BackThe coming of age of e-health platforms
Most healthcare startups are seeing an unprecedented surge in demand. Is a unicorn around the corner?Despite the regulatory environment becoming clearer and increasing customer interest, startups could face opposition from local pharmacy groups
PremiumMUMBAI : Two decades ago, Alexander Kuruvilla launched the telemedicine business for Narayana Hrudayalaya, a hospital chain in Bengaluru. But because of poor internet access and a generally low-technology infrastructure—patients would often make payments through demand drafts—the business struggled to take off. “What was missing was instant gratification—patients wouldn’t instantly get consultations, doctors wouldn’t get the fees due to them on time," Kuruvilla said.
In his present position as chief healthcare strategy officer at online healthcare platform Practo Technologies Pvt. Ltd, Kuruvilla has no such problems. Since the first week of March, Practo has registered a five-times jump in daily doctor consultations from customers, with general physicians, gynaecologists, dermatologists and psychiatrists most in demand.
To cope, Practo was forced to shift dozens of employees from other business lines to the consultation team. “We’ve been working 15-16 hours every day for the past eight weeks. We wake up to this. We sleep to this," Kuruvilla said.
Like Practo, many other healthcare startups are seeing an unprecedented surge in demand. Unlike the past, people are increasingly willing to pay for digital health services.
At 1mg Technologies Pvt. Ltd, until March, only 8% of customers in the company’s doctor consultation business used to pay for the service. Over the past two months, that number has risen to 70%. In the same period, as many 10,000 doctors have shown interest in signing up with 1mg to treat patients. Before March, 1mg had just 150 doctors on the platform.
“Because of covid, patients are afraid to go to clinics, and doctors are afraid to see patients, so a lot of doctors and hospitals that previously saw telemedicine as an unnecessary service are now embracing it," 1mg chief executive officer (CEO) Prashant Tandon told Mint.
Across the world, the coronavirus outbreak has provided a turbocharge for the expansion of digital health services. Countries across the board are trying to shift healthcare delivery on to the internet, incentivise telemedicine, encourage online medicine bookings and use chatbots to answer patient queries.
In India, too, after years of treating online healthcare platforms with suspicion, the government has “notified" online medicine bookings and online doctor consultations as essential services during the lockdown that began on March 25.
The abrupt change in the attitude of the government, together with the very real need felt by doctors, patients and pharmaceutical companies to use the internet for healthcare delivery in the new environment, has presented an unexpected gift for health startups that have lagged their peers in other sectors in the startup ecosystem.
A medical unicorn?
India has a unicorn in most sectors: e-commerce, transportation, food delivery, travel and hospitality, content, financial technology, logistics and business software. Health is perhaps the only major space that has so far failed to throw up a billion-dollar-plus internet firm.
Not for too long, entrepreneurs and investors said.
According to RedSeer Consulting, India’s digital health market will expand to $4.5 billion in this financial year, compared with $1.2 billion in FY20. The consultancy has upped its estimate of the digital health market to $25 billion in FY25, compared with its pre-covid estimate of $19 billion. Medicine delivery will continue to comprise a large majority of the market, according to RedSeer.
To be sure, India’s most valuable healthcare startup, CureFit Healthcare Pvt. Ltd, valued at nearly $750 million, has been badly hit by the coronavirus outbreak. CureFit’s online-to-offline model, which was a strength in pre-covid times, is now a liability as its core business of fitness centres is likely to be hit for a long time. CureFit was forced to cut about 10% of its staff earlier this month after revenues vanished.
That said, bigger healthcare firms—like Practo, 1mg, Medlife, PharmEasy, Netmeds—as well as smaller startups—like BeatO and mfine—are registering increasing user interest and demand with each passing week. Post covid, people want to know more about healthcare, spend on boosting their immunity, treat illnesses through online consultations and buy medicines online.
Even diagnostic startups—like KlinicApp and Portea Medical—whose businesses have taken a hit as people have put off non-urgent blood tests and other diagnostic check-ups, are expected to fare better over the coming months compared with offline diagnostic centres.
“One of the biggest challenges for any internet business is to get people to try their service, and then it’s up to the merit of the experience. This phase has enabled trial at a massive scale for us and for the ecosystem. It’s not just consumers that are moving online. The entire ecosystem—from doctors, hospitals, pharma companies, government—everyone clearly believes that digital health is a key part of the health delivery architecture of the country and it’s not just an add-on," 1mg’s Tandon said.
Apart from doctor consultations, 1mg’s medicine delivery orders have risen by 45-50% and viewership of its healthcare content has spiked since the coronavirus outbreak. In addition, 1mg has cut marketing spending to “nearly zero" because customers are coming anyway.
The delivery imperative
At Medlife, another large digital health firm, demand for medicine delivery has also increased by 50%. Further, because customers are presently more motivated by safety concerns than lower prices, Medlife has cut discounts by as much as 7 percentage points.
The company’s doctor consultation business has jumped to 8,000 daily bookings from 3,000 earlier. Earlier this month, Medlife started asking customers to pay for consultations for speedier responses and other benefits. The company expects to register 8,000 daily paid consultations within a year. And like 1mg, Medlife has cut marketing spending, by 30% since the outbreak.
“Digital health is becoming mainstream because people believe that this is a safer way to access health services," said Ananth Narayanan, co-founder and CEO of Medlife.
Like grocery delivery firms, healthcare startups expect that much of the new business will remain, particularly as social distancing becomes the norm, perhaps for years to come.
Medlife expects order volumes in its medicine delivery and doctor consultation to be “easily more than 150%" in October compared with January, Narayanan said. “It’s a long-term structural boost. The trend is here to stay," he said.
Pradeep Dadha, founder and CEO of Netmeds, added that going forward, customers may become “far less demanding" in terms of their service expectations from online health platforms. “Everyone seems to have acquired a new-found sense of patience," Dadha said.
For now, medicine delivery firms are still inching back up to full capacity, as lockdowns in cities like Mumbai, Ahmedabad and Chennai continue to hit operations.
The lockdown has also brought a sharp, temporary increase in costs for medicine delivery firms.
For instance, Medlife said that since March the company is ploughing back more than 2% of revenues toward covid-related expenses. Additional costs include paying for doctors to visit all its fulfilment centres, arranging for masks and sanitisers and offering free doctor consultations for operations and logistics staff, and paying for their transportation because of the ban on public transport. The company expects to continue incurring these additional costs through June.
In addition, healthcare startups expect their diagnostic businesses to take another six months to fully recover to pre-covid levels.
Still, over the long term, however, entrepreneurs said that margins may increase once the peak of the pandemic passes, largely because spending on marketing (including discounts), which is one of the two highest areas of expenditure, may not need to return to pre-covid levels.
Companies like 1mg and Medlife are also making their supply chains more efficient. During the first month of the lockdown, companies faced severe disruptions in supply chains and shortage of labour even as demand spiked. This forced them to deliver more packages through fewer logistics staff. Medlife’s Narayanan said that the company’s delivery “productivity almost doubled because of route optimization."
To capitalize on the surging customer interest, healthcare startups are also entering new businesses. 1mg is signing up with companies to offer them advice and protocols on how to keep employees safe in fulfilment centres, factories and warehouses and how to handle situations if their staff contract the virus.
Medlife has begun discussions with insurance companies to devise customized insurance products. “Insurance, historically, has been actuarial, based on statistics. Whereas now we have real consumption data. So we’re working with insurance players on how we can use this data and create customized insurance products for our customers," Narayanan said.
Coming boom
So far, healthcare startups have lagged other internet companies partly because sectors like e-commerce, transportation and food delivery have hogged capital. But now, with the healthcare sector expected to be one of the beneficiaries of the pandemic, investors and entrepreneurs expect an investment boom in the space.
“Like we had an e-commerce boom, a hyperlocal boom and a fintech boom in the last decade, we’ll see an investment boom in health tech and education over the next five years," said Anup Jain, managing partner, Orios Venture Partners, an early-stage fund. Jain expects new startups to come in spaces like nutrition and fitness, health insurance, digital therapeutics and healthcare lending.
“In these kinds of categories there is a lot of scope for direct-to-consumer platforms that will capture data, do customer profiling and then offer the right kinds of products to each customer. Each of these segments look very promising after covid. We should see new startups coming up in such spaces in the next three to six months," Jain said.
Already, interest is rising in the space. Reliance is in talks to buy Netmeds as the conglomerate seeks to build a large, integrated healthcare offering, a person familiar with the matter said. Both companies have declined to comment.
Medlife, which has been trying to raise $150 million for nearly a year, said that investors have become much more bullish on the sector after the pandemic.
“Now there is a recognition among investors that this is a sunrise sector. The expansion in digital health that was expected to happen in five years is now going to be two to three years—that’s the kind of acceleration investors are now expecting," Narayanan said.
Regulatory issues
In the past, healthcare startups have been hampered by regulatory problems. The Delhi high court and the Madras high court had separately banned online medicine sales, though their orders were stayed later. The country’s drugs regulator, Drugs Controller General of India, too, has been ambivalent about e-pharmacies.
But after the pandemic, online health startups said that the regulatory environment has become clearer, which will spur investments into the sector.
“Big investors have been very concerned about regulatory issues in health tech, but now that both telemedicine and e-pharmacy have been legally notified by the government, one of the major reservations of investors has been removed," 1mg’s Tandon said. “When you add to this, things like a fast-growing market, lower discounts, better unit economics—there will be big investments coming into the sector. We’ll see a unicorn very soon."
Despite the optimism and customer interest, though, startups could face opposition from local pharmacy groups.
Recently, The Economic Times reported that the All India Organisation of Chemists and Druggists (AIOCD) has requested the government to remove e-pharmacies from the Aarogya Setu platform in a letter to Prime Minister Narendra Modi.
The AIOCD represents more than 850,000 pharmacy outlets across the country.
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