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It's nothing new to have at least a 5%-10% discount on medicines when you go to a chemist. But up to 25% off any day-any time brings my eye to visit this vast e-Pharmacy model.
Ethical v/s Generic 💊
Meds are salts. The brand that discovers the salts first mostly files a patent to sell the medicine of the particular salt under their name. If not first, the mega players sell the meds under their brands and try to create a monopoly. They sell the drug at their price and pace. In comparison to this, we have many players who sell the same salt with almost the same efficacy at a lower price tag. The latter ones are the generic producers. For example, Paracetamol (Acetaminophen) is the name of the salt or a generic name whereas Dolo 650/Crocin/Metacin are brand names.
The Distribution Funnel 🌪️
The drug is interrupted three to four times between the route to its customer. The Carrying and Forwarding Agent(CFA) is responsible for stocking and movement of medicines, drugs & promotional items (k/a the backbone of logistics). Then comes the Stockist/Distributor who supplies the goods to the chemists. Everyone in between takes a profit cut, thus making drugs more expensive. The profit margins say that generic products are a high-margin business. The retailer can earn up to 16-22% percent at branded medicines and 20-50% at generic medicine. The same ratio is followed at every interruption.
Let's say there is this medicine named 'A' and the manufacturing cost of A is ₹100. Using the same salts we made the generic medicine 'B' which cost us around ₹40. Now adding the margins we have 'A' with ₹140 and 'B' with ₹55.
Still, B is more profitable...
Every checkpoint in the distribution funnel adds 5%-10% cost of the product. With so many hurdles in between the Maximum Retail Price becomes almost 1.5x the Manufacturing Cost. The only way to lessen the price is by slashing off the players in between.
Voila, that's what e-pharmacies are doing.
They are the sole Distributor + Stockiest + CFA's in the process. Thus cutting off all the profit margins in between. Hence they can give up to 25% discount + free home delivery to their customers. The major players are Pharmeasy, Netmeds, 1MG, Apollo Pharmacy, etc.
The Cutthroat Competition 🩺
Even though this is a high-profit business. But the edgy competition is pulling down the numbers. Every company is giving the same hefty discounts on the same USPs.
No one has a proper monopoly in the health-tech domain. The companies are trying to put their hands into offline franchises, digital therapy, free consultancy, 24/7 availability, medicines calendar, and whatnot.
Apollo Pharmacy and Pharmeasy are leading the race currently but still, it's everyone's game. Apollo is trying to create an online plus offline impression by setting up multiple stores in tier 1 and 2 cities, trying to capture the untapped tier 2 offline folks (who prefer to buy meds from chemists) giving them an instant 10% off. Pharmeasy runs some solid marketing campaigns and has a solid customer base online. They are also trying to expand offline but Apollo is too ahead offline. Both are looking to go public very soon...
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Ciao
Nishchal from Team Rubric