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Here’s how digital platforms can reset the pharma supply chain with embedded credit

Anna Catherine   /    Content Specialist    /    2023-01-25


The pharma engine runs on MSME horsepower!

Surprised? Well, I for one, jumped out of my skin as I pieced together the pharma market landscape.

When you think ‘pharma’, big names such as Cipla, Sun Pharma, Dr. Reddy’s come to mind. Unless you are an industry insider, it would be hard to imagine that MSMEs turn the wheel of an industry as scientifically rigorous as pharma. To strengthen your disbelief, let me lay out a few statistics for you. 

In the highly fragmented Indian pharma industry, about 60 per cent of the manufacturing is contributed by MSMEs within an annual turnover of ~60,000 crores — predominantly in the formulations segment, and to a certain extent in the Active Pharmaceutical Ingredients (API) industry, as per news reported by Express Pharma. 

Further, about 24,000 MSMEs contribute to almost 90% of domestic formulations and about 50% of exports — that is 70% of production by volume and 50% by value. This is only the supply side of it. 

On the demand side of things, 90% of total medicine trade to the tune of ~$18 billion is fulfilled by standalone pharmacies, according to IBEF research.  Unlike the USA, where the top three retail pharmacy chains hold 82% of the market share, India currently has over 8,50,000 offline pharmacy retail stores with no dominant retail chain in terms of market share. They are the driving force of pharmaceutical distribution in the country, and at the same time the contributors to the complexity of India’s pharmaceutical supply chain. 

Pharma gets a dose of ‘platform’ medicine

Supply chain issues have been rife in the pharma industry for a while now. But disruptions caused by socio-economic factors such as the pandemic and the war in Europe have exacerbated the problem considerably. 

Wait times are breaking all records, prices have gone through the roof, and medicine shortages are besetting nations. The US and the UK are reeling under drug shortages, as I write this. Although India may seem better off, we too faced severe drug shortages at the height of the pandemic, despite being one of the world’s largest pharmaceutical hubs. 

All this made it incumbent on digital platforms to act and improve market linkages, and, of course, the opportunity was there for the taking. Several platforms have emerged to fill supply chain gaps — some of them are digitising the pharma supply chain end-to-end while some others are growing to be marketplaces that connect various stakeholders, both supply- and demand-side actors. Saveo, Biddano, Pharmarack, and Retailio are some of the platform players in the space, in India. 

Turning the flywheel with embedded credit

Solving problems of inventory management, information asymmetry, and real-time visibility is only one part of fixing the broken pharma supply chain. In times of adversity, these solutions may fall short in averting disruptions, and capital is the only thing that can keep it going. Therefore, the ability to finance pharma MSMEs and retail pharmacies will determine the next phase of growth for the industry. However, the challenge lies in assessing credit worthiness of MSME borrowers, as a majority of them have little to no credit history that platforms’ lending partners can rely on for evaluation. 

The good news is that financial technology, like that at FinBox, holds the potential to level the playing field for pharma MSMEs and retailers from all socio-economic backgrounds and geographies. With the added power of financial technology, platforms can meaningfully engage their entire user base, boosting conversion rates and CLTV. 

At FinBox, we enable platforms to offer MSMEs a robust alternative to traditional credit. Our data analytics capabilities to draw up a social, behavioural and financial portrait of borrowers help platforms and their lending partners better understand the borrowing and repayment ability of a customer. We also help pharma platforms expand financing options for MSMEs and diversify and build their capabilities in borrower outreach, credit assessment and data analytics. To know more about how FinBox helps pharma platforms power in-context credit, contact us