E Pharmacy sector have proliferated steadily in last few years, attracting significant attention and investments. During the pandemic period, E Pharmacies pegged at around $ 2.7 billion in 2021. The outbreak of Covid-19 elevated the performance of online pharmacy websites. The Indian online pharmacy sector was projected to grow at 63 percent annually from 2020 to 2025. Private equity and venture capitalists had invested more than $ 2.5 billion in online pharmacies.
But contrary to the expectations, the consolidated losses of E pharmacies grew further and further. PharmEasy, the leader in this sector faced a loss of 4043.1 crores in FY22. It also withdrew its initial public offer draft papers in August 2022 almost an year after filing it.
REASONS FOR POOR PERFORMANCE OF E PHARMACIES
1)REGULATORY CHALLENGES:-
Most of the E Pharmacies in India were operating without licenses. They engaged in immeasurable unethical practices like selling medicines without doctor's prescription and selling of fake medicines. The drug abuse cases also shoot up during the span of last 5 years. Upon this allegations, Government of India strengthened the surveillance on online pharmacies.
> E Pharmacies are required compulsorily to take license to operate from Central Drugs Standard Control Organisation. (CDSCO)
>Online Pharmacies have to maintain detailed records of all transactions associated with purchase and sale of medicines.
>In september 2018, Delhi high court banned the sale of medicines via online. But later, this ban was revoked in December that year.
>In December 2019, Madras high court also imposed an interim ban upon online Pharmacies.
>In February this year, Drugs Controller General of India issued show cause notice to 20 E Pharmacy platforms for alleged contravention of laws.
2)INCREASED COMPETITION :-
As the sector was enjoying huge amount of profits along with a mountain of predicted profit, corporate giants like Reliance group and Tata group smelled the growth opportunity and entered into competition. While Reliance acquired major stakes in Netmeds, Tata invested their capital in 1mg. E commerce giants like Amazon and flipkart have their own pharmacy sections.
Howe'er, these arrivals had a negative impact on the profits of E pharmacy leaders during the period.
3)Retail Rivalry :-
The All India organisation of chemists and Druggists purported that E Pharmacies were burning capital to kill competition. As the margin given to offline stores by the National Pharmaceutical Authority is 10% for wholesalers and 20% to relailers, they are unable to compete with 25 % to 40% discounts offered by E Pharmacies. Because of this, there are huge amount of rivalry among the traditional traders of medicines all over the country. This is having a negative influence upon E Pharmacy sector.
CONCLUSION
Corporate governance is the system of rules, practices and processes by which a company is directed and controlled. Accountability, transparency, fairness and responsibility are the four pillars of corporate social responsibility. By abiding corporate governance norms and conditions, E pharmacy sector in India can grow bigger and stronger in the future.
According to Vijay Chawla- CEO of KPMG,
"The industry is growing nicely and eventually it will become profitable. E Pharmacies in India will see a Compounded growth of 20-30% over the next several years "
Let's hope for a highly profitable and socially responsible E pharmacies in India.
Article by
Stalwin Joju
August 04, 2023
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