PharmEasy Business Model: How does it work and what is its revenue model?

PharmEasy is one of the leading online pharmacies that link patients to the pharmacy shops nearby. They are one of the pioneers in modernizing healthcare in India. PharmEasy is one of the biggest e-commerce businesses operating in the country and a leading healthcare aggregator. The PharmEasy business model has the target of delivering drugs and various pharm equipment to several modern cities in India. 

The company was started by a couple of Mumbai-based entrepreneurs Dr, Dhaval Shah, and Dharmil Seth. These founders set out to make the healthcare segment handy and low cost for everyone. These businessmen realized that there was a big market for connecting patients with the pharmacies close by with the use of technology.

PharmEasy Background

Flipkart was founded in 2007 and this led to the development of a wave of online shoppers. Amazon entered the fray in 2013 there were other competitors close on its heel such as Snapdeal. All of this set the wheels of the Indian E-commerce industry in motion. Some start-ups such as Swiggy and Zomato ensured that Indian food lovers could order food online. 

Other new start-ups began popping up in different industries such as Ola/Uber in transportation, Big Basket/Grofers in grocery delivery, etc. It began to dawn on several new entrepreneurs that online medicine delivery was not yet available by 2014. 

This led to almost 60 e-pharmacies opening shops between 2014 and 15 with a pharmacy business plan. However, within a few years, most of these companies had failed. After the market consolidated, there were three real contenders in the race for becoming India’s top e-pharmacy Netmeds, 1mg, and PharmEasy.

How does Pharmeasy work – business model

For obtaining the trust of the different customers, the PharmEasy e-commerce platform keeps on informing the clientele nicely about their services and provides a clear platform as a way of providing assurance. This platform works in a certain way to ensure that the tools and drugs they supply are top quality and are delivered in time. 

The first step in the PharmEasy business model is the patient sharing his or her prescription with the business. This prescription is tested by using a certain set of standards and then it is handed over to a pharmacy close to the customer.

PharmEasy has a partnership with several pharmacies that are licensed and can evaluate the prescription and the required drugs with the applicable grant and other benefits related to the medicine. After this, a transport agent will collect the prescription and the drugs to get them validated at the pharmacy shop based on regulations and guidelines. These pharmacists will also contact you in case they have any questions and vice versa. The order gets dispatched for transport after its verification is completed.

The transport agent will then collect the package and deliver it to you at your doorstep as fast as possible. Apart from this they also provide a range of payment structures such as Cash On Delivery (COD) and online payment facilities such as Paytm, Google Pay, Amazon Pay, and others for making it less tough for the clientele. The patients can place orders through their website without any delays and use their phone apps as well. 

The PharmEasy business model offers around a 20% discount on the orders that are collected through the app. This platform ensures that it is following all the guidelines set by the government about e-pharmacies and drugs.

By using a completely customer-centric method, PharmEasy has crafted a business success story that took the organization up the ladder. However, they have had to face several challenges on the way. There are certain limitations to the PharmEasy business model as well. In total there are four ways used by PharmEasy business model to make money.

• Commission from different pharmacies and healthcare products sellers.
• Through delivery fees on healthcare and medicinal products.
• Sale of advertising spots to healthcare brands and pharmaceutical entities.
• Selling lab tests.

PharmEasy revenue model

When it is time to consider the revenues generated, the most significant source of income for the PharmEasy organization is advertising. The different PharmEasy features add up on the “Home” page. Or, you can search for helpful results from different pharmaceutical companies. Some of these advertisements can be from some of the distinctive sources such as E-wallets, diagnostic centers, or telecom companies. Another source of income for the company is the sale of fitness and drug equipment. It is also a substantial mode of revenue generation for the organization.

Most e-commerce companies having online portals utilize this business model. The share of fees everyone makes is pre-defined by the parent organization. This fee is decided by taking into consideration the cutting-edge market scenarios. When there is a race going on to make more money, you also need to keep the expenditure in check. The price of the products on the website has to be competitive. It is tough and yet necessary to find the right balance between both these aspects.

Acquisitions

Up till the moment, PharmEasy has acquired three big companies, Thyrocare, Aknamed, and Medlife. Medlife was one of the competitors of PharmEasy. The acquisition of this company happened when the Indian e-commerce industry was undergoing consolidation. Medlife was acquired by PharmEasy in 2020. 

At the same time, a major share of Netmeds was purchased by Reliance. Tata brought a significant stake in 1mg in the same year as well. Medlife made a revenue of Rs 363 crore in 2019 with losses of 404 crores. This negative revenue ratio played a significant role in Medlife agreeing to a merger with PharmEasy having better revenue to loss ratios.

Thyrocare is India’s biggest diagnostic test laboratory. PharmEasy acquired Thyrocare to expand its presence in the lab testing space. This means there are more touchpoints for the start-up facilities in the healthcare journey of a patient. Apart from these two major brands, PharmEasy also purchased Aknamed. 

It is a healthcare company trying to streamline the supply chain in India. This merger took place in 2021. If you take into consideration the recent acquisitions of PharmEasy and the way they have expanded their operations, you can expect it to become a significant touchpoint for patients.

PharmEasy funding

In December 2015 PharmEasy raised $5 million through a Series A funding. At the time close to this, around one lac users were using an app every 45 days. The average ticket size at the time was Rs 1500. Different E-pharmacies such as PharmEasy offered large discounts for encouraging the clients to purchase medicine over the web in this early period. 

Pharm Easy had expanded to 7 cities by July 2016 and to 20 cities by 2017. For achieving rapid growth, the organization undertook a series B funding of $16 million in March 2017. After this round of funding, PharmEasy went to back. Their revenues tripled in 2017. However, with the increased revenues the companies also had to face increased losses.

In September of 2018, PharmEasy again raised a series C round of another whopping $50 million. They armed themselves to grow further with this money. The company tried to improve its unit economics by increasing the revenue to losses ratio. By the year 2019, the company had taken steps to expand beyond conventional medicine delivery into other related services. 

The company started lab tests at home together with healthcare products leveraging the existing client base. There are three important services provided by PharmEasy at the moment. These include the sale of online medicine, lab testing at home, and the sale of healthcare products.

Conclusion

The founding of PharmEasy business model and its subsequent competition with the competitors such as 1mg and Netmeds was based on one premise. The pharmaceutical revenue in India was close to $20 billion in 2015. It was expected to rise to $65 billion in 2024. Another important aspect was that the Indian consumers were getting comfortable with the idea of online shopping. 

Although convincing this massive market to purchase medicine on the internet meant a great deal of marketing was necessary. E-pharmacies struggled in this earlier period but some of them such as PharmEasy flourished. 

If you want to develop an online medicine ordering platform such as PharmEasy for a success story, get in touch with Jungleworks for expert workmanship.