Bangladesh, a country of 170 million people, faces a growing demand for quality healthcare services as the country gradually goes through a series of consequential economic, demographic, and socio-cultural transitions.
Healthcare remains one of the underdeveloped sectors in Bangladesh with the sector facing multifaceted challenges. The challenges are expected to exacerbate as the young population of the country slowly but surely becomes an aging population over the next decades.
However, there have been significant changes taking place in the sector. With economic growth, the government is expected to expand its investment in the sector. Similarly, the current relatively low per capita spending on healthcare is anticipated to rise as income and affordability increase. Meanwhile, digital healthcare services, including online pharmacies, at-home diagnostic services, online doctor appointments, and virtual consultations, have been experiencing a gradual yet hopeful adoption.
This is the context online pharmacies entered the scene a couple of years ago as part of the broader health-tech play. Online pharmacies offer benefits of cost and quality transparency, seamless inventory management, and, crucially, the prospect of serving remote areas currently underserved by offline drug stores.
A new white paper published jointly by the University of Liberal Arts Bangladesh's Center for Enterprise and Society (ULAB CES) and Future Startup, an entrepreneurship and business knowledge platform, explores the state and the future potential of online medicine delivery in the country, an emerging vertical among several promising technology-aided trends in the healthcare sector.
The white paper, titled "The State of Online Medicine Delivery in Bangladesh", examines the thesis behind an online medicine delivery market, highlights the drivers fueling the growth of online pharmacies and digital healthcare services in the South Asian nation, offers an overview of the overall healthcare market opportunity, sheds light on the major online medicine delivery players, investment landscape and future direction for the emerging vertical.
As noted above, Bangladesh has seen a rising national healthcare expenditure. The Bangladesh National Health Accounts (BNHA) estimated that the total health expenditure in 2020 was $7.77 billion, up from $6.76 billion in 2018. Per capita healthcare spending in the country was estimated to be $42 during the same period. Of this expenditure, over 64% goes to drugs, followed by 11.7% and 10.8% for lab costs and doctors, respectively. Out-of-pocket (OOP) healthcare expenditure in Bangladesh has been steadily rising. The World Health Organization (WHO) reported that the OOP figure accounted for 74% of the total healthcare expenditure in 2020.
Offline pharmacies play a significant role in Bangladesh's healthcare landscape. There are some 155,589 registered brick-and-mortar pharmacies and an equal number of unregistered ones.
However, a generational shift towards digital services, enabled by increasing internet penetration, the government's digitization push, and changing consumer behaviors under the influence of technology has created a new dynamic for digital services including digital healthcare services in the country.
The online pharmacy landscape is further aided by the rise of chronic non-communicable diseases (NCDs) in Bangladesh over the last decades. The treatment of chronic diseases commonly includes long-term use of pharmacotherapy. Online pharmacies can help patients access medicine on-demand and help patients with personalized services such as medicine reminders, etc via their app.
The prospect has gained meaningful attention. Investments in Bangladesh’s health-tech startups saw steady growth over the last several years. Between 2015-2023, the vertical has attracted some $32 million in disclosed investments, including $7 million in disclosed funding for pure-play online pharmacy startups in 2023 alone. Prominent online pharma players like Arogga, MedEasy, Shombhob Health, and Chaldal-owned BanglaMeds are pioneering inventory-led models that control the supply chain from procurement to last-mile delivery.
By all means, online pharmacy is a relatively new vertical in Bangladesh. A small number of online pharmacy players are slowly gaining market share. A few of these players such as Arogga, MedEasy, and Shombhob Health have raised meaningful capital. Some online pharmacies are also expanding into offline retail. Going omnichannel can create a competitive advantage for online pharmacies as a company expands. It can also help build trust faster, reduce inventory management costs, and reduce both cost and time of delivery. Similarly, many traditional offline pharmacies have also been investing in building their online delivery business, creating a new competitive dynamic.
One interesting development is that some online pharmacies have started expanding into adjacent healthcare products such as doctor consultations, etc. Since healthcare is an integrated service, it offers further service aggregation opportunities, which means these companies can expand into new services using their existing users such as doctor consultation, diagnostics, etc. A strategy that comes with both meaningful upsides as well as serious downsides.
The nascent vertical also faces challenges including the ubiquitous presence of entrenched consumer dependence on neighborhood drug stores, complex logistics for timely deliveries, lack of trust in e-commerce, and a competitive landscape where offline pharmacy chains are going omnichannel.
Like any emerging vertical, online pharmacy is a fascinating phenomenon. The whitepaper provides a comprehensive look into an emerging sector that is unfolding rapidly.
The full white paper titled 'the state of online medicine delivery in Bangladesh' can be found here.
