India needs clarity and parity in the epharmacy business, says 1mg’s Prashant Tandon
1mg founder Prashant Tandon

Sequoia-backed online drugs marketplace 1mg, which has raised a total of $37 million till now, operates in a space fraught with regulatory issues. The sector, with players such as NetMeds, mChemist, Pluss, Medikoe and BigChemist, is seeing an uptick in investment after a lean period in 2016. Recently, the Drugs Consultative Committee, which had instated a sub-committee to examine epharmacies, recommended that all epharmacies be registered with the Central Drugs Standard Control Organisaion (CDSCO), national portal for monitoring online sale of drugs be set up and it also put geographical restriction on operations of epharmacies. In an interaction with VCCircle, 1mg founder Prashant Tandon, who is also the president of Indian Internet Pharmacy Association, speaks about the impact of regulatory developments on the industry and his own company and its growth plans.

You’ve raised $15 million in your Series B round recently. How will the company utilize the funds? What is your growth plan for next year?

Broadly, we will be focussing on three areas. Firstly, we are looking at expansion of pharmacy and diagnostics service. We are looking to cover most cities in India by the end of this year, and also grow marketing efforts. We cover around 50 cities in diagnostics and 600 cities in e-pharmacy. We would like to cover around 20,000 pin codes for pharmacy. For diagnostics, we want to be in around 70 to 80 metro cities. E-consultation is a new business launched in April this year. As for the revenue, the split is around 80-20 between pharmacy and diagnostics.

Secondly, we are setting up a data analytics and infrastructure team to get into more personalised and predictive health services. With data analytics, we are able to figure out, for example, whether there is a spike in dengue in Delhi, or any such infectious disease/allergy. So we are trying to set an infrastructure that figures out actionable insights on this.

Thirdly, we are working on a bunch of partnerships in the ecosystem, largely with corporates, insurance companies, and pharma companies. For a corporate, we will provide healthcare coverage for the employees.

How do you plan to utilise the funds raised so far? And how is the business growing?

We have raised a total of $37 million till now. We haven’t specifically allocated funds for acquisitions but we are going to look at companies on an opportunistic basis. We have already made three acquisitions till now.

We have been seeing a comfortable double digit growth in gross merchandise value (GMV) on a month-on-month basis last year. We are the largest health app in terms of traffic with 20 million monthly visits and 65 million page views. Our average order size is Rs 1,000.

Alongside new players even the traditional pharmacies, such as Apollo Pharmacy, MedPlus, and Guardian Lifecare, have begun delivering online. Does the growing competition in the epharmacy segment worry you?

Like any other promising space, it is expected that there will be multiple players. At the end of the day, if the consumer prefers a certain convenience, and someone is providing it, then almost all players will have to move towards that kind of a model. I think we are distinct in the sense that we are going after integrated health, not just pharmacy. But we are seeing competition in various dimensions of the business. Given the scale of the opportunity, to us it is healthy that there are so many companies developing the market. Pharmacy itself is a $20 billion market, and we have some five to 10 significant companies in this space right now. So competition is not between us, but it is how much we can grow the market as a whole.

What are your thoughts on the recommendations made by the sub-committee constituted by the Drugs Consultative Committee on online pharmacies?

Overall, I think the intent is good. Pharma is a key sector, and till date we do not have a tracking system for medicines. In terms of implementation, it is a huge project given the state of our ecosystem. But we have to start somewhere, and it is good that the government has taken the first step.

However, we believe a few points need some more thinking.

First is the geographic restriction for epharmacies. As a group, we feel that is something that reduces the value proposition of the model because one of the values we provide is that we can send medicines to places that do not have easy access (to medicines).

Another issue is the charge that they propose to levy - which is 1% of the transaction value. This will generate Rs 2000-4000 crores. The platform does not need that kind of money. We believe there should do some rethinking here.

What were your expectations from the committee?

From the very beginning, we had two expectations – clarity and parity. Right now, the regulations that we are governed by fall under multiple ministries. We are governed by the IT Act for marketplaces, the Drugs and Cosmetics Act for pharmacy operations, and others. We are asking for clarity so that the drug inspector doesn’t get to say that he is concerned with only one part of the law. Most of the issues crop up because the local level government does not have much time to figure out all the Acts. So we want clarity there.

Second is parity. DIPP has clearly defined marketplaces. We need a level playing field with respect to the offline market. We all know that in the offline market there is hardly any prescription adherence and regulation compliance. In our case, the expectation is to go above and beyond when our competition clearly does not do so. We want the law to be applied uniformly.

Other things that we asked for is a central registry of epharmacies operating out of India. A lot of times, people get confused because of international epharmacies operating illegally in India. We want to make the distinction very clear that we are a group of epharmacies operating legally out of India, and the government has accepted this recommendation.

Now we want that we should be clearly defined so that the illegal players can be clearly identified and caught. Almost all developed countries have done it. In Europe and the US, every epharmacy that has an office in that country is registered. We want the same to happen in India, so that there is a clear distinction between us and the non-compliant players.

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