Telemedicine and e-pharmacy

The biggest shift during the COVID-19 pandemic is the number of patients turning to technology to communicate with their doctors and an increasing popularity of telemedicine. With the sudden pivot to working from home, doctors have had to quickly figure out how to care for patients when they could not see them in person and likewise for the patients. There has been a good noise around e-pharmacy over the past 12 months with television advertisments been bombarded by a few, but the real idea of this convenience is best seen in conjunction with telemedicine or online consulting. A combo of prescription with delivery is probably more sustainable version of this major health-tech initiative and the pandemic driven lockdown is right catalyst for the industry, something similar to what demonetisation did to online payments and wallets. 

Traditional healthcare systems require the patient to physically visit the doctor to get diagnosed. Telemedicine is nothing but remote diagnosis and treatment of patients by means of telecommunications technology i.e. via video, audio, or text. Increase in incidence of lifestyle diseases, rising health care costs, shortage of doctors and medical equipment has led the way for real-time consultation. Also, it helps the patients save travel and wait time as this they can consult a doctor at their own convenience and at the comfort of their home. Typically, the rural India is bereaved from medical facilities, giving telemedicine a tremendous space for growth in India. Deprived education level and availability of medical professionals in rural areas is the reason behind government’s ideology to use technology to bridge this gap.

The underlying business model is that there is a marketplace where doctors can list themselves according to their specialisation. A patient can log in and fill in the necessary details like name, age & problem faced. The algorithms work and a list of doctors is suggested to the patient from which he can choose to book an appointment based on review rating, demographics, etc. The whole process is a win-win situation for all 3 parties, doctor – who can widen his reachability and efficient use of time, Patients – who can consult anytime, anywhere at their convenience & marketplace (start-ups) – who can earn a commission to set up the whole process. The main aim is to reduce the number of patients visiting hospitals/clinics for non-emergency cases.

Globally, the telemedicine market is estimated to be $20 bn in FY20 and the sector constitutes a large pie of the growing health tech market. Developed economies tend to have a few large players controlling the majority market share as opposed to the developing nations where there are multiple small players operating to gain the market share. Indian telemedicine market is estimated to be $1 bn in FY20 which has a potential to grow to ~$5 bn by 2025 due to the massive demand supply gap acting as a growth driver. Indian telemedicine industry is primarily driven by start-up players rather than large corporations and is currently dominated with players like Practo, Lybrate, Mfine, Docsapp, Meddo, etc. Active VC investors in India for the sector include – Chirate ventures, Blume VC, Sofina, Temasek, Eight road ventures, Accel, etc. Also, the space has seen a quite of venture debt investing by Innoven, Trifecta, Alteria capital and others.

Recently in March 2020, the Indian government issued new guidelines for the telemedicine industry which was earlier covered under the IT Act, 2000. The new regulation provides a more comprehensive framework for applications, mode of communication, medical ethics, data privacy and confidentiality, document requirements, fees, process, drug list, technological platforms, etc. This will attract more investors to the telemedicine segment as businesses gain clarity on model and the regulations.

Online pharmacy players like Pharmeasy, 1mg, Netmeds have also entered the telemedicine space to gain some market share. Recently, it was published that Reliance Industries was in advance talks to acquire Netmeds. It appears to be part of a bigger plan where Reliance has entered the retail market via JioMart and partnering with Facebook and some other prominent US PE players. Pharmeasy, a leader in ePharmacy market in India, raised $220 mn in the last funding round at a valuation of $700 mn. The funding led by Temasek, was one of the biggest deals in healthtech sector in 2019.

Talking about e-Pharmacy & consolidation, there is also a parallel trend of consolidation in the Indian pharmaceutical distribution sector as well. The Indian pharma distribution market is pegged at $20 bn and currently has 50,000+ pharma distributors whose job is to act as an interface between manufacturer and the retail pharmacy. The fragmented distribution along with multiple layers is causing inefficiencies and restricts economies of scale. Over the years, more developed global markets have consolidated the pharma distribution business which shall be replicated by the developing nations like India. Some leading aggregators in Indian market are Keimed backed by Mitusi, Ascent

Health & wellness and Entero healthcare solutions (backed by good amount of PE funding). Thus, on the consolidation graph – ePharmacy sector is at a nascent stage compared to the matured pharma distribution sector but some convergence is likely in near term.

Investments in the Health-Tech sector in India in the last few years have largely gone towards consumer Tech (B2C) segment. Significant market opportunity is also expected to arise in the relatively under-explored healthcare “enabler” space (i.e., healthcare services like finance, insurance and pharma distribution). Following the steps of more developed markets, HealthTech sector in India is going to see a lot of consolidation activity and it shall have well-defined 3-4 major players in each segment.

With no clarity on the end of Covid-19, we can now say for sure that telemedicine is an idea whose time has come and consumers/patients seem to have adopted it as part of their life much like the payments through mobile. In near term, doctors and consultants will have to be prepared with the necessary infrastructure to cater the online demand, that may further reduce the consultation charges to certain extent. Big institutional hospitals shall likely have a special cell dedicated to real-time consultation. For the health tech industry, the Covid-19 crisis could bring about a lot more clarity and impetus just like the fintech sector got in India soon after demonetisation in 2016.

At IMAP India, we have been successful in building a good eco-system in the healthtech market and expect the market to consolidate in the near term. With the help of our partners in US & Europe, we strive to stich a winning formula for the investors as well the founders who are working hard to make our lives easier and convenient.