says Prashant Tandon, Founder and CEO, 1MG.

In April this year, Tandon spun-off his medical business at Healthkart (which is nutrition-focused that he along with Sameer Maheshwari started in 2011) as 1MG. Most of these e-pharmacies follow a marketplace model, sourcing inventory from experienced licensed pharmacies as vendors that work with authorized distributors and have licensed pharmacists to avoid any drug misuse. "We don't hire fresh graduates. They need to have at least eight-month to one-year experience with a minimum B Pharm qualification," says Shravan Kesarla, Founder, Medidart.

Last year in March, Kesarla launched Medidart as a marketplace. "We partner with slightly progressive mom and pop pharmacies that use technologies like computer and Internet and are local entrepreneurs who want to grow leveraging online platforms like ours. They have to work with authorized distributors only, so it is highly unlikely that fakes will enter the system that happens largely through cash transactions where none of them gets tracked offline as lots of transactions happen without bill, batch number or prescription," says Tandon.

However Rajiv Gulati, former president of pharma giant Ranbaxy Laboratories, which was acquired by Mumbai-based pharmaceutical MNC, Sun Pharmaceutical Industries, in 2014, prefers inventory-led model for his e-pharmacy mChemist launched in May this year.

"We sell directly to customers. We manage inventory, but it is minimal and just in-time because we have tied up with eight pharma manufacturers and around 12 large authorised distributors," says Gulati.

mChemist currently covers 25,000 pin codes across India with a central warehouse hub in Delhi and has outsourced logistics to companies like GoJavas, First Flight, Safe Express and DTDC for delivering across India. The startup will switch to hub-and-spoke model once the volume grows.

"This we will do via franchising model where each licensed location will have trained and registered pharmacists. We will train them in procurement, packaging and dispatch processes," says Gulati.

The other area where e-pharmacies score over offline ones are discounts offered, typical of an e-commerce model to attract customers. "Our vendors offer discounts that are currently 10 per cent on first purchase and 5 per cent cash back in Medidart e-wallet on the second purchase," says Kesarla.

"There are two principles on which start-ups can deliver great value to customers. First, they offer easy to digest research-based information about medicines that leads to informed decision making and creating awareness. Second, pharma companies are extremely price sensitive for medicines where it is a life-and-death issue. So, access to affordable drugs is an important advantage that these start-ups offer," says Sujay Shetty, Leader, Pharmaceuticals and Life Sciences, PwC India.

Apart from content-based information that includes medicines' side effects and precautions, these e-pharmacies offer customers services such as free dosage and refill reminders for the medicines, free diet counselling with dieticians, finding doctors, booking appointments, maintaining digital records of customers' details.

The biggest play is about the large data volumes, which these start-ups get from customers that they can analyze and use to drive more customers. This data can also be used by the government while formulating public health policies.

"This is where the disruption lies. Through this phenomenal amount of data and analytics, start-ups can track customers' style and pattern of purchase, interest, disease category, preferences for drugs, compliance, etc," says Shetty. ILLEGAL? Currently, there is presumably a grey area where these start-ups are operating as there is no particular law governing e-pharmacies. Drugs and Cosmetics Act, 1940, mandates, "Only registered pharmacists are eligible to dispense drugs in licensed premises," while Pharmacy Act, 1948, states, "Only Pharmacist can dispense medicine on the prescription of a doctor."

Indian Pharmacist Association (IPA) and All India Organisation of Chemists and Druggists (AIOCD) had written to Drugs Controller General of India (DCGI) curbing e-pharmacy model in June this year. Following this, DCGI appointed industry body FICCI as the nodal agency for consolidating guidelines for e-pharmacies.

However, this seemingly applies to inventory-led platforms where they have to stock the inventory instead of a marketplace model where drugs are still being "dispensed" within the premises of vendors which are already licensed pharmacies and have registered pharmacists who validate the prescription before dispensing drugs.

"Drugs and Cosmetic Act doesn't permit this model. There is a fine print in these start-ups agreement that they are not responsible for what is being supplied to customers, which customers usually don't read. Additionally, even a computerized bill is not acceptable in a pharmacy. The government will have to regulate them very carefully. What driving customers to these portals are discounts, not convenience," says Ashutosh Garg, Chairman and MD, Guardian Pharmacy.

The third largest pharmacy chain claims of getting requests from e-pharmacies to become their supplier and also to enter online model, but it will not do that until regulations are in place.

On the contrary, Tandon says, "In a marketplace model, vendors (offline pharmacies) need to comply with all provisions of Drugs and Cosmetics Act not platforms like us. Pharmacies sell medicines through us, we are not retailing at all. Our vendors are fully compliant with provisions including selling medicines with prescriptions under the supervision of a licensed pharmacist within licensed pharmacy."

"It is a huge untapped opportunity for reaching to multiple markets as offline channel remains somewhat expensive. I believe billion dollar companies will come out of this space, and I hope 1MG will be one of them with regulatory issues being resolved," says Sasha Mirchandani, MD and Founder, Kae Capital.

Along with Sequoia Capital, Intel Capital, Omidyar Network and Deep Kalra, Founder,, an e-travel portal, Kae Capital invested $6 million in 1MG during its launch. A customer needs to upload his/her prescription which then gets validated by a licensed pharmacist before customer can add medicines to the shopping cart and make payment.

The validation of prescription electronically however has also become a part of the debate. "Information Technology Act, 2000 section, "legal recognition of electronic records,' supersedes all previous acts that ask for documents in writing. It states that if documents are received in the electronic form and is reproducible, you can assume that you have received it in writing," says Kesarla.

Moreover, customers can't see prescription drugs along with their details on the platform before their prescription gets validated. "Drug and Cosmetic Act doesn't allow advertising direct to customer because a reader can be fooled into presuming that he can self-medicate whereas you can't self-medicate in health care. You need to have a valid doctor's prescription," says Shetty.

DCGI is yet to bring out formal guidelines for e-pharmacy model though FICCI has submitted its recommendations. Most of these start-ups facilitate returns; however unlike fashion and electronics, it is unlikely for them to deliver wrong products.

"We can take back full medicine strips, not partial strips. A delivery boy collects medicines and returns to pharmacy and then customers' money is reimbursed to his/her Medidart wallet.Returns however are less than one per cent for us," says Kesarla. The regulations by the government will be the tipping point for e-pharmacies to grow rapidly but what else they'll have to focus on? "The one who has the best stocking system or backend infrastructure to support will succeed. There are around 1.4 lakh SKUs, and this is a relatively large number to deal with," says Pradeep Dadha, Founder and CEO,

"I don't think these start-ups are authenticating the supply chain or storage as ultimately the medicines their vendors have are made by same manufacturers who sell at other pharmacies as well. This will however evolve with the marketplace evolution. Those who aspire to become Flipkart of e-pharmacy will have to be very cautious about quality or source material they are giving to customers," concludes Shetty.

(This article first appeared in the Indian edition of Entrepreneur magazine (October, 2015 Issue).

Sandeep Soni

Former Features Editor

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