“Your industry is my opportunity”

As prescription power shifts, the power of the brand erodes and pharma continues to chase product over service, the rise of healthcare ecosystems led by Amazon and Reliance is imminent.


A few years ago, when Netflix was becoming popular in India, friends and I sparred with a model to price medicines that way.

Would pharma companies allow patients access to their whole portfolio of medicines for upfront subscription fees, just like Netflix allows viewers access to hundreds of movies, TV shows and documentaries?

“Will our industry allow this?” wondered a friend. “Won’t it affect their business if an Amazon Prime like model is built?” As it happened, Amazon Prime and companies that followed, dropped prices further and expanded content, creating greater customer interest.

This week Amazon and Reliance announced their entry into Indian healthcare. Almost predictably, they chose to exploit the weakest link of the value chain i.e., distribution. For long, the movement of drugs from factory to pharmacy has been inefficient, locking in about 30-35% of value, making Jeff Bezos’ comment quite relevant.


It is unlikely that either Amazon or Reliance, will merely distribute medicines and not extend to other parts of the sector.

Their motto, as evidenced by their past businesses is to ‘serve at scale’. And this is what the pharmaceutical industry should be watching with bated breath. While the giants are recent in their foray into the Indian healthcare space, their past successes provide lessons to incumbents.

D.I.Y. Healthcare

For long, different parts of the industry provide services to consumers of healthcare (patients, families, and caregivers). Pharma makes medicines, doctors prescribe them and retailers ‘fill’ those prescriptions. When patients ask for additional information, the doctor provides it grudgingly, as it consumes time better spent treating other patients.

Doctors employ counselors, or staff that provides this information. However, the sheer numbers or the repetitive nature of such tasks gradually erodes sensitivity and compassion required to deal with the ill. As a result, customer experience suffers.

Newer players in the area noticed these inefficiencies and rapidly used technology to reach out, engage and use far more satisfying experiences to acquire patients onto their platforms. They realized quickly that the need in the healthcare sector was not for new products but efficient services.

That incumbent pharma giants had exited the area opting to focus on selling products instead, made the model more attractive.

People need more to recover from illness than just a pill.

Beyond doctors and medicine shops, people also need gyms to work out, fitness gear such as clothes and accessories, healthy food, family doctors referred to as primary care, access to specialist doctors called tertiary care, health insurance to pay for it all, healthcare at home, access to diagnostic facilities and a health watch or other wearables that helps them to keep a tab on their health.

A ‘health concierge’ would be helpful, an app to manage all of this would be convenient, and if it all happened in the comfort of their homes that would be the cherry on top! As COVID changed old habits, people quickly realized the comfort of Do It Yourself (DIY) healthcare.

Healthcare ecosystems

Technology can link together diverse services and companies that provide a comfortable and a one-stop-solution to healthcare consumers. Technically called ‘ecosystems’ – this maybe the next innovation in healthcare.

Reliance and Amazon understand ecosystems well.

They will create them by linking these healthcare players together. This might involve either forming such companies or acquiring controlling stakes in existing ones like Netmeds. The result will provide a very strong and efficient healthcare ecosystem. It is quite likely that other players like 1mg and Cure.fit will enter the race.

New price structures will evolve

Such a re-organisation of healthcare may also solve for its biggest problem today – high cost. Subscription-based services could emerge as a mode of payment.

Rather than paying large sums upfront for hospital and medicine bills, Amazon, Reliance and other players could evolve a subscription model to pay for healthcare

This is well on the lines of the ‘Netflix’ model that my friends were thinking of. Prices at easily affordable monthly/annual subscriptions that cover the whole gamut of services offered via the network, will allow companies to acquire consumers at scale.

Also, since the ‘serve at scale’ model will be a ‘consumer acquisition’ one as opposed to the ‘patient acquisition’ one practiced today, the model will have multiple entry points for consumers to enter.

A 16-year-old student looking for fitness can join, as can a 55-year-old looking for tertiary care. Anyone looking for meditation or yoga facilities will be as welcome as someone opting for a health insurance policy. This might provide clues to the unfolding of Reliance/Amazon’s strategy in the sector.

What will aggregate therefore, is a base of people and not necessarily the ill. Staying attractive to people with varied needs and preferences will require the company to continuously stay low-priced while driving up the quality of their offerings.

Such innovation will be desperately welcomed in the world of medicines where high prices often exclude more people than include them. In a market with this new avatar, the government may not need to enforce price controls and can focus on ensuring competitiveness.

Erosion of the brand

Where would such structural shifts leave pharma? When medicines become a small part of the ecosystem, the bargaining power of these massive companies may relegate pharma to becoming suppliers of high-quality yet affordable medicines. Of course, innovative products will have an edge, but that is less than 10% of today’s market and unlikely to grow larger.

Private labels are a well-known evolution of most retail chains. Big Basket, Flipkart, Walmart, Tesco, Amazon, Reliance and almost every other retailer has a host of them that drive profit. While they develop their own private labels, they use scale to bargain hard with manufacturers and pass on those discounts to consumers, thus retaining their loyalty. With the rise of private labels sourcing generics, pharma brand power can erode.

Shift in prescription power

Healthcare ecosystems will own or control doctors, hospitals, and e-pharmacies, and will influence prescriptions, the purchase, the availability, and the fulfilment of those prescriptions. Think of it as a manifold scale-up of the corporate hospital model at very different price points. This can drastically erode the power of the pharma brand as we have seen with generics in Latin America and Europe.

Prescription power has been gradually shifting for years. When people gawk at the price of medicines prescribed to them, retailers show them options of the same medicine that are much cheaper. Decisions are made on prices, yet pharma does precious little to provide information that can allow consumers to make educated choices. Digital health companies have gleefully grabbed that white space and are therefore becoming more popular with the common man.

What then of the current doctor-brand promotion model that companies spend hundreds, if not thousands of crores to build and maintain? The big boys announced entry into an industry that is tired, old, unimaginative, and driven by the wrong incentives.

When my friend asked if the industry would allow a Netflix-like model, he probably did not expect that years later, Bezos or Ambani might well say “your industry is my opportunity”.


4 thoughts on ““Your industry is my opportunity”

  1. Very Futuristic avd thought provoking article.
    With biggies like Amazon, Reliance, Flipkart & others entering the Pharma supply chain.. there is going to be a blood bath.
    Distributor/Retail margins will go south and they may not see too many bonus schemes in the future.
    There will be direct procurement from companies at a hectic discount.
    Obviously the funds for transactional business/quid pro quo will go down considerably.
    Driven largely to generic business with low margins due to hectic bargaining, small timers may vanish.

    Bad times for the industry. There is a greater need for development of innovative brands to survive in the days to come

  2. Could not have come across a better article regarding Amazon and RIL entry into e-pharmacy and its possible implications. This is something you have always highlighted through your lectures ! Thanks for the insightful article.

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