Revolutionizing Pharma Commerce: ONDC's Impact on Pharma Sector Growth
Published By
Abhay
Subject
The Indian pharmaceutical market, a robust segment of the healthcare industry, is experiencing a significant transformation. Valued at approximately $21 billion in the fiscal year 2022, with digital commerce contributing about $1 billion, it's at the cusp of a revolutionary shift. The forecast for the online pharmacy market is a Compound Annual Growth Rate (CAGR) of 33 to 35 percent from FY22 to FY30, outstripping the offline market's projected 6 to 7 percent CAGR. This rapid growth trajectory is partly attributable to the burgeoning digitalization of commerce, catalyzed by initiatives like the Open Network for Digital Commerce (ONDC).
ONDC: A Game Changer in Pharma Commerce
The introduction of ONDC is set to radically alter the landscape of pharmaceutical commerce in India. By democratizing digital commerce and providing a level playing field, ONDC is expected to amplify the presence of smaller pharmacies and new entrants, enabling them to compete effectively with larger, established players. The platform's standardization of digital transactions promises to increase trust and reliability among consumers, potentially transforming the way medicines and healthcare products are bought and sold.
Current Landscape and Growth Drivers
Extensive Product Range:
The traditional offline pharmacies offer a limited range (5,000 to 10,000 SKUs), while online pharmacies expand the choice significantly with over 50,000 SKUs.
Comfort with Technology Post-COVID-19:
The pandemic era saw a substantial shift in consumer behavior, with a threefold increase in households purchasing medicines online, jumping from approximately 3.5 million to about 9.0 million.
Convenience of Online Ordering:
E-commerce in pharmaceuticals offers convenience, especially for those with limited mobility due to age or illness. Notably, patients with chronic diseases represent a significant share (60 to 70 percent) of the online chemist market.
Humorous Side of Ordering Medicines Online:
Who knew that ordering medicines online could be easier than finding a good parking spot? Gone are the days of circling around the block for a pharmacy!"
Global Perspective and Local Challenges
Despite these promising trends, India's digital penetration in pharmaceutical commerce (4 to 6 percent) trails behind its global counterparts like China (8 to 10 percent) and the United States (10 to 12 percent). This disparity highlights the untapped potential within the Indian market. Barriers include concerns about counterfeit medicines, lack of access to digital platforms in smaller towns, and resistance to changing traditional buying habits. ONDC's role in bridging these gaps is pivotal, as it offers a unified platform that can address these challenges head-on, enhancing accessibility and trust in the digital pharma space.
Stakeholder Analysis in the ONDC Ecosystem
Pharmaceutical Companies:
Companies face potential pricing pressures due to online channel consolidation. However, ONDC's open network can empower standalone chemists for digital and omnichannel operations, leveling the playing field.
Distributors:
Distributors grapple with technical know-how and resistance to digital adoption. ONDC can facilitate their transition by providing necessary technological support and fostering a business environment conducive to eB2B evolution.
Pharmacies:
High customer acquisition costs and additional expenses in digitization pose challenges for pharmacies. ONDC can aid in optimizing these costs and expanding the digital reach of local pharmacies, especially in Tier 3/4+ regions.
Customers:
Consumers' concerns about counterfeit medicines and limited online access in smaller towns are significant barriers. ONDC's framework can enhance credibility through standardized processes and ratings, and its integration with hyperlocal logistics can improve access and convenience.
Shaping Digital Commerce in Pharma with ONDC
To capitalize on ONDC’s potential, stakeholders must consider several strategic areas:
Creating a Superior Customer Experience:
Developing user-friendly interfaces in buyer apps is crucial for wider adoption. Enhanced customer acquisition strategies and the provision of credit options for high-value purchases can further drive growth.
Harnessing Systemic Cost Efficiencies:
ONDC can streamline operations by automating customer management, handling returns, and verifying prescriptions, leading to significant cost savings.
Digitalizing Inventory Management:
Real-time online inventory management becomes a necessity in the ONDC framework. Technology service providers on the network can support pharmacies in this transition.
Building Robust Logistics and Storage:
Investment in cold-chain storage capabilities, particularly in less developed regions, will be essential to ensure proper storage and distribution of medicines.
Offering Additional Support Services:
The network should facilitate services like prescription verification using technologies like Optical Character Recognition and provide platforms for doctor teleconsultations.
Conclusion
The Indian pharmaceutical industry stands on the threshold of a digital revolution with ONDC. While the current digital penetration in pharma commerce indicates a nascent stage of development, the strategic engagement with digital commerce, as envisioned by ONDC, can propel the sector toward exponential growth. This growth is not just in terms of financial gains but also in enhancing the efficiency and resilience of the healthcare ecosystem. By embracing the ONDC framework, the pharmaceutical sector can overcome existing challenges and position itself for a future that is more inclusive, efficient, and aligned with global digital commerce trends.
References:
Healthworld.com from Economic Times, October 2021.
