Daybreak - Daybreak Special: The Pharmeasy Investigation

Episode Date: May 24, 2024

In this week's Daybreak Special episode, hosts Snigdha Sharma and Rahel Philipose speak to The Ken's Shivani Verma about her investigation into Pharmeasy's dubious business practices. The once IPO-bound company is under the scanner for its 'unethical' ways of upselling alternative medicines and supplements. Everyone – from Pharmeasy's own pharmacists, to the doctors who call behalf of the company to validate a customer's prescription – are under pressure to sell these supplements. The saga began with Pharmeasy’s 2021  acquisition of Bengaluru-based e-pharmacy Medlife, where former executives noted a similar trend of upselling alternatives and supplements.  This comes amid ballooning losses and immense pressure from investors to show profitability. So what's the deal? Why is Pharmeasy going down this route? Tune in to find out. Daybreak is produced from the newsroom of The Ken, India’s first subscriber-only business news platform. Subscribe for more exclusive, deeply-reported, and analytical business stories.P.S. Daybreak episodes drop daily now :)

Hi, this is Rohan Dharma Kumar. If you've heard any of the Ken's podcasts, you've probably heard me, my interruptions, my analogies, and my contrarian takes on most topics. And you might rightly be wondering why am I interrupting this episode too. It's for a special announcement. For the last few months, I and Sita Raman Ganeshan, my colleague and the Ken's deputy editor, have been working on an ambitious new podcast. It's called Intermission.

We want to tell the same. secret sauce stories of India's greatest companies. Stories of how they were born, how they fought to survive, how they build their organizations and culture, how they manage to innovate and thrive over decades, and most importantly, how they're poised today. To do that, Sita and I have been reading books, poring over reports, going through financial statements, digging up archives, and talking to dozens of people. And if that wasn't enough, we also decided to throw in video into.

to the mix. Yes, you heard that right. Intermission has also had to find its footing in the world of multi-camera shoots in professional studios, laborious editing, and extensive post-production. Sita and I are still reeling from the intensity of our first studio recording. Intermission launches on March 23rd. To get an alert, as soon as we release our first episode, please follow Intermission on Spotify and Apple Podcast. or subscribe to the Ken's YouTube channel. You can find all of the links at the ken.com slash I am. With that, back to your episode.

Rohini Lakshane is a 30-year-old woman who works as a technologist in the South Indian city of Mysore. A few months ago, she was in terrible pain. And the painkiller she needed was a class-age drug. Basically, this is a category of medication that you can only get with a prescription. Now, unfortunately for Rohini in this case, she could not find her prescription. And to make matters worse, since it is not a very common medicine, it isn't available at all medical stores.

So instead of going through the trouble of going store to store to find it, she decided to place an order on Farm Easy, one of India's most popular epharmacy apps. But even here, Rohini would still need a prescription. It's a good thing That is not a problem on Farm Easy It's got that covered No prescription, no problem For people like Rohini It offers free online doctor consultations

So she went ahead and placed the order And almost immediately She got a call from someone Who said that they were a doctor at Farmeasy Hello The call didn't last very long But at the end of the conversation Rohingy was left quite concerned

confused and a little frustrated. So what happened, Roheini? The doctor spoke with suggested that he'll prescribe a supplement to fill the gaps in my nutrition, which felt very odd because he had no basis to determine any gaps based on the single symptom that I had described which was pain. He didn't ask for any medical history or prescribe any medical tests or ask whether I had any other ailments or whether I was on any other. or whether I was on any other medication or whether I had undergone any other tests recently and this being a phone call

there was of course no physical examination. After that a prescription was generated on the Farmeasy site and apart from the pill that I wanted it named a generic vitamin D supplement by the brand name Livesee. I did not intend to buy it but out of curiosity I looked it up It was a Fermizy brand and this was a generic supplement

label with that brand. Did you notice all the red flags during that one or two minute long phone conversation that Rohini just described? Not only was the doctor willing to give her the medicine without inquiring about her medical history, he went as far as prescribing a bunch of other

Ayurvedic supplements. Rohini said she wasn't interested. But you won't believe what happened when the delivery boy showed up at her front door. After that, the delivery, career delivery arrives and the person delivering it asked me to pay some amount of money and I told him I already paid for it in full. I'm not required to pay at the time of delivery.

He said, you either pay the pending amount or we are going to take it back. So that's when it sounded very efficient. and I said, take it back. I'm not going to pay anything more than what I already have. Rohani's unpleasant experience on the Farmy Easy app led to a chain of events that ultimately landed up in the Ken's newsroom. At our colleague Shivani Varma's desk to be specific.

And Shivani knew something was wrong. When she started asking around, she realized there was something much larger and much more sinister at play here. So initially, when I first read that email, it just seemed like a one-off instance. That could also be possible because I myself don't use online pharmacies as such. So we did not know the scale. We did not know how many people was just happening to. Welcome to our second episode of Daybreak Fridays.

I'm Sinkda Sharma. And I'm Rahil Filippos. And once a week, Rahil and I come together to talk about things in business and tech that interests the both of us. And it won't just be us. Depending on what we are talking about, we will also be bringing in a bunch of really interesting people onto the podcast. This week, we speak to our colleague Shivani Varma

about a very important investigation she did for the Ken. Shivani uncovered how the e-pharmacy app Farm Easy has been putting the health of nearly 4 million of its customers at risk. It didn't take Shivani very long to figure out that Rooney was not alone. Farm Easy has been pulling a fast one on nearly all of its customers. And every single time, the script is the same. So I think we did some nine odd calls, placed orders, and then we got these calls. So the first order that I did was with diabetes medicines and cholesterol medicines.

We added three medicines in it and we did not upload a prescription in it. And I just randomly took a picture of my notebook. and add it as a prescription. And soon after, I got a call from them. And I think that's a one nun from Farmingy. Hey, hey, hey, yes. And this person said that, hey, I'm calling you from Pharmizied, you place an order. May I know the name of the patient, age?

And since this was a fake order, so I just said that I'm placing this for my relative. Relative's name is Ravi, age is this and that. Okay, and your name's name? Ravi. What are? Ravi, Ravi. Ravi, Ravi. How are you?

How much? 37. He's diabetes. And I think cholesterol levels are high. There were no more questions apart from that, right? Okay, wow. So what you just said sounds so much like what Rohingi had said, right? So, Shivani, can you tell us exactly what this person at the other end of the call was saying,

to you. Yes, yes. I did. This was something that caught my attention and this was unusual in that whole, I think, conversation that lasted for around two minutes. He asked me whether I would like to order more medicines and he asked this question twice. So I said, no, I don't want to order any more medicines. And then slightly he just asked me whether I would like to go for karela jamun juice and I asked him what is it for and he said it's good for diabetes and then I asked which brand because I wanted to confirm whether they are pushing their own private labels so he said he took a pause of a second or two and then he said we you'll get brands we have Himalia etc and I said no I don't want it so Shivani is karela juice the only thing that they're trying to

sell customers because even Rohini She said they were trying to hard sell some... Vitamin D. Yeah. It was vitamin D. By a brand called Livesee. Yeah. Yeah.

Right. Right. So Farmy Z has some 300 odd products in its portfolio. They have two private label brands, namely Everhub and Livesee. And they also have certain products with its own label. And they range from various supplements, vitamins, these all sort of juices. is Ayyod Vedic in the portfolio. So, okay, for the sake of this story,

let me just play the devil's advocate here, okay? What is the problem with selling a little bit of karela juice? Because think about it, even when you go to a store to buy, say, for example, a bottle of shampoo, somebody will come and tell you, hey, look at this conditioner, it goes very well with this shampoo and your hair will become really shiny and nice and smooth if you use them together. So it's a little bit similar to that, no? Something like a karela juice or aloeuvre or jaman juice, it's pretty harmless, no? No, what's the problem here? Right, but Snikda, I just feel like it's not just about selling Ayurvedic juices, right? Like, look at Rohanis

experience. She literally managed to get a class-age drug after a two-minute conversation where the doctor didn't even ask her about her medical history. He didn't even ask her to show any reports. She literally just got the medicine. Right? To me, that's a glaring lapse. So it's that easy to get prescription medication through online pharmacies, right? Unfortunately, yes. So in two instances, what we noticed was that in one order where one of our colleague tried to place an order for insulin for use for diabetic patients.

And along with that, this person added a cardiac medicines with it. that they got a call from a doctor again from Farm Easy and that call was very like, you know, of poor quality. The person was hardly audible and they just, you know, asked the name, age and they just issued a prescription and it didn't even last for a minute or so, you know? Similarly, another person who placed in order for a medicine for brain stoke. Again, the call went similarly and I have shared those recordings as well with you folks. And you can listen in that recording that,

that how there's so much disturbance from the doctor's side and that doctor is hardly audible and they just issued the prescription again within two minutes. Okay, that's definitely a red flag, especially when we're talking about medicines to treat chronic illnesses, right? But coming back to how Farmy Z is hard-selling these supplements, these generic alternatives, these Ayurvedic drinks, etc. The obvious next question there, Shivani, is why sell them at all, right? What's in it for Farmy Z?

So, wild margins, right? So in both the cases, if you'll see, generic medications have, like, we spoke to Kossal Shah, founder of the E. Vital RX, and he, along with other executives former and current, we spoke to about the margins that these alternative generic medications have and private label supplements have. They are huge. They are crazy. And I couldn't believe.

when I first got to know that margins in generic medications can go up to 90%. And case of supplements, they are anywhere from 60 to 70%. This is in comparison to branded medications which will only yield you around 20 to 30%. So, why would you not push it? So generic drugs are basically the ones whose patents have expired. So any pharma company is allowed to manufacture them. And in India, three-fourths of patients use generic drugs. drugs because they are comparatively cheaper.

Patented drugs are sold by MNCs and they are way more expensive. Right. And you know when you're shopping on Farm Easy, Shivani, in fact, you wrote this in your story, it's constantly promoting these generic alternatives literally every step of the way, right? So you'll keep seeing terms like top seller or others also bought this along with this, that sort of thing. It's basically constantly pushing you to make more. purchases. So ultimately, it all boils down to money, right? Yeah, because it makes sense also, when you look at the story of Farmy Z. There was a point when it was valued at like $5 billion or something. And then a few months ago, it was raising money through this rights issue and it did it

at a 90% discount of its peak valuation. 90%. So obviously the valuation fell from like $5 billion to around 500 million. Right. And one more kind of interesting point on its route to an IPO, which it very much was at that time. It went on this shopping spree of sorts, the shopping spree of acquisitions. Right. The idea was to own every bit of the value chain from diagnostics to the actual medicines that they were selling. Right. The idea was basically to amp up their profit margins. Exactly. And it almost took a. shortcut for this, no? Because instead of building that value chain, Farmy Z chose to acquire these companies and that too at a premium price. So, for example, Thairocare, right? The diagnostics

company, it took that over as well because diagnostics have a higher profit margin. And then there was also a med life, right? Chivani. Yes, yes. So in 21, Farmyzi acquired this Bangalubased epharmacy MedLife, which was its competitor. So two people, two former executives and pharmacists, sorry, we spoke to said that something similar was faring at MedLife in terms of, you know, target-based selling and upselling, and people were assigned to make sales worth about, you know, a crore in a span of three months. And there were people who were selling like around 100 supplement bottles every day. So when this acquisition happened, and MedLife had a huge portfolio of these private label products ranging from 20 to 30 brands.

So when Farmyzy acquired it, its portfolio shrank and was absorbed into two Farmeasy labels that I mentioned. And yeah, the practice that was happening at MedLife, these people mentioned, started to, you know, happened, it started to happen at Farm Easy as well after the acquisition. You know, you really have to give it to Farmyzy man, for one thing, which is, obviously, it's gone completely wrong now, but it's been this very audacious company, right? I think even our colleague, Praveen Kopalakrishan, he wrote about it in his newsletter, The NutGraf, about Farmezzi, and it's ambitious nature. Yeah, no, there's really no two ways about that.

But, you know, the MedLife acquisition that we were just talking about, I feel like that's pretty significant to the Farm Easy story. Because MedLife brought with it a whole bunch, like a portfolio of supplements, right? And that's exactly what had helped Farmy Z raise its order margins at the time. Yeah, but then the unexpected happened, no. A recession hit and Farm Easy had nowhere to go. And it had so much debt to pay after all these acquisitions that it made. it almost feels at this point that Farmyzi was unknowingly kind of digging its own grave, right?

Which is why now it is being forced to resort to these unethical tactics. Yeah, you know, I can't imagine what it must feel like for someone who actually, you know, has to do this as an employee of Farmyzzi. I know. Shivani, I know you spoke to a few people who work there. Can you tell us what you heard, you know, what's going on there? Right. So initially when I spoke to two former pharmacists, I mean, we spoke to five people and two of them, the way they were talking, these conversations were fairly, very lengthy. And there was a lot of guilt that I could, you know, observe by the way they were speaking and, you know, telling us what and how the operation is going on at Farm Easy. And the fact that, you know, them being pharmacist and in medical industry and how it felt very wrong for them to do it, but they did it because they did not have a choice.

So this one pharmacist told us that initially they didn't tell us that they would be asked to push generic medications or their own private label supplements. All they were asked to do was just, you know, check whether these prescriptions are valid or not and just clear that and just go ahead with the order. but that did not happen, right? Okay, but you know, when you say that they don't have a choice, what does that mean, Shavani? I mean, it's their job, right?

Daily bread and butter. And if you have been asked to do something, you will have to do it. And a lot of times in these cases, they said that people who were not able to fulfill or abide by the targets were asked to just, you know, outright leave or were issued PIPs or were questioned every day. They have usually, they had these WhatsApp groups

with a team lead asking, why you were not able to fulfill your targets? Why are you not able to sell X number of supplements or replace these medicines with alternate medicines? So there was an immense pressure that, you know, these people were going through and two of the former pharmacists we spoke to quit because of this reason. So in case of supplements, they were asked to sell four to six supplement bottles every day and they would get specific incentives which ranged from, I think, supplement to supplement and it ranged from rupees 10 to hundred per bottle. For higher margin supplements, so when I say higher margin, supplements that are priced above 500. So if you are able to successfully push these, you will get more incentives.

In case of, say, medications, 1% told us they were asked to overall all the calls that they make in a day, which ranged from 50 to around 180, 200 calls every day, they were asked to, you know, replace 12 or 15 medicines every day across the orders. So say, for example, someone has placed an order with five medications. So they were supposed to replace two of them with generic medications. Wow, that sounds so wrong. Now, Shivani, all of this could not have been possible without these free online doctor consultations that Farmy Z is offering, right?

But you said in your story that Farmy Z has some kind of a third-party platform called Doc stat, which onboards these kind of doctors. Right. So, if you are placing an order on Farm Easy in the app, if you are saying that you don't have a prescription, if you click on that option and if you go ahead, it says that you get a free consultation by a licensed third-party doctor. If you click on more info, it will say that this is powered by Dockstat, India's largest remote consultation platform.

Now, since it said that it's third party, we assumed it's third party. But while I was reporting, while I spoke to several people about this, former pharmacist, and then more people eventually as in when reporting proceeded, we realized that DocStats registered name is DocOn Technologies, which is a subsidiary of API Holdings, Farm Easy's parent. Okay, so what you're saying is that FarmEasy technically owns this platform called Dogstat, owned by Docon. And DocStat essentially assigns doctors to customers for these teleconsultation. right? That is essentially what the platform does, right? So Docon, all the former folks from

Docon we spoke to told us that the company is into AMR, which is electronic medical record maintenance platform, which provides software to generate doctors' prescriptions, to doctors, to individual doctors and hospitals. So, and that was the only business they were into, right? So to my surprised, I got to know that, you know, DoCon dissolved its operations in 2022 going to a financial crisis. That's what the people who worked at the company told us. And I mean, the company still exists on paper, but it's only like four, five people that are working from the Farmy Z, Bangor office. What? Wait a second. So Dockon doesn't really exist and neither does Dockstatt? So the platform Dockstat is handled, managed, all the calls are being done.

by DocOn Technologies is what their website stated, right? But the website also had a link to the Play Store app link, which was a defunct link. And when we tried to register on its platform as a doctor by entering wrong details of medical degrees and hospital of the colleges where we got our degree from, we did not hear from them. And the number that was there on the website, it was again switched off and we tried to make multiple calls. So we realized, so when we spoke to several former and current executives from the company, we realized that Docon has nothing to do with FAMIZ and its teleconcultation process. Okay then Shivani, who are these doctors, you know, the ones who are calling you and saying

that they're from FAMIZ? Are they even real doctors? I mean, I mean, you don't know, right? We can, I mean, it's, again, very subjective because if you will see in their prescriptions, all the prescriptions that are generated are black and white in colour, they have like a couple of details in it which are consistent, like you will have a name of the doctor and a very consistent designation, which is MBBS and nothing beyond that. And if you look at prescriptions that are generated by Tata 1MG that we noticed in our while reporting was that they also provided additional details like where the doctor is from, their email ID and sometimes even their clinics address. And we also tried to reach out to three of

them, but we did not hear from them. So all you can see in the prescription is the doctor's name, the MBBS degree, and there's some registered number, like an ID number of some kind that all doctors have, no? Is there any way, Shivani, to find out if these registration numbers are real? Right. Even I had this question where I was reporting and I spoke to one friend of mine who's a doctor and this person told me that all the states have this medical council website. So for Delhi, it will have Delhi Medical Council. For Andhra Pradesh, it will have the Anuripadesh Medical Council. And if you will see in the prescription, in a couple of prescriptions, these doctors had APMC or DMC slash, you know, number, registration number. So you can easily copy paste this and you can go to the doctor. the respective website of these states and check whether these are legit or not. And we did check for two doctors where we were also able to see the profile and registration details on the respective websites, right? But in some cases, you don't have the state detail mentioned.

Like, for example, you won't have DMC slash number. You will just have that registration ID, which will only comprise of numeric. numbers. In that case, it gets difficult for me or you to check. Right. But tell me something. I'm wondering, say for example, I want to pretend to be a doctor on Famisi. I can just go find some random doctor's number, registration ID. How will a customer who has ordered medicine online through me ever find out if I am a real doctor or not? Right. Just Sikda, you are asking all the questions then I ask my sources. So, I did ask you. I did ask. this and it's it's not I mean possible for me as a customer or a patient to know right I mean I will not

get to know and this can most definitely happen and but there's this thing where you know if you are using the registration ID or number of a doctor I think like I spoke to two people and or both of us sources said that in such cases doctors usually know because it's I think they are the one's also giving consent to do that. Otherwise, you can't, I mean, ideally do it. Okay, so let's go over what we've discussed so far. Here's what we know. One, Farm Easy has been hard-selling supplements and generic medications to its customer.

Two, the reason it's doing this is because it's desperately chasing after profits at the moment. Three, it's a really, really hard time to be a Pharmacy employee. And four, if you order your medicines on e-pharmacy apps, be like Rohini. because if she didn't call this out Shivani's investigation and this episode wouldn't have ever happened. Yes, please be like Rohini. And on that note, that's a wrap.

We know we took a little more than usual amount of your time today but we're really hoping that it was worth it for you. Like we said in the last daybreak Friday episode, we are trying something new here. And for all those of you who fill the survey form from the last episode, thank you guys. especially the ones who left some really solid constructive criticism. It's helped us so much with this episode.

Absolutely. Thank you so much each and every one of you. And for all the haters who were complaining about us laughing and giggling and enjoying ourselves in that episode, take this. I hope it was serious enough for you.