Medicine Shoppe is trying to introduce a semblance of structure in the highly disorganised retail pharma market, but is it too little, too early?

By Brian Carvalho

Picture this scenario: your doctor inadvertently prescribes you a dosage much more than what's good for you-maybe 300 mg instead of 30 mg. You sleepwalk to your neighbourhood pharmacist, who duly doles out the stuff. You might not remember what happens once you've gulped down the drug. Because you're dead by then. The prescription will probably make it to the grave (or the pyre) along with you, your pharmacist doesn't know you're dead, and your doctor shrugs his shoulders.

Perhaps if you were born in the US, things could have worked out slightly differently. You'd still be doing the great gig in the sky, but your physician might well have been slapped with a fine. And your not-so-friendly- neighbourhood pharmacist could have been locked up. That, indeed, is exactly what happened in the one of the American states a few years ago when a patient died of a drug overdose: the courts found the pharmacist to be more culpable than the doctor who scribbled the prescription. Although the doctor erred, the chemist, the court felt, deserved a bigger rap because it had acted irresponsibly in handing out such a killer dose.

New Entrant

Wow, does that mean that I can nail the guy behind the counter of my local chemist store who never gives me the drug my doctor has prescribed, but insists on shoving a 'substitute' brand (because he's been promised a fatter margin on that drug)? No, you can't. Not yet, at least. But if Viraj Gandhi has his way, the Indian pharmacy retail market could well be headed for a much-needed overhaul. Gandhi has tied up with Medicine Shoppe Inter- national, the world's largest pharmacy franchiser, with close to 1,500 pharmacies spread over 10 countries. A wholly-owned subsidiary of Fortune 200 company Cardinal Health Inc, Medicine Shoppe has close to 1,500 franchised pharmacies spread over 10 countries. India is its latest stop. As managing director of Medicine Shoppe India-in which Commonwealth Development Corporation has picked up a 35 per cent stake-Gandhi's task is clear-cut: transform the retail chemist business from a commodity-based industry into a service-oriented one. ''Consumers don't walk into a store only to buy medicines, but for a comprehensive healthcare experience,'' says he.

Growing Industry

You might not realise it, but the retail drug industry is no small beer. According to data compiled by the National Council for Applied Economic Research (NCAER), the country's eight lakh outlets do business worth close to Rs 30,000 crore. The industry is growing at a fair clip of 18 per cent annually, and will be valued at all of Rs 65,000 crore by 2006.

To be sure, it's not just Medicine Shoppe that has spotted the potential of the Indian markets. The Apollo Group has flagged off a chain of 30-odd retail pharma stores in the south and the RPG group has Health-n-Glow. Then there's Lifespring, an Indo-Australian JV in Delhi, and according to industry sources, Cadila Healthcare too will soon take the plunge.

Medicine Shoppe's strategy, however, is slightly different. Unlike the others, it doesn't-and won't-own any of its stores. In India, it has appointed Gandhi (via his company Melrose Trading) as its master franchisee, who in turn is busy scouting for franchisees of his own. He's already roped in 11 in Mumbai, and hopes to rope in 25 by March. He has also found one in Calcutta, another in Vadodara, and a third in the semi-urban town of Rasayani (120 km off Mumbai).

Here's how it works: once a franchisee signs up, he pays an 'originator fee' of Rs 2 lakh upfront to Medicine India. He also forks out a royalty every year-3 per cent in the first three years, 4 per cent from the fourth year, and 4.5 per cent from the eight onwards. Gandhi, in turn, has paid an upfront fee to the US partner, and will also be paying royalties annually (he refused to reveal those figures).

What he does reveal is that his investment in the project has been Rs 4 crore so far, and that another Rs 5 crore will be spent over the next couple of years. Yet, breaking even in this low-margin business won't prove easy. For the Indian operations to start making money, Gandhi will need to have at least 250 franchisees in place. As for the US company, it doesn't expect to break even for the next seven years.

Clearly, Medicine Shoppe is taking a long-term perspective. The theory is that retail pharmacists have to break out of their 'baniya' mentality and get their acts organised. Gandhi cites the example of the US market, where, in 1971, there existed 200,000 mom-n-pop pharmacies, and just 500 retail chains. By 1998, the unorganised sector had shrunk to 70,000, and the chains had expanded to 45,000 units.

Gandhi is counting on something like that happening in India. What's more, once insurance companies begin offering health insurance, the organised retailers will be on a better wicket. Reason: the insurance companies will have to tie up with retail chains, and consumers will be able to claim the benefits only if they buy from these outlets.

Uneven Roads

But if the reaction BT got from a small sample of chemists is anything to go by, the going won't be easy. The biggest barrier Medicine Shoppe faces is that chemists feel customers won't be keen to enter such shops as they perceive them to be 'expensive'. Also, the royalty payment doesn't excite many, who are convinced that they will have adequate business of their own in the years to come.

Gandhi promises that a franchise can break even within 11 months of operations, and, by the second year, it should be making money. By the third year, the franchisee should be making Rs 1 crore, something he won't be able to do without the Medicine Shoppe banner.

But what is it that will make Medicine Shoppe different from its hole-in-the-wall counterparts? Gandhi says that its the unique service on offer that's the biggest draw. For instance, each Medicine Shoppe has a full-time pharmacist. This may not appear special, since the US Federal Drug Administration (FDA) norms mandate that every chemist store has to have a full-time pharmacist, but it's another matter that more than half of the country's outlets don't follow this regulation. The Shoppes will also have computerised databases on patients. Then, registered pharmacy customers also become eligible for free medical screenings and advice from a panel of doctors on a regular basis.

Would you take your prescription to a Medicine Shoppe?

Issue Contents  Write to us   Subscriptions   Syndication 

INDIA TODAY |  INDIA TODAY PLUS | COMPUTERS TODAY
TEENS TODAY | NEWS HOME | MUSIC TODAY | ART TODAY | CARE TODAY

© Living Media India Ltd