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Home / News / Business Of Life /  Covid pushes local pharmacies to try tech cure

Healthcare has been in the spotlight post covid-19. So it’s not surprising that big tech is making moves to disrupt the pharmacy business.

Earlier this month, Amazon launched a pharmacy service in Bengaluru that takes orders for both over-the-counter and prescription medicines. Days later, Reliance Retail announced acquisition of online pharmacy Netmeds. At the same time, two other leading e-pharmacies, Pharmeasy and Medlife, decided to merge.

But the action is not limited to online players. More than 85% of pharma sales in India happen in over 850,000 pharmacy stores that operate cheek by jowl with FMCG and grocery kirana stores. They are waking up to the reality that either they go digital too or get disrupted.

“One of the fundamental changes we’re seeing is that small and medium pharma retailers are becoming more discerning about using data for customer relationships because they perceive a threat from online pharmacies," says Suresh Satyamurthy, CEO and co-founder of Bengaluru-based Tarnea, which has been bringing automation to the last mile of pharma distribution. Even a small retailer can use customer data in the Tarnea system to create loyalty programmes, launch promotions, and send prompts to replenish medicines or make diagnostic lab visits.

It enables a medical store to take orders and receive payments online. Medicines can be delivered home or picked up. “This is especially useful in a post-covid world where people are reluctant to step into crowded shops," says Satyamurthy.

Bridging gaps

Apart from the front end, digitization solves multiple issues in the supply chain. Pharma retail is highly fragmented in India, with over 80,000 distributors apart from the scattering of small medical stores.

This wasn’t always the case. Time was when a pharma major would have a rigorous process of testing and interviewing to onboard a distributor.

Then the bean counters at these companies decided the easy way to add to their turnover was to appoint more distributors in a sprawling, diverse market as India. The upshot is a noodle soup of distribution, unlike Western markets where pharma companies operate with a handful of large distributors. It’s hard to untangle this.

Tarnea decided early on in its eight-year journey to work with the given structure in the industry. So what it tries to do with digitization and information flow is bring value to all stakeholders, including retailers, distributors and manufacturers.

Take the problem of expired medicines: the Tarnea system tracks the batch number of every product that sits on a retailer’s shelf. It can alert the retailer well before expiry date to return a product to the distributor and claim a full refund. The distributor can in turn send it back to the pharma company and get reimbursed.

The pharma company does incur losses for unsold medicines, but it’s a better outcome than huge potential liabilities from expired medicines getting into the hands of customers and causing harm.

Stockouts are another recurring problem in the pharma sector. Typically the sales engine of a pharma company will pitch to doctors to prescribe its brand. But it has no way of ensuring the prescribed brand is available with the local retailer. That’s because distributors work with multiple brands competing with one another. When a distributor’s salesman goes to a local retailer, he’s not looking for a particular brand.

Here the Tarnea system can give pharma companies alerts on pincodes where stock has run out. It’s up to the pharma company to take corrective action. “In both cases of expiry and stockout, we’re not upsetting the structure of the industry as it exists. But we’re still able to provide information to solve the problems for all constituents in the supply chain," says Satyamurthy.

The cloud-based system has subscription plans for both retailers and distributors. Getting orders and collecting payments digitally saves costs significantly for a distributor. Besides, it minimizes feet on the street at a time when social distancing has become the norm.

Tarnea’s aim is to be a digital platform, not just a SaaS (software-as-a-service) product, says P.G. Ponnapa, an angel investor and mentor to the startup. Retailers have a growing need for credit as distributors by have become tight-fisted after the pandemic. The platform ropes in banks that can offer credit based on billing data.

“If I have a retailer network in place, I can aggregate orders for companies that don’t have pharma distribution in specific geographies. Multiple revenue streams become possible once you onboard a sufficient number of retailers," says Ponnapa.

In Andhra Pradesh and Telangana, where Tarnea made its first foray, it has a footprint larger than those of the leading pharma retail chains Apollo and Medplus combined, says Satyamurthy. It wanted to prove its value in one geography before expanding across the country, he explains.

Overcoming scepticism

It didn’t come easy. One of the first to come aboard, a large pharmacy in a small town of Andhra Pradesh, was sceptical initially. “He told me his turnaround time for a customer was 15 minutes which was as good a service as anything you would get in a big city," recounts Satyamurthy. “As the discussion progressed, we realized he didn’t have barcoding in his legacy billing system. When we introduced barcoding with our system, his turnaround time came down to six minutes. That meant he could serve twice the number of customers."

Satyamurthy had a 26-year corporate career in India and abroad before becoming an entrepreneur, his last stint being the head of Siemens’ telecom business. His exposure to retail distribution came in his very first job for a company that launched frozen vegetables in India. This was in the pre-internet era of the early nineties.

In the absence of a cold chain, he had to optimize the delivery of insulated containers with frozen vegetables in the summer heat of Delhi. If he sent out too many, there would be an unacceptable level of wastage given the short shelf life. If he sent out too few, his sales team would chew him out.

He came up with a hack where salespeople went on motorcycles to every retail outlet twice a day. They would collect information on sales and stocks, go to the nearest phone booth and call HQ. “The information would go into a Lotus 1-2-3 spreadsheet (before the advent of Excel). There was no internet or mobile phone, but that spreadsheet became invaluable to us because over time we were able to predict demand at each retail outlet. I experienced the power of information and analytics first hand," recalls Satyamurthy.

Today he’s bringing that to another sector with unique needs. And the post-covid consolidation of e-pharmacies has made it an opportune time for Tarnea’s expansion.

Sumit Chakraberty is a consulting editor with Mint. Write to him at chakraberty@gmail.com

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