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THE NEED FOR REGULATION IN THE E-PHARMACEUTICAL SECTOR IN INDIA.

EVOLUTION OF E-PHARMACIES IN INDIA


The e-commerce industry in India is booming with the increased accessibility of the internet and smartphones. This industry has recently explored the healthcare and pharmaceutical sector to serve the interests of customers conveniently and effectively. The pharmaceutical industry in India is expected to experience a growth of up to 100 billion USD by the year 2025. According to a report published by the Department for Promotion of Industry and Internal Trade, this sector has attracted approximately 16.86 billion USD as cumulative foreign direct investment between 2000-2020.[1] Today the Indian pharmaceutical market is a place full of exciting opportunities with tremendous potential due to the policies of the government. The e-pharmacy sector saw immense growth and increased traction last year due to Covid-19 lockdown-driven demands. Although the sector shows a promising growth rate along with significant investments, it has been a grey area when it comes to the legal aspect. There are no regulations in India that cover e-pharmacies, particularly which has led to the question of the legality of these pharmacies.


Online pharmacy or e-pharmacy is a pharmacy that conducts its business over the internet by sending the customers the ordered medicines or products through delivery agencies or companies. It is a website like any other wherein a customer can order the required medicines and these medicines will be delivered to the registered address of the customer placing the order. A valid prescription has to be uploaded on the website of the pharmacy while placing an order for certain medicines. The e-pharmaceutical sector although rising is in a nascent stage in India, whereas it has already undergone full development and regularisation in the US and Europe. E-pharmacies can be classified into three types. The first one is the traditional e-pharmacy, wherein medicines are delivered to the customer only when a valid prescription receipt is presented/uploaded to the e-pharmacy’s website. In this kind of model, the customer is not provided with medicines without a valid doctor’s prescription. The second one is the online pharmacist model wherein the customer or patient has to usually fill in a questionnaire giving out all the details based on which a prescription is issued by the doctor in the e-pharmacy after which the medicines are provided to the customer. The medication and prescription are provided without any physical examination of the patient. The third one is the e-pharmacy where customers have no obligation or requirement to show prescriptions to order medicines. This model is one of the chief reasons for the increasing necessity for regulation of the e-pharmaceutical market.

E-pharmacy gained popularity in India due to its customer-friendly business model wherein medicines are readily available for the customers/patients at their doorstep. In this model, the customer/patient does not have to worry about the shortage of medicines at the retailer's end or run from one pharmacy to another in search of medicines.[2] Covid-19 further increased traction in this sector due to the various lockdown restrictions and social distancing rules that made it impossible and extremely unsafe for people to get out of their house for buying essentials. The pandemic also led to a boost in the demand for some specific medicines and related products like sanitizers. The demand for e-pharmacy based purchasing is driven by factors like the rising number of unfulfilled medical needs of a large population and increasing access to internet services both in urban and rural areas of the country.[3] The major issues in the brick-and-mortar pharmacies have been addressed quite efficiently by the e-pharmacies as they focus on tracking authenticity, medicine traceability, more accessibility, consumer empowerment through tax loss, and value-added services in the healthcare sector which plays a key role in the development of the nation.[4] E-pharmacies also provide competitive pricing as they have the advantage of low working capital, overhead costs, and more margins, which helps the entrepreneurs broaden their customer base by providing customers with lucrative discounts and prices. E-pharmacy is expected to account for 5 to 15 % of the total sales of pharmaceuticals in the country only by reaching the population that has unfulfilled needs. As of now the leading players in this sector are Pharmeasy, Netmeds, Medlife, Medidart, mChemist, Savemymeds, SaveOnMedicals, Bookmeds, 1MG, etc.


NEED FOR LEGAL AND REGULATORY FRAMEWORK


The e-pharmaceutical sector has proven to be investor-friendly and highly growth-oriented but prone to legal controversies. This has led to a lack of certainty from the point of view of an investor as there is no clarification from the government yet about the FDI permissibility or a regulatory/ licensing framework. This has hugely negatively impacted the sector and made the need for a regulatory framework quite pertinent. Due to the absence of rules specifically for e-pharmacies, they have sought to follow the rules applicable and made for brick-and-mortar pharmacies which prove to be inefficient when it comes to regulation of all of their activities and business transactions.

The emergence of e-pharmacies led to heated debates and strong objections from the side of the brick-and-mortar pharmacies along with the doctors concerning the legality of these e-pharmacy models, their regulation under the Indian laws, the risk of forged prescriptions endangering the life of the end customer/patient, exploitation or misuse of the medicines available for drug abuse and so on. There has been a lot of debate over the issue of a licensing framework and who will take up the role of a regulator for the e-pharmacies.


The Office of Drugs Controller General of India in the year 2015, considered an elaborate examination of the e-pharmaceutical sector due to the various issues arising due to it. An interim order was passed to the state authorities on Dec 30, 2015 stating, “inter alia …you are requested to put a strict vigil on online sale of medicines and take action against those indulging in the online sale of medicines in violation of the Drugs and Cosmetics Act and Rules thereunder, in the interest of public health.”[5] Although there has been a lot of deliberation as to whether an e-pharmacy can be classified in the same manner as brick-and-mortar pharmacies as they have the same business model, the issue of the regulation remains unsolved.


The primary legislation that deals with the sale and distribution of medicines along with other things related in India is the Drugs and Cosmetics Act, 1940 which was enacted keeping in mind retail or brick and mortar pharmacies and never e-pharmacies. The Drugs and Cosmetics Act, 1940 states that a license is required to sell drugs and to obtain this license the applicant should have a proper premise for storage of the drugs. The Act also mandates the presence of a registered pharmacist in case the pharmacy is involved in the sale of prescription drugs and certain other drugs that have to be dispensed under the supervision of the pharmacist. So, the e-pharmacies have to comply with the conditions under the Drugs and Cosmetics Act, 1940, that is they need a storage facility for drugs and cannot conduct business in this country without having a physical storage premise.


Although there is no concrete framework for the regulation of e-pharmacies, there are some Draft Rules[6] pending approval. Under these rules, anyone who wishes to sell drugs through a website or an internet-based model has to mandatorily seek a registration certificate from the authority for licensing by applying Form 18AA to do so.[7] The registration certificate will be granted to the e-pharmacy applicant and it will be allowed to hold the certificate only if: “the web portal of the e-pharmacy is located in India; the e-pharmacy is under the charge of a registered pharmacist; and the e-pharmacy is not offering for sale drugs that are covered under categories of the Narcotic and Psychotropic Substances Act, 1985 or under Schedule X of the Rules.”[8]


The e-pharmacy also has to comply with certain disclosure norms like publishing information about the owners of the business along with that of the registered pharmacist and delivery or logistics team used. This is for the benefit of customers so that they can verify the legitimacy of the e-pharmacy based on this information. The Rules also cover the point of data privacy, as it requires the e-pharmacies to ensure no data collected about the customer is ever disclosed and sent outside India. If the draft rules are approved and brought into effect, this debate will reach a final settlement with the much-needed clarity regarding this sector’s regulation and legal framework.


FOREIGN DIRECT INVESTMENT IN THE E-PHARMACEUTICAL SECTOR


E-pharmacy can be said to come under two different sectors that is the e-commerce sector and the pharmaceutical sector. Both these sectors have their regulations regarding foreign direct investment, with their specific restrictions, terms, and conditions. While the pharmaceutical sector has a 100% FDI limit for greenfield businesses and a 74% limit for brownfield businesses; it is not yet clear whether e-pharmacies come under the retail pharmaceutical sector or just the trading sector.[9] When it comes to FDI in the e-pharmaceutical sector, a prospective foreign investor is more likely to validate the investment as under the trading sector rather than the pharmaceutical sector. Under the extant FDI regime, e-commerce is understood as “…buying and selling of goods and services including digital products over digital & electronic network”. This can be classified into two models ‘inventory-based model’ and the ‘marketplace-based model’.[10] The inventory-based model is an e-commerce model where the company or the e-pharmacy owns the medicines/drugs stored at various geographical locations as per convenience, the medication is then delivered to the consumer after consultation with the supervisor pharmacist and the upload of a valid prescription by the consumer.[11] A marketplace-based model is one where the e-pharmacy performs the role of an aggregator. It connects consumers and the sellers on the digital platform which enlists their products and empanels licensed pharmacies.[12] Here also the prescription needs to be uploaded by the consumer for placing an order. In India, both of these models are currently in operation. It is important to take into consideration the business model while talking about foreign direct investment as the FDI in the inventory-based model is prohibited in India while the marketplace model has certain specific terms and conditions that have to be complied with. The business structure plays an important role in making the investment viable on the legal as well as the business front.


CONCLUSION


In conclusion, the approval and implementation of the Draft Rules will bring about much-needed operational clarity in the e-pharmaceutical sector. Given how the current system doesn't have a sweeping denial on online sale of medications however the unlicensed online sale of medications, the permitting/licensing system should be smoothed out better during enactment. This may require not simply the e-pharmacy explicit additions from the Draft Rules yet additionally different changes at any rate in the Rules to avoid the e-pharmaceutical business from the conventional enlistment prerequisites. Likewise, FDI should happen in a consistent marketplace-based model of e-pharmacy. The business/company would likewise need to guarantee consistency with few other significant viewpoints, for example, online business-related guidelines under consumer protection laws and data privacy, protection laws, and related information technology law regulations. Both legitimacy separate assessment and conversation. Despite being in a complex administrative space, from a business viewpoint, e-pharmacies is a developing portion that needs capital and can legitimize it with consistent if not quick development on the lookout.


[1] Indian Pharmaceuticals Industry Report, Indian Brand Equity Foundation, (March 2020) https://www.ibef.org/industry/pharmaceutical-india.aspx

[2]e-Pharmacy in India, An Exponential Growth Opportunity, Frost and Sullivan (2019) https://ww2.frost.com/wp-content/uploads/2019/01/Frost-Sullivan-Outlook-on-e-pharmacy-market-in-India.pdf

[3] E-Pharmacy in India: Last-mile access to medicines, Indian Bar Association, (2019) https://www.indianbarassociation.org/wp-content/uploads/2019/05/E-Pharmacy-in-India-Last-Mile-Access-to-Medicines_v6.pdf/

[4] Supra note 2.

[5] Drugs Controller General of India, Reference No.7-5/2015/Misc/e-Governance/091 dated Dec 30, 2015

[6] Notification dated August 28, 2018, by Ministry of Health and Family Welfare, http://egazette.nic.in/WriteReadData/2018/189043.pdf

[7] Ibid.

[8] Ibid.

[9] FDI in Pharmaceuticals in India, FDI INDIA (2021)

https://www.fdi.finance/sectors/pharmaceuticals

[10] Saurya Bhattacharya, Regulating e-pharmacies and FDI: What to look out for? Law & Policy Update, HSA Advocates (2021)

[11]e-Pharmacy in India, An Exponential Growth Opportunity, Frost and Sullivan (2019) https://ww2.frost.com/wp-content/uploads/2019/01/Frost-Sullivan-Outlook-on-e-pharmacy-market-in-India.pdf

[12] Ibid.

Navin Kumar Jaggi

Aditee Dash

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