Group purchase organisation (GPO) simplifies healthcare value chain by aggregating supply and demand sides for targeted segment, just like an ecommerce company does. Neeraj Katare, CEO, DrStore, in an interaction with Viveka Roychowdhury, reveals more about the GPO market’s growth in India
How does a Group Purchase Organization (GPO) work in the healthcare space? What are the advantages for clients? What is the business model?
India has a decentralised healthcare system. Smaller hospitals and nursing homes make a large part of the industry. Recently, there is also a significant growth in the number of boutique care centres, which provide specialised care, but are relatively expensive for mid and lower income segments. The key reason for high cost of healthcare in India is that small and mid-size healthcare providers are not in a position to utilise economies-of-scale when procuring and offering consumables, medicine, and various products and services. As a result, the earning-per-bed remains lower compared to large facilities. This creates a competitive disadvantage for small providers, and eventually burdens the patients.
Group purchase GPO simplifies the healthcare value chain by aggregating supply and demand sides for targeted segment, just like an ecommerce company does. Therefore, it becomes a single window that allows small and mid-size healthcare organisations to exercise the market intelligence and purchasing power of a large organisation while maintaining their independence. The model also allows them to save about 6-8 per cent on their annual operational cost. Due to the trickle-down effect, the patients are also benefitted significantly.
The government is capping the prices of various medical devices and consumables and looking at ways to cut trade margins. How would a GPO approach work in such a scenario?
The objective of government policies is not necessarily to cut down the trade margins, but to ensure that essential medical supplies are accessible to the patients at an appropriate price. GPO model has the same objective. As small and mid-size healthcare centres get the benefits of bulk-negotiated supplies, they are able to serve the patients at lower cost. This fulfils the government’s policy objective. As the adoption of GPO-based purchases accelerates, we believe that the policy based control on pricing will loosen.
What has been the pick-up in business in the three years since it started in 2015, in terms of revenues, numbers of vendors registered, number of orders placed annually, range of product and services provided by DrStore etc. What are the other metrics to track success of such ventures?
DrStore has grown quite significantly and created a niche for itself in the market. Many well-known hospitals are now part of our GPO programme. The business is growing at a rapid pace with target to expand pan India in the next few months. We have all major manufacturers’ part of our suppliers’ base. Our online ecommerce platform is among the most respected and largest for healthcare professional in India
What guarantee does DrStore give to clients that the supplies are authentic and safe? What are the security features built into the supply chain to assure hospital service providers and buyers?
While distribution partners represent a brand, DrStore represent consumers, i.e., doctors and hospitals. This balancing act will go a long way in transforming the healthcare sector in India. All products are directly sourced from well-known manufacturers under strict quality management framework. Our state-of-the-art tech- driven supply chain operation ensures complete traceability of each and every SKU supplied to customers
Healthcare establishments in tier-2/3/4 cities are smaller and many have connectivity issues, both geographically as well as technology related. What is the geographical distribution of your buyer base as of now?
We are currently servicing west and central India. Our aim is to expand pan India in the next few months with local fulfilment centre to ensure promote service delivery to customers
DrStore got seed funding from Pragma Ventures in 2017. What are the future growth plans and funding timeline?
We believe that the GPO market in India will be around multi billion by 2020. Riding on the high wave and our aggressive expansion plans, we aim to sign up 2000 GPO members by December 2020, and to become the largest healthcare institutional buyer in India. If the early response is any indication, we are heading in the right direction.