“Ma’am, on every purchase of Rs 500 and above, membership is free. It applies to all the outlets of our pharmacy chain.” That’s what the man sitting behind the system in a chain pharmacy outlet in Delhi told me as I was about to pay my bill. When I showed willingness, he was quick to feed my details into the system and a couple of minutes later produced a membership card and announced some discounts as and how I accumulated my Reward Points.
According to Ramesh Deen Chand, Store Manager for 98.4, a chain of retail chemist stores and a brand of Global Healthline, this is just the front-end for a comprehensive back-end CRM system that is integrated with financial and billing systems. Like 98.4, there are a lot of other pharmacies that are bringing technology into their operations.
While these are instances from outlets of retail chains, the tech wave is beginning to become visible in the Indian retail pharmacy industry as a whole. When the retail pharmacy chains started making their presence felt in the metros about half a decade back, they bought along the concept of automation. Though these chains account for less than 3 per cent of the total number of retail pharmacies in India, the trend of adopting technology in pharmacies has been established.
The domestic pharmacy retail market clocked a robust growth of 15 per cent during 2011. It is estimated that about 95-97 per cent of this market is still controlled by the unorganised sector. So the demand of technology is obvious, but greatly scattered.
What remains to be seen is the pace and the impact of regulations on the tech wave in the Indian pharmacy sector.
Enterprise apps to the fore
With the coming of pharmacy chains in India, the use of technology has moved to the next level. These chains began using applications like ERP, CRM and SCM in order to standardise their operations and bring about greater efficiencies. What started with plain backend automation soon moved to the front-end, to the customer’s level, in order to ensure streamlined services.
The use of CRM systems to record orders and databases of patients made reordering for customers with chronic ailments an easy task. Barcoding of medicines reduced the chances of incorrect billing and helped in tracking expiry dates. As these benefits were realised, these chains went on to automate their functions. Further down the road, to increase the customer base, some chains also began offering additional related services such as investigations (sample collection) and on-demand doctor consultations that could be booked online or via the telephone.
Sankaranarayanan also touched upon a third kind of technology that is making small beginnings in the pharmacy space in India namely mobile technology. “The use of mobile technology is also slightly visible. Retail chains are providing value-added services to their customers including placing orders via SMS.” Other nascent technologies in the space include RFID and barcoding. Business intelligence and MIS have also started gaining popularity in the industry, since BI predicts performance, seasonal trends, customer sales behaviour etc.
The biggest benefits of automation in pharmacies has been with regard to the management of items and prevention of loss on account of low shelf life and items that have expired. These benefits get multiplied in healthcare delivery units such as hospitals and clinics where wrong orders, substitution and contra-indication alerts are prevented at the time of ordering.
The bigger pie
About 3-4 per cent of the Indian retail pharma market is busy automating itself. Meanwhile, what is the silent majority up to? Sankaranarayanan said, “The coverage of retail chains in India is limited. They may be adopting technology but, because they are so few in number, it’s unlikely that they can have a domino effect.”
However, the good bit of the news lies in the fact, that some limited technology deployments are indeed taking place at your local pharmacy. Explained Rajesh Sabrawal, owner of LifeCare Chemists, that has two branches in Delhi, “We automated all of our transactions and billing. The next step for us is to introduce a system that will manage our supplies and give us alerts for shortages in stock.” What Sabrawal is hinting at is some sort of a SCM system though, as of now, he isn’t sure about which vendor he would like to approach.
The catch, however, lies in the fact that there are a lot of challenges to be overcome before we can see technology penetrating into the paper-intensive retail pharmacy sector.
Challenges in pharmacy automation
Automating standalone pharmacies, that comprise a major chunk of the Indian pharmacy landscape is something that is easier said than done. The first apparent glitch is the cost. Technology, though it has its economies of scale for chain operations, can be an expensive affair for individual pharmacies.
Sehgal detailed for us the costs and the nuances involved in automating a pharmacy. “Given the current automation solutions available in India for barcoding, Web ordering, etc. a single desk pharmacy would need to spend between `1-2 lakh of CAPEX and would also require year-on-year operating expenses (OPEX) for automation. However, the maximum benefit is derived by large scale hospitals and OTC chains. Some pharmacy chains also make arrangements with local doctors and pathology laboratories to provide multi-purpose solutions as a one stop shop. Benefits and costs both increase, depending upon the purpose and complexity of automation.”
Neena Pahuja, CIO of Max Healthcare, which is bar-coding all of its medicines agreed that the benefits of automation were indeed substantial for a large hospital chain. Moreover, these benefits were not relegated to costs alone but also helped in bettering the alert mechanisms and, therefore, the ultimate quality of service.
The road however, isn’t smooth for standalone players as there is no common method for barcoding and the sale of cut strip medicines deters any standardisation from happening in the market. Also, since the traditional mode of ordering is still on paper, a systems-driven approach at the pharmacy level is not going to help.
Sehgal suggested, “Integration of all three steps of ordering, dispensing and consumption would provide the maximum benefit to end-customers and everyone involved with the process.” Jha of Guardian Lifecare cited lack of awareness and training as another hindering factor for automation in pharmacies.
Despite these challenges, basic automation of billing systems is already commonly visible in standalone pharmacies. A lot of pharmacies have also already put in place a system that keeps track of their inventory. Activity on the regulatory front could further push this automation.
The regulatory sphere
The current plan for mandatory barcoding for pharmacy items is also limited to the manufacturer and not the distributor or seller. Although the industry is unanimous on proclaiming that barcoding definitely is the right step for the management of drugs at all levels, there are several gaps in the regulation. While the implementation of new technology is always beneficial from the customer’s point of view, the impact on manufacturers is different. According to Prashant Ahuja, Director, Piya Pharmaceuticals, the investment in technology might be nothing for an MNC brand, but for an SMB manufacturer, it’s huge. Ahuja was of the opinion that regulations should be holistic in nature and impact all players of the ecosystem in a balanced manner.
Even though he was not fully convinced about barcoding being made mandatory through regulation, which is expected to come into effect from July 2012, Ahuja was positive that as the regulation expanded to encompass domestic sales (it only includes exports as of now) , it would compel pharmacies to automate. “That automation would not be out of willingness to be more efficient, but out of compulsion to be compliant,” he remarked.
Sankaranarayanan of PwC agreed to that and added that a phased kind of approach could be the best way out. “There has to be a driver for change and a proposition of value add for pharmacies for such a regulation to work.”
Scattered opportunity
If Sabrawal is unable to decide on a vendor for his SCM ‘type’ of system, it is primarily for two reasons. The first being that he is not exactly clear as to what he wants for his pharmacy that would be a good fit. Secondly, he is far from being convinced that any large application vendor like SAP or Oracle could provide him with an apt system at a suitable cost given his limited scale of operations.
Sabrawal’s dilemma pretty much sums up the scattered nature of IT opportunity that lies in this domain. Though there is no doubt that potential for automation is immense, it is on an individual basis and, for any vendor to tap individual pharmacies, requires a distributed effort. No one system can fit all.
As a result, analysts see an opportunity for smaller, low-end, niche and regional players to spring up, and move from pharmacy to pharmacy customizing or developing their solutions.
As far as the Indian retail pharmacy segment goes, it is in the low end solutions that the big opportunities rest.