Bengaluru: At least twice a day, a van drops off a consignment of medicines worth several lakhs of rupees at a fulfilment centre of Medlife, an online health services firm. The fulfilment centre is in Sahakar Nagar in northern Bengaluru, on the top floor of a small building that also houses a diagnostic centre run by Medlife.

Within minutes, the medicines, sourced either from pharmaceutical companies or their distributors, are sorted by workers into colourful trays on a long table. The workers then check the name, quantity and price of the medicines against the purchase order. For this they use the internal app designed by Medlife to manage its supply chain.

The products are also checked for damage and expiry date. If there is any discrepancy, the medicines are returned. Insulin medicines and those that require cold storage are processed first, and are put in an ice-box.

Post checks, another set of workers carry the trays to the designated storage space inside the warehouse, which is spread out over 4,000 sq. ft. There’s another 2,000 sq. ft for product deliveries, the pantry and the washing room for workers. After a second round of checks, the medicines are stored in hundreds of rectangular boxes on the shelves of dark grey racks. There are nearly 170 such racks, 10 feet high, three feet wide and deep. They are divided into eight zones.

Insulin and other sensitive products are deposited in two large Celfrost refrigerators. Quietly watching over this climate controlled zone are 53 security cameras attached on pillars or walls that transmit footage in real time to the company’s headquarters in Bengaluru.

BOOMING MARKET

Founded in 2014 by Prashant Singh and Tushar Kumar, Medlife says it is the leader in the fast-growing online medicine delivery market. Medicine delivery makes up about 70% of its business, with the rest coming mostly from diagnostic services. Medlife also offers online doctor consultations although it presently doesn’t charge customers for this service.

The large infrastructure investments made by Medlife to set up its supply chain and the stringent processes help the company source genuine medicines and preserve their efficacy. Selling genuine drugs, stored and delivered safely, may seem like a basic, essential service offered by any pharmacy, but it isn’t that black-and-white.

According to a 2015 study by The Associated Chambers of Commerce of India (Assocham), as much as a fourth of domestic drugs sold could be spurious or substandard. Sales of fake drugs are especially high in the National Capital Region (NCR), according to the Assocham study. Apart from the problem of fake drugs, several offline pharmacies do not consistently follow storage rules related to temperature, humidity and handling of medicines. Many do not have trained pharmacists dispensing medicines.

These flaws of offline pharmacies have aided the expansion of online healthcare platforms. Over the past three years, several medicine delivery and healthcare startups including Practo, Netmeds, Pharmeasy and 1MG have received large amounts of venture capital. Medlife, too, is in talks to raise $150 million from investors to expand its business.

The e-pharma market will reach $2.7 billion by 2023 from $360 million currently, according to an EY report. In urban areas, in particular, an increasing number of people are experimenting with online platforms to meet healthcare and fitness needs.

Apart from selling genuine drugs, these platforms offer similar benefits to customers in comparison to their offline counterparts, as e-commerce firms did to offline retailers: convenience, wider range of products and lower prices.

For instance, according to Medlife research, an average pharmacy offline carries about 6,000-8,000 SKUs (stock keeping units). Medlife keeps about 50,000 SKUs. This makes it more likely that Medlife has all the medicines on a patient’s prescription. Instead of having to go to several pharmacies to buy the prescribed medicines, a patient can thus source from one place. Medlife and other platforms offer these medicines at discounted rates to make their services more alluring for customers.

REGULATORY CONCERNS

Even as the sector has started to blossom, online medicine delivery firms have run into regulatory hurdles. In a December 2015 notification, the Drugs Controller General of India (DCGI) directed state authorities to put a “strict vigil" on online sales of medicines and take action against e-pharmacies that violate the provisions of the Drug and Cosmetics Act, 1940.

Last December, the Delhi high court ordered all online pharmacies in the country to shut down, saying that the law did not specifically allow for such services. Though the Madras high court later suspended the ban, there is little margin for error for delivery services.

Over the past year, healthcare services have made their processes more stringent. For instance, before the regulatory troubles of last year, some hyper-local delivery services in Bengaluru used to deliver medicines without demanding or verifying prescriptions. That has all but stopped.

“There are several factors driving the expansion of online healthcare services, which offer several benefits compared with offline players," said Ankur Pahwa, national leader, e-commerce and consumer internet, at EY.

“Fake drugs are a big problem in offline pharmacies. Online firms solve this problem by sourcing directly from manufacturers or authorized distributors. The online firms stock a far wider variety of products at competitive prices since they procure in bulk besides offering the convenience of delivering products at customers’ doorsteps. They are also more compliant in verifying prescriptions and keeping records compared with offline pharmacies," he adds.

A NEED FOR SPEED

Alongside following regulations, online medicine firms are constantly striving to make their services faster.

Inside the Sahakar Nagar warehouse of Medlife, there are two broad order processes. One is for customers suffering from chronic illnesses who need medicines delivered every month or so. The other, which is far more challenging for the firm, is for its Express business in which it promises to deliver products within two hours from the time an order is placed.

This is how an Express order is typically processed: a customer uploads a prescription on the Medlife app, which gets vetted and approved by one of the 215 pharmacists that the company employs. The company has attempted to automate the digitization of prescriptions by using artificial intelligence and machine learning, but doctors’ handwritings are notoriously difficult to interpret.

So, all orders are still vetted by pharmacists and manually entered in Medlife’s systems. After the order is confirmed, it is immediately reflected in Medlife’s internal supply chain app. This app, viewed on company-provided mobile phones all warehouse workers wear around their necks like ID badges, provides exact, detailed information about where the products are located inside the warehouse.

The workers collect the products and pack them in appropriately-sized boxes, which are examined by pharmacists. The boxes are then deposited in the outer part of the warehouse reserved for ready-to-deliver packages. This entire process is typically completed in 15 minutes.

Either a Medlife delivery worker or their counterpart from one of the company’s external logistics partners picks up the packages from this area and delivers them to customers. The bags used by these workers are also equipped with ice boxes to maintain the temperature for specific medicines. In most cases, a delivery worker has to complete at least five orders in one trip—only then do the ‘unit economics’ work out for Medlife. The median delivery time for the Express service is less than 84 minutes, according to the company.

Medlife has 32 other such warehouses across 21 cities. It delivers more than 25,000 orders a day, a number that is growing by nearly 7% every month. Many of them are Express orders.

ZERO ERRORS

From the Sahakar Nagar warehouse, a few hundred orders are delivered every day. Here, the orders are processed by 16 workers, apart from pharmacists and data entry professionals. They work in two eight-hour shifts; one starts at 7am and the other at 3pm. Workers are not allowed to carry their personal mobiles and wallets inside the medicine storage area (they have to be stored in lockers at the entrance of the warehouse).

No wallets, because it then becomes easier to steal medicines. As for mobiles, Medlife demands that its delivery workers are fully focused on their task. “Medicines are critical—you can’t go wrong," said Faizan Aziz, the head of product at Medlife.

In addition, the company takes a bunch of other steps to avoid going ‘wrong’ and meet its delivery time promise at the same time. Different versions of the same medicine are kept in separate boxes because there’s a high possibility of picking the wrong variant. Medicines that the company observes are usually ordered together are kept inside the same box, which allows for faster packaging. Each of the hundreds of medicine boxes as well as the fridges are audited every 60 to 90 days to confirm the authenticity of the medicines and to ensure that the proper processes are being followed at the warehouse.

Delivering genuine products in the exact quantities with unfailing accuracy is essential for Medlife to establish and maintain trust among its nearly two million customers. Aziz said, “When consumers get wrong medicines, they lose trust and confidence in us. This is not like food. This is life and death. There could be serious consequences of delivering wrong medicines."

ONE-STOP PLATFORMS

Unlike sectors like retail, travel and transportation, the healthcare sector has been slow to take to the internet. There are various business models in the space.

For firms like Medlife, PharmEasy and Netmeds, medicine delivery is the core business. 1MG provides a marketplace platform that connects users with external service providers. Practo has built its business around attracting doctors to its platform by selling software they can use to organize patient bookings and other clinic activities.

Eventually, as internet usage is increasing in healthcare, all platforms are attempting to become comprehensive health services providers.

In August, Medlife appointed former Myntra chief Ananth Narayanan as its new CEO, in part to find new areas of growth beyond medicine delivery. “There is no consumer digital health journey in India yet. People do various things offline in a disparate manner. What we want to do is to become a one-stop healthcare platform," Narayanan said.

Medlife already sees the benefits of having various services. Based on the medicines its customers buy, Medlife suggests tests that they may want to take. About a third of its medicine delivery customers use its diagnostics services. Online doctor consultation is used by both sets of customers; some customers use it to verify or obtain a medicine prescription and some use it to explain diagnostic reports. In this fashion, Medlife plans to launch new health-related services that can also complement its present offerings.

“By the end of current financial year we’ll have close to 2.5 million customers. As we continue to increase our customer base it is really important to figure out what are the different needs of our customers and how do we fulfil them? Eventually we want to one data platform to make all these services seamless," Narayanan said.

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