Generic Warriors

In 2016, two IIT Mumbai alumni set out to reinvent the generic pharma industry. In 2017, they set up their first brick-and-mortar store in Mulund. Today, they have more than 40 stores in the story. Can they survive JanAushudis and other startups? A HE report.

"The term branded generic is an oxymoron," says Siddharth Gadia, CEO of Generico, a startup which aims to bring generic drugs directly from the manufacturer to consumer. "Because if you are going to make it branded, it cannot be affordable."

Generico is one of the healthcare startups which has emerged in the past few years with the ambition of reinventing the pharmacy sector. Currently, it runs 43 stores in Mumbai. "We want to introduce people to the idea of affordable and accessible medicine," says the co-founder.

As per the National Sample Survey Office survey on healthcare, in 2014, medicines emerged as a principal component of total health expenses, —72% in rural areas and 68% in urban areas.

Shifting from Mechanical Engineering to Healthcare

The co-founders of Generico-Siddharth Gadia and Girish Agarwal are both alumni of IIT Mumbai. Gadia figured out very early in his entrepreneurial journey that winning over customers is a tough nut to crack. He started a tech startup, which had to shut shop in six months because the market was small. Eventually, he and Agarwal decided to join forces and start Workcel Solutions, the parent company of Generico, in 2016. The duo first launched Reap App, a real-time tech application for the in-house supply chain management. The team were able to onboard more than 20,000 retail pharmacies in less than six months. The chemists were able to spot the availability of a particular drug in the digital product information system.

That's how the duo got exposed to the concept of generics.

Can you trust Generics?

A generic drug is a pharmaceutical drug that is similar to a brand-name product in dosage, potency, route of treatment, quality, performance, and intended usage.

It is typically 30%–80% cheaper than originator equivalents.

Can Generico change the game?

"We were astonished to find out that the adoption among Indian customers was low due to inadequate access to generic medicines at an affordable price point. That's when we decided to pivot our business model to focus on consumers," recalls Gadia, a mechanical engineering graduate.

According to the India Brand Equity Foundation, IBEF, India is the largest provider of generic drugs globally. Indian pharmaceutical sector industry supplies over 50 per cent of global demand for various vaccines, 40 per cent of the generic market in the US and 25 per cent of all medicine in the UK. Even the Medical Council of India urged in 2016 that all practitioner should prescribe medications with generic names and he or she shall assure that there is a rational prescription which promotes the use of generic medicines.

Keeping an Ear to the Ground

Generico is priced slightly higher than government's Jan Aushudhi stores, but the availability of drugs is the USP of their stores. The other significant players in the market are Zota Healthcare, Medkart and StayHappi.

But why did they not make it a pure-play technology platform? Gadia points out that regulations regarding e-pharmacies were not clear when they started. "Generics is a new concept. You need to speak to doctors and educate customers, that's why we decided to have a physical store. We see online as a medium to order. Fifteen per cent of our orders come through WhatsApp. It's a convenience medium. We always wanted to be close to our customers. Currently, 20,000 people from Mulund order from our store."He also adds that they are also planning to launch the omnichannel model.

What is the market size of the Pharmaceutical Sector?

The pharmaceutical sector was valued at US$ 33 billion in 2017. The country's pharmaceutical industry is expected to expand at a CAGR of 22.4 per cent over 2015–20 to reach US$ 55 billion. India's pharmaceutical exports stood at US$ 17.27 billion in FY18 and have reached US$ 19.14 billion in FY19.

How are they different from other players?

Generico believes that complete control over the entire customer journey is essential for the company, and that is where they differentiate a lot from other players.

Generico stores also provide branded generics, because "trade-generic" version of all drugs are not available in India. "Medicines contribute significantly to the healthcare expenditure of a consumer. If you provide credible benefits to patients, then you can easily attract customers," he adds.

Making Cost Cutting a Priority

For every successful healthcare startup, who succeed in the Indian market, there are hordes of young men and who take the plunge and then ditch it for a mainstream profession, when things get tricky.

Why is Generico an exception? Optimizing operation to manage cost, is the key to the success of the business model of Generico. Most of the stores are at non-prime locations. As a result, the average rent is lesser than the top retailers. The revenue per employee is 1.5 times the standard revenue per employee in this industry. The stores also do not stock any FMCG products, unlike other drugstores.

Cry Product or Not

Dinesh Thakur, a public health expert, points out that generic medicine can make healthcare more affordable in India. But there are challenges. "Consistent availability and quality of medicines is an issue. Enough has already been reported about the patchy and inconsistent supply through Jan Aushudhi stores. Reports of past parliamentary standing committees and the CAG which document in great detail the corruption at the drug regulator CDSCO and the fact that at least one in four drugs purchased by CGHS, Indian Army and Indian railways was substandard," he adds.

It is not an easy path and Gadia would be the first one to admit that. Investors often asked him what's the value of his product during the early days. " One of our investors, Sandeep Tandon, asked us, during the early phase, whether whatever we are doing is a cry-product or not. He told us that if you are not there tomorrow will someone cry; then there is value in your product."

Isn't lean smart?

How does one extricate oneself from the pitfalls of scaling up? With planning and of course a lot of pluck. Generico does nearly 200,000 transactions a month and generates immense amounts of data. The startup also uses machine learning algorithms to predict the sales with over 85% efficiency.

The technology developed by the team improves efficiency and reduces manual intervention to generate savings for the company. The tech systems are now integrated with suppliers and orders are placed via APIs, which is a first in the industry.

The company has also raised 100 cores until now.

Are efficacy and availability an issue for Generico? Gadia says that they see an opportunity for them. " There are not many counterfeits in the generic market because there is not much margin, unlike other medicines. We provide quality medicines from top pharma companies and guarantee consistent supply," says Gadia.

Fuelled for Success?

The first store of Generico was set up in 2017. Currently, it has more than 400 employees. It also employs two pharmacists at every store. According to the Gadia, it was a long and bumpy ride. "Everything was a challenge in the beginning. Pharma companies were not making generic variants; doctors were not prescribing generic medicine and players were selling at higher rates. But we slowly solved those issues through focus and efficiency."

Future Plans

The team plans to open 150 stores in the next one and half year in and around Mumbai. "There are challenges when you want to scale fast because we have to invest a lot in technology as well as training people. Hiring the right people and finding real estate, keeping cost low are some other hurdles," he adds.