Why is Practo missing in action? - The Morning Context

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  • Around 2015, somebody from Practo reached out to the doctor and made an offer they couldn’t refuse.

  • For a small subscription fee of just about Rs 12,000, the doctor would get access to an electronic medical record software created by the health tech startup. It basically meant immediate access to a patient’s health records on all the doctor’s devices—something that had seemed possible only for big hospitals. For a neurologist in a small hospital in Chennai, this was a tempting proposition. Additionally, Practo offered the doctor a listing on its customer platform, which for all practical purposes was a Just Dial for doctors; this listing meant exposure to a much bigger pool of potential patients.

  • The euphoria didn’t last long though. The doctors remember 2017 as the last year when they were thrilled to have Practo in their lives. That was also the last time Practo flew high in the health tech ecosystem.

  • Just in the past year, Reliance Industries has acquired online pharmacy Netmeds for $88 million, PharmEasy and Medlife have announced a merger and Tata Digital has acquired a majority stake in 1mg, another online pharmacy.

  • And just last week, PharmEasy acquired a 66.1% stake in publicly listed diagnostics firm Thyrocare for Rs 4,546 crore.

  • After spreading itself thin across a range of healthcare verticals, the startup struggled. Its valuation has nearly halved, from a peak of $670 million in 2017 to about $350 million in August 2020

  • Privately held companies will begin filing their statements and annual reports for fiscal 2020-21 in a few months, so Practo is long overdue, which is generally not a good sign. Practo’s latest earnings report, for 2018-19, showed about a 30% drop in its operating revenue that fiscal year.

  • “They wanted to be the Apollo or Cloudnine of online healthcare,” says an analyst

  • “This meant newer verticals such as buying and selling of drugs (e-commerce), online consultations, search and listings, and new subscription models.”

  • The startup’s relationship with doctors completely changed when it made a pivot to paid listings and e-commerce. It launched Practo Reach as a paid listings service; a monthly fee of Rs 10,000 to Rs 25,000, depending on specialty and location, guaranteed doctors a spot on the top of the listings.

  • Prime and Reach also meant that doctors on Practo were forced to beef up their consultation charges.

  • Rs 200 and upwards as platform fee is quite large. It increases the cost of treatment to the customer instantly. Practo never realized that most small clinics in the country charge only a small amount for consultations. Moreover, those on Prime were charged for even phone calls that did not go through

  • Meanwhile, the company was also trying to make headway in the e-pharmacy space. But strong competition from established players such as 1mg meant Practo had its work cut out.

  • One founder of a health tech startup, who asked not to be named while commenting on Practo, makes no bones about the fact that the company has missed the bus to quick growth and profits by focusing on verticals that take time to scale and grow.

  • A good example of a startup trying a similar play is Curefit. The company started in 2016 with a pitch to become a house of health—from a chain of fitness studios, health foods, to primary healthcare centres and mental wellness. Five years later, all that has changed and Curefit is a new company. We wrote earlier this month about how the company is essentially narrowing its focus to mostly its Cult fitness centres and at-home workouts.

  • Going forward, Practo is now pinning its hopes for growth on telemedicine and online consultations—businesses that have been gaining traction amid the pandemic.

  • But a collapse in its valuation amid a pandemic that has seen health tech and Practo’s own traction shoot up implies that its days are numbered.

  • For one, the company no longer has any first-mover advantage. Rival telemedicine companies such as MFine, Lybrate and Pristyn care are already racing ahead.

  • Two, the economics of teleconsultation are tricky. “Online consultation is an infrequent use case. The user will indulge with your product twice or three times a year. That’s all,”

  • The cost of acquiring customers, though, remains high as for most consumer internet businesses.

  • The company is also keenly watching the government’s national digital health mission, which encapsulates a plan to create a unified health ID, and a personal health record system.

  • The pandemic has definitely provided it with an opportunity to rebuild and perhaps attract investors again—or at least, creating a business attractive enough to be sold. But with the everything-healthcare pitch wearing thin, it might need to narrow its focus and double down on a couple of niches to get there.

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