Why are Indian Pharma Companies Investing in ABCD Technologies?
Indian pharma market is one of the biggest in the world. And, it is ready to add a new dimension to it. I am talking about the online business of pharma companies. In the last few days, we have seen reports where the Indian pharma companies are acquiring some stake in the same company.
India’s top pharmaceutical companies, namely Sun Pharma, Cadila Healthcare, Lupin and Torrent Pharma are reportedly in talks to acquire business-to-business (B2B) healthcare platform Pharmarack. These reports also mention that the above mentioned four companies have invested Rs 40 crore each for 20% in the newly formed venture ABCD Technologies.
This ABCD Technologies will be renamed IndoHealth Services. Then it will acquire Pune-based Pharmarack which we are talking about. But why is this sudden fuss all about? Pharmarack currently has 3,000-4,000 distributors and 100,000 retailers. The major pharma companies want to facilitate efficient goods distribution and digitalise the healthcare system.
They want to efficiently utilize the resources of Pharmarack to have a robust presence in the online B2B marketplace and online pharmacy. The plan is that ABCD Technologies will buy full 100% equity in Pharmarack which is eventually owned by the leading pharma companies. A perfect case of acquisitions and mergers!
The said group of pharma companies have also reportedly hired KPMG to make a strategy that will help them to compete in the online pharmacy segment. We have mentioned four companies above which are Sun Pharma, Cadila Healthcare, Lupin and Torrent Pharma. But according to recent news, even Dr Reddy and Cipla have invested in ABCD Technologies. Thus, things are still very unclear as to which company has bid for what much stake. But one thing which can be said definitely is that the race for the e-pharma market is heating up very fast.
A Fight against Reliance and Amazon
Reliance and Amazon have already started entering the online pharmacy market. Maybe this is why the established pharma companies are trying to stay together and fend off any monopoly to get established. Reliance has been selling healthcare and pharmaceutical products through JioMart since last year. They also acquired Netmeds last year who tags themselves as "India's most convenient online pharmacy".
Even Amazon was seen delivering medicines in Bangalore last year which raised a lot of concerns among the All India Organisation of Chemists and Druggists (AIOCD). The organisation represents 8.5 lakh chemists from different parts of the country. Last year, they tried to contest against the entry of corporate giants like Reliance and Amazon in the Indian pharma market.
AIOCD wrote a letter to many parties including Mukesh Ambani, Amit Shah and PM Narendra Modi expressing their concerns. “It is pertinent to mention that this move will not only threaten the livelihood of millions of our citizens, but it will also create a monopoly in a perfect competition market and of course create a concentration of wealth while taking it away from our citizens and putting it in Reliance’s pocket,” the letter said.
There's a fear that if Reliance and Amazon are allowed to operate their business freely in this domain, then we might see misuse of antibiotics. Also, the big corporate giants will have the margin to offer deep discounts on their medicines or some other financial incentives to the customers. This will attract customers and leave a very small portion of the current pharmacy market. This might jeopardise hundreds of jobs of chemists.
E-Pharma to revolutionise the Indian drug market in future?
The Covid-19 has forced people to stay inside their homes. The rise in Covid cases always gives birth to the threat of another lockdown. Since the last 12 months, we have seen people depending on online shopping a lot more than they used to do earlier. In countries like the US and in Europe we are already seeing how nicely the e-pharma space is flourishing.
Due to the unstructured and fragmented nature of the e-pharma market in India, the success has been slightly delayed. But Covid-19 might act as a perfect stimulus to force this change in behaviour among the people. Covid-19 has also given the opportunity to people to consult their doctors online. Now no longer they are forced to leave their home in sickness and visit a doctor. All this can be done solely on your smartphone or laptop! This has aided the doctors to increase their business as well.
In our opinion, the e-pharma market is the way to go ahead. But the authorities need to regulate the market. It is them who need to be the in-charge of this space. People should get the medicines at a reasonable price and at the same time, there should be no risk to their health. Government has to make sure that e-pharma space does not turn into a monopoly or an oligopoly form of market. In the meantime, let's sit and see what are the further updates regarding ABCD Technologies in the next few weeks. Till then, keep reading!