Last year, Prime Minister Narendra Modi, while addressing the Global Innovation Summit, highlighted that India has earned the global reputation of being the “pharmacy of the world.” With a local chemist store available at a 2 km radius across, the country’s fast booming pharma industry has become a leading source of path-breaking innovation. However, the ecosystem saw a setback amidst the pandemic, much similar to other sectors. It also exposed the highly fragmented nature of the sector through several reports of delaying routine treatments, straining healthcare budgets, derailing drug development for non-COVID-related diseases and causing supply chain disruptions.
Recent data suggest that the average prescription fill rate in India is 6/10, which means that an individual can only get six out of 10 medicines in India. Several reasons could be attributed to it such as tertiary data or prescription data not flowing to all the pharmacies, manual inventory management by pharmacies on the store (85 per cent pharmacies don’t have ERP in India) as well as the fragmented distribution that makes it difficult for pharmacies to procure. In addition to this, owing to the pandemic, the demand for drugs or vaccines led to an overdrive of pressure on the industry and slow global travel increased pharma supply chain disruptions. Despite being one of the largest providers of generic drugs, India faced severe drug supply shortage, leaving many small local pharmacies to the big medical stores, hospitals running out of critical medicines.
To help address this gap created, pharma companies have come up with disruptive solutions to ensure free flow of medicines. The sector that saw the lowest contributions in terms of technological innovation in the pre-pandemic era, recognised the significance of digitisation, thus amping up their efforts and focussing on creating interventions that ensure that chain of medicine procurement is not challenged.
One important aspect that requires immediate attention is efforts towards guarding against surges in medication use as well as stockpiling that may cause shortages and inequitable access. This was a rampant issue, witnessed most prominently during the pandemic, when individuals started to store medicines, oxygen cylinders at their households. India needs a strategy wherein essential medicines are allowed only as per the requirements. It is also important to note that independent pharmacies have started to struggle profoundly, owing to declining localised populations, higher cost of prescription drugs for low-volume pharmacies, and increased competition from internet and chain store pharmacies. Government and private companies need to look at empowering these local pharmacies as they are the first response to healthcare needs in most parts of the country.
Another key aspect where private players can play a key role is consolidating the existing distribution to reduce inventory hoarding at fragmented layers, bringing secondary sales data visibility to predict area-wise prescriptions such that stocks can reach pharmacies in time before the prescription comes. This will also improve company-level planning and reduced stock outs in the micro markets. The industry suffers average five per cent expiry which is a direct loss to the balance sheet for the companies and also a health risk for the population.
The public healthcare spend in India is close to 1.6 per cent of GDP. We have seen continued private investments in the hospital space in the last 10 years, but very miniscule investments happening in the pharma supply chain. The fact that not many new distributors have opened in the last five years though the industry is growing at 14 per cent CAGR highlights the lack of investment in the pharma infrastructure in India making medicine accessibility still a huge challenge. This makes it important to increase our focus on the sector, and also bring in innovations. Furthermore, digitisation in the pharma industry is essential for improving patient outcomes, cost-effectiveness, greater transparency, reduced expiry, increasing production and drug development. The highly fragmented nature of the $70 billion pharma industry (22k pharma companies, 65k suppliers for 1M pharmacies serving 2lac+ SKUs) requires consolidation across the supply chain to serve pharmacies better.