| |FEBRUARY 20239With growing customer patronage, e-Pharmacies like Tata 1 mg, Medlife, Netmeds and many others, today are aggressively aiming for a large share of the country's $42 billion pharmaceuticals marketComparison among the e-Pharma Model & the Conventional Chemist ModelThe traditional pharma distribution model of pharma firms built of a multi-echelon network of Carry & Forwarding Agents, depots, stockists & sub-stockists, unlike the direct-to-customer model of e-pharmas. The representatives of pharmaceutical firms educate doctors regarding their brands & lobby hard with them with gifts, conference grants, trips and various other expensive tokens to prescribe their medicines & not that of the competition. The patient show these prescriptions to one among close to eight lakh and fifty thousand unorganized chemists/hospital that are linked chemist counters, who then fill them. This incumbent distribution model most often suffers from numerous disadvantages when compared to the business model of the new e-Pharmacies.Poor ReachThe supply chain network of several pharma firms tends to be fragmented & unorganized. As smaller towns as well as villages across the hinterlands of India do not possess adequate number of chemists & continuous availability of medicines, it is shown that more than three-fifths of the citizens should be doing without consistent access to modern medicine. Furthermore, in most of the smaller Tier-II & III cities, most of the consumers have awareness as well as purchasing power, however lower access to major brands. E-pharmacies are also making efforts to reach out to such customers. Hence, this could be a major reason why more than 45 per cent of the new users onboarded during the COVID outbreak that were based out of non-metros.Poor Availability & Infiltration by Spurious DrugsA fragmented & unorganized supply chain, with persistent unavailability of in-demand medicines at local chemists, can lead to encouraging spurious drug makers to try to take in this demand. A report by the World Health Organization stated that about 10.5 percent of medicines that were sold in low & middle-income countries, including India are substandard & falsified and this at times leads to distrust of chemist outlets among the customers. The new e-pharmacies are taking huge advantage of this mistrust of these local chemists, & are wooing customers by promising to provide genuine drugs sourced directly from manufacturers & license resellers.High Inventory Carrying CostsOne of the challenges for conventional channel is the multi-echelon distribution network should be able to manage upwards of 250000 stock keeping units with differentiation of brand preferences across countries. Maintaining the availability at several points in the network is difficult & involves huge investment in inventory for channel partners.Ramification on the Competitiveness of the Conventional Distribution ModelThe one & only way for the pharmaceutical firms to support the viability of the high-cost conventional model is to make sure that the drug prices are buffered with huge trade margins. An e-Pharmacy operating in this segment with not as much costs however the same margin is at a greater advantage & can provide huge advantage.In a NutshellIf pharmaceutical firms shift from a forecasting & push-based operations to pull mode of inventory creation as well as distribution, these companies can stop the lead time of manufacturing, reduce costs & significantly increase sales. PO
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