In spite of Regulatory Hurdles, Online Pharmacy Sector Attracts Record Investment in 2018

Venture capital and private equity (PE) investments in India’s online pharmacy sector has been highest in last 6 years. The regulatory challenges to the sector were seen more as temporary aberration than as a real threat to the online business model by investors. As the central government is working to notify new rules governing the sector, investor confidence remains intact and will follow the same growth trajectory according to experts.

Madras High court’s single judge bench recently directed complete ban on online sales of medicines and had given the government the deadline of January 31 to notify final rules governing the sector. The petition was filed by Tamil Nadu Druggists and Chemists Association stating the rule that only registered pharmacists can sell prescribed medicine. The ban could have affected 30-40 lakh patients and could have cost the sector 300 crore in revenues for over next two months. However, the divisional bench of Madras High Court reserved its orders to stay the previous order of complete ban on online medical sales allowing the sales before the final judgment is out.

As online pharmacy firms sighed of relief, they argued that they sell medicine only on proper prescription and that only through registered pharmacists. The online pharmacy chains see themselves more as aggregators connecting the consumers with registered pharmacists. As the industry is in its budding phases with government still working on the right kind of regulation, Industry is optimistic about the future of investments.

PharmEasy, which attracted a highest amount of investment in 2018 of $65 million from Fundamentum, Bessemer, Think Investments, Eight Roads Ventures, Aarin Capital, Trifecta Capital,

Orios VP and JM Financials, is aiming to give complete customer solution by providing fairly priced medicines with the added benefit of home delivery. Similar startup Netmeds raised $35 million from Systema Asia Fund, $10 million by Sequoia Capital IIFL VC and others.

Fast growing access to internet and a growing penetration of smartphones has given a massive boost to the online business sector. According to reports, by September 2018, there were about 500 million internet connections in the country. There are about 1.5 million online buyers of medicine while 20,000 have found employment in this sector, according to senior member of a digital health startup.  Businesses see a strong potential and lucrative untapped opportunities for the online pharmacy sector.