Demonetization is defined as the act of stripping a currency unit of its status as legal tender. Since the announcement of Demonetization, Indian economy has been fluctuating in terms of increase in Inflation, increased GDP rate and increase in the rate of imports and exports. It has impacted individuals, businesses and industries drastically.
- Pharma sector also experienced negative impact with the impact of demonetization, but the impact is temporary and expected to be same.
- Healthcare businesses and organizations are contending with extraordinarily new financial, demographic, and regulatory pressures.
- A challenging global economy continues to strain the bottom lines of providers, payers, and pharmaceutical companies - not to mention the businesses and taxpayers who ultimately foot the bill.
- Tighter finances and thinning margins have made cost cutting and operational efficiency a top priority across the healthcare supply chain. It has also fuelled innovation, without compromising the end goal: patient care
- The National Sample Survey reveals that over 80% of Indian population is not covered by health insurance.
- Private Doctors are a one-man army, taking up the majority cases in both rural and urban areas.
- A Forbes report stated that the per capita healthcare expenditure in India is about $60, which is significantly less amongst the BRIC nations and trivial compared to the developed countries, considering that USA spends over $8600.
The country is witnessing a revolution where the healthcare system would go cashless. The industry is witnessing innovations in value chain thereby making it more fragmented. Growth spurt in the adoption of digital payments, entry of non-traditional players, technological innovations and proliferation of immediate payments are largely driving the healthcare technology industry while attempting to create a 360-degree healthcare ecosystem.
More e-commerce players like wallet providers; web aggregators and online retail portals are coming into the field of distributing health products and services.
- In India, 47% of rural citizens and 37% of urban ones borrow money or sell assets to pay medical bills.
- Medical cost is one of the most common reasons for rural bankruptcy.
- One of the reasons for saving surplus currency in certain households was to cater to unforeseen medical emergencies.
- The under-penetrated health insurance sector already growing at a CAGR of 23% would receive a major push due to demonetization. The better the penetration, the more economical the cost of insurance for the end consumer, thus driving further growth of the sector.
- In India, the percentage of GDP expenditure on healthcare is 4%, it is lesser than certain underdeveloped countries.
- With more financial reserves at government’s disposal due to digitization of payments and less hoarding of paper money, while the percentage expenditure on healthcare may not be altered, the overall quantum of the money spent would certainly increase. This would eventually lead to better quality Government healthcare services.
- Overall, demonetization should not be considered in isolation. Now that the economy is cashless and people are learning and adapting the digital modes of payment, with Internet reaching every nook and corner of the country, India would witness a phenomenal movement in overall healthcare ecosystem, touching every citizen positively over time.
Initial Hiccups
Health care was one of the industries that faced trouble in the initial stages of demonetization as patients were not able to get the right treatment and even relatives of patients, who were hospitalized during the time of announcing demonetization faced a lot of difficulties as they were not able to get the foods they required.
Delay in Treatment for many Patients:
Due to demonetization nearly 70-80% of door-step services in health care industry like home care and diagnostics were affected. As the patients were not able to pay the exact change for these services, they just cancelled their appointments with respect to diagnostics.
The Effect Of Demonetization On Pharma Industry & Future Job Perspective
The ban of highest domination currency Rs 500 & Rs 1000 left the whole country mourn as the country went cashless when it came to transactions. The biggest witnesses were the lines for depositing old currency to the bank to the difficulty in receiving new ones. The pharma industry consists of various elements which are as follows:
- Pharma Company
- Distributor
- Stockiest
- C&F (Carrying & Forwarding Agent)
- Retailer/Chemist/Pharmacies
- Consumer
- Doctor
The cash transaction is a widely accepted mode of transfer everywhere. The individuals who have initiated the business or were going to start one went to face a lot of issues. From prescription to every commission made as a bribe & black money, demonetization affected the pharma journey a lot. If you have illegal money then business will be difficult whereas legal money will win the race.
The Pharma Jobs like medical representatives, pharmacists etc. were also affected. As per 2017 is expected to be a bright year of those seeking for jobs in the pharma industry. The Pharma Vision 2020 is expected to rise to about 12% by next three years. The first half may seem a surge but is expected to smooth out sooner.
After Effects Witnessed By The Pharma Industry Due To Demonetization
The decision of demonetization was a success or failure is still a debate. The Indian Pharmaceuticals is still determined to grow and reach the vision of 2020. What was the effect of the decision of the industry are as follows:
- A good downfall of medicine was witnessed. This will result in legal invoicing & billing habits.
- Prescribe for cash was replaced with ethical codes. This accounted more than 80% of doctors who write prescription against cash.
- Better control of drug administration on sale and purchase above Rs 20, 000 cash against the invoice.
- Blanking has better control over high transactions.
- Rules & regulation against illegal drug & medicines were closely watched by the Government.
The online market rather experienced a huge jump in sales, as the market moved towards cashless transactions. Demonetization has in fact opened an electronic gateway to conduct cashless transactions, thereby, maintaining transparency and accountability in the trade dealings.
Post demonetization, the online pharma space has had a positive impact considering that they offer not only one stop services at-home but also because the consumer has access to cashless payments. Given the fact that consumers can also avail heavy discounts on our portal and mobile apps, it has increased traffic to e-pharmacy businesses."
Factors like affordable and accessible medical facilities, increased proliferation in terms of discounts and offers and off course the recent digitization of transactions, have driven phenomenal demand growth in the country. The online healthcare platforms not only allow for a hassle-free experience for patients and doctors, but also save patients' time as their consultation slots are pre-booked at the time of making the payment.
Demonetization has affected the credit cycles on Pharma value chain --stockists have extended credit period to the retailers to settle payment and to protect the revenue . This is a temprorary step and would get normalised . On supply chain and Inventory levels there was not much impact.
Overall the demonetization lever ,while triggering short term revenue dip has kick started some welcome practices in cashless ecosystem.
