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Status of E-Pharmacies in India: Time to end the policy flip flops

E-pharmacies in India have been walking the tight rope for far too long now. The Drug Controller General of India (“DCGI”) recently ordered all states and union territories to prohibit e-pharmacies online sale of medicines in india through unlicensed online platforms until the Drugs and Cosmetics (Amendment) Rules, 2018 (“Draft Rules”) are rolled out. The DCGI order was passed in response to a Delhi High Court order[1] barring entities without licences from selling medicines through online platforms.

The fact remains that technology disruption has made a significant impact on the pharmacy segment with the online-pharmacy market recording over 700% growth in India in the last four years. Given the sensitivities around consumer health and privacy, the dynamics here are slightly different from the e-commerce sector. That having said, regulatory certainty and enforcement consistency are critical for attracting further investments in this sector.

We take a quick look at the legal and regulatory framework affecting this nascent sector.

Existing Framework

Presently, pharmacies are regulated under two central legislations, The Pharmacy Act, 1958 (“PA”) and The Drugs and Cosmetics Act, 1940 (“DCA”). PA regulates the profession and practice of pharmacy and provides the framework for licensing and registration of a pharmacist in various states. The DCA regulates the sale and distribution of medicines and medical devices, stipulating the compliances for conducting the pharmacy business. These stipulations include the requirement that certain drugs be sold only on production of a valid prescription from a certified medical practitioner and prescribing minimum standards for equipment, packaging and storage of medicines.

When online sales started getting traction in 2015, ‘offline’ retailers across the country protested against online pharmacies for flouting rules. This was followed by a notice in December 2015[2] from the DCGI, the regulatory authority under the DCA, calling upon online pharmacy retailers to strictly adhere to the rules framed under DCA as applicable to conventional pharmacies (“DCGI Notice”). In July 2016, the Indian

Medical Association, a voluntary association of medical professionals, issued a White Paper[1] vehemently opposing online pharmacies in the absence of a dedicated law regulating the sector.

So, what needs to be done to build in regulatory safeguards to foster efficiencies yet protect consumer health and safety?

Concerns around the e-pharmacy model

The key concerns surrounding e-pharmacies in india revolve around the following:

  1. Licensing regime for e-pharmacies

As sale and distribution of medicines is possible only through licensed pharmacies, the conservative view is that online sale of medicines may not squarely fall within the ambit of the DCA and the PA unless it is merely to address the aspect of last-mile delivery. There has to be a mechanism for stand-alone online pharmacies to register themselves if they meet the specific eligibility criteria.

Under the prevailing legal framework, the licensing regime is broadly distributed between the Central Government and State Governments. The licensing authority appointed by the State Government (i.e., the State Drug Controlling Authority) issues licenses for selling, stocking, exhibiting or offering for sale or distribution drugs that are specified in Schedules H, H1 and X by retail or wholesale. The Central Government through the Central Drugs Standard Control Organization issues licenses for import of drugs and cosmetics.

This may change as and when the Draft Rules become law. The Draft Rules introduce a pan-India registration for those intending to conduct the e-pharmacy business.  This registration will enable e-pharmacies to operate throughout India. Additionally, the Draft Rules also mandate that e-pharmacies in india comply with the provisions of the Information Technology Act, 2000. 

  1. Sale of restricted drugs and medicines

The regulation of drugs presently depends on the nature of the drug (and the ailment). Over the counter (“OTC”) drugs can be sold by licensed retailers without any prescription from qualified medical personnel. However, the sale of non-OTC drugs, i.e., ‘restrictive drugs’ or Schedule ‘H’ and Schedule ‘X’ drugs is possible only on the basis of a prescription from a registered medical practitioner. Schedule ‘H/H1’ drugs include potent antibiotics (like anti-tuberculosis drugs), habit forming

painkillers and anti-anxiety drugs that induce sleep while Schedule X drugs include narcotics and psychotropic substances. Given the high chances of drug abuse and addiction with the non-OTC drugs, their sale is subject to safeguards on sale, storage and record-keeping. Without a robust authentication mechanism, the ‘click and order online’ format of business may lead to cases of drug abuse, drug misuse and unregulated medication. The regulatory framework also has to ensure that there is no sale of such drugs to minors. Presently, most online pharmacies do not sell such restrictive drugs in India.

  1. Spurious drugs

With 1 in 7 medicines reported to be sub-standard in the country and 35% of the counterfeit drugs supplied worldwide coming from India, the menace of fake and spurious drugs is a gigantic problem. Given the lack of regulatory framework on the sale of medicines through an online medium, it is a logistical nightmare – right from sourcing of medicines, its storage under controlled conditions, authentication by a registered medical professional to post-sale record keeping requirements. An unregulated online market for sale and distribution of medicines may well promote the spurious drug market in the country. A stringent inspection and regulatory mechanism is required to ensure transparency in the sourcing of drugs sold online as well as establish quality norms to counter the proliferation of fake/mislabeled drugs.

  1. Mechanism to regulate doctor prescriptions

We have to have a robust mechanism to guard against abuse of prescriptions of medical professionals. Rather than placing reliance on a scanned version of a doctor’s prescription, introduction of a digital verification process (such as a digital signature or Aadhaar or a bar code) for validation of the credentials of the medical practitioners on their prescriptions may help weed out fake/forged prescriptions.

  1. Patient privacy

Most online pharmacies may fall under the category of “intermediaries” under the Indian information technology and must therefore follow norms for collection, storage and sharing of personal information. However, that alone may not be sufficient considering the extremely confidential nature of the personal information.While there is no specific law regulating the online sale of medicines in India at present, the DCGINotice had clarified that the DCA and the corresponding rules that regulate the sale and distribution of drugs in India do not distinguish between conventional/offline sale and online sale. Therefore, all the provisions of the DCA and the corresponding rules are applicable to e-pharmacy companies as well.

With a view to formally recognize and regulate online pharmacies, the Ministry of Health and Family Welfare had released the Draft Rules in August 2018[1]that sought comments and recommendations from the industry stakeholders. However, the Draft Rules are yet to be finalized by the government. 

What is the road ahead?

The growth in the digital economy with disruptive business models harnessing the power and reach of the internet has been a nightmare for regulators across businesses and regulators have been grappling with ways to regulate such businesses in a commercially prudent manner. Online pharmacies are also no exception. 

The very nature of online pharmacy business with the different types of drugs requiring different levels of regulation makes it all the more complicated.  For instance, while  OTC drugs can be sold without prescription, restrictive drugs such as potent antibiotics, habit forming painkillers and anti-anxiety drugs (that induce sleep, narcotics and psychotropic substances, etc.) has to be mandatorily sold as per the prescription of registered medical practitioner. Given the high chances of drug abuse and addiction with restrictive/non-OTC drugs, dealing with such drugs requires more stringent safeguards. The problem of spurious drugs in India and the lack of robust enforcement machinery for weeding out spurious drugs is also another roadblock to embracing online sale of drugs.

Like the small businesses and kirana stores battling it out with the e-commerce big boys, most brick and mortar pharmacies consider online pharmacies an existential threat. It is important (and perhaps daunting too) for the government to create a level playing field for the two different business models.

[1]Order dated December 12, 2018 passed in Dr. Zaheer Ahmed v. Union of India and Ors.[WP(C) 11711/2018]

[2]Notification no. 7 – 5/2015/Misc/(e-Governance)/091 dated December 30, 2015



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