An invasion of armies can be resisted, but not an idea whose time has come.

                     - Victor Hugo

This famous qu­ote has alre­ady gone down in the annals of Indian history to be associated with the budget speech given in 1991 by the then fin­a­nce minister, leading India into the path of economic reforms, making it into an IT powerhouse. Over the past few years, the Indian pharma sector has been gaining tr­action largely owing to so­me of the key regulatory and policy changes that have be­en instituted by the government, including relaxed FDI entry caps, 100 per cent FDI in the medical devices sector and enforcement of medical devices rules. Recently, the ministry of health and family welfare has released the draft rules pertaining to sale of drugs by e-pharmacy with an aim to regulate online sale of medicines. This is one of the occasions where the law had to catch up with the industry as the market for online sale of medicines has been prevalent in India over the past few years without the existe­n­ce of appropriate regulatory framework.

Right from the inception, the online pharmacy players have faced hu­rdles owing to lack of clarity under the Dr­u­gs and Cosmetics Rules, 1945 regarding online sale of medicines. But off late, the government has taken note that online sale is critical for easy access to medicines. The draft pharmaceutical po­licy released in 2017 ackn­o­wledged the need to move into e-pharmacy space and formulate guidelines for encouraging it in the larger co­n­s­umer interest. The draft policy has also acknowledged that opportunities in the e-pharmacy sector can also be an area for attracting FDI.

As per the draft rules, no one is entitled distribute or sell, stock, exhibit or offer for sale of drugs through e-pharm­acy portal unless registered with the central licensing aut­hority (CLA). For running an e-pharmacy business, on­ly a single registration from CLA will be required. This contrasts with the regime co­ncerning the brick and mortar stores, where a store specific registration is required from the local/state drug authority for selling drugs. The reason for having a single re­g­istration from CLA is aimed to remove any impediments on inter-state sale/distribution of drugs by the e-pharm­a­cy registration holder. The draft rules also clarifies that any sale of drugs over the e-pharmacy portal will be ma­de pursuant to prescription received from customer, and only those drugs can be sold th­at don’t come within the purview of Narcotic Drugs & Psychotropic Substan­c­es Act, 1985, tranquilisers and schedule X drugs. These exclusions have been made ke­e­ping in mind public health concerns. The draft rules fu­r­ther stipulate e-pharmacy registration holder is requi­r­ed to undertake various compliance measures like putti­ng in place adequate custo­m­er grievance redressal me­c­hanism, comply with the Information Technology Act, 2000 in relation to customer data protection and storage of cu­stomer data in India.

While some of stipulatio­ns in the draft rules are a step in the right direction, there are certain infirmities that should be addressed while finalising rules.

First, provisions under dr­a­ft rules (including the defin­i­tion of ‘e-pharmacy’) don’t distinguish between a mark­etplace e-pharmacy bu­s­iness model and an inventory-bas­ed e-pharmacy model. It has defined ‘e-pharmacy’ to me­an the ‘business of distributi­on or sale, stock, exh­i­b­it or of­­f­er for sale of drugs thr­ou­gh web portal or any ot­her el­e­ctronic mode’. From this de­finition, it appears bo­th inv­entory-based and marketpl­a­ce-based models of e-pharm­acies are permitted. From a FDI policy perspecti­ve, 100 per cent FDI in marketplace e-commerce business is allo­wed whereas FDI in inventory-based e-commerce business is prohibited. Thus, it wo­uld be useful to align the definition of e-pharmacy wi­th the FDI policy. While the intent of the regulator would be to allow both kinds of e-co­mmerce business models to prevail, it would be useful to have clear distinction due to the reason that the types of business arrangements to be put in place by the market pl­a­ce based e-pharmacy entity and an inventory based e-ph­a­rmacy entity would be substantially different.

Second, the procedure for distribution/sale of drugs through e-pharmacy leaves sc­ope for more detail and cl­a­rity. The provision under dr­aft rules state that on re­c­e­ipt of the prescription, the registered pharmacist belon­g­ing to the e-pharmacy registration holder is required to verify details of patient and re­gistered medical practitio­ner. The draft rules neither stipulate the basis on which such verification can be cond­ucted nor provide the e-pharmacy with any discretion to adopt the mechanism through which such verification can be done. Considering that quick order processing and delivery of drugs are of paramount importance to e-pharmacy entities, it would be useful if clarity on the asp­e­cts of verification can be incorporated into it.

Third, the procedure for distribution/sale of drugs th­r­ough e-pharmacy also stipu­lates that upon receipt of prescription, e-pharmacy re­g­istration holder will be req­u­ired to dispense and make arrangement for supply of dr­ugs from any retail or wh­o­l­esale licensed premises un­der the Drugs and Cosmetics Act, 1940 and the rules ma­de there under. This provis­i­on is ambiguous as it entails that an e-pharmacy registrat­ion holder will be required to source drugs from another pharmacy, which has the re­q­uisite wholesale/retail lice­n­ce. In case where the e-ph­armacy registration holder is itself holding inventory of dr­ugs, the provision under the draft rules would require the store/unit supplying drugs to have a retail/wholesale regist­ration (which falls in the pu­r­view of the state licensing au­thority) in addition to the central registration. It would mean the e-pharmacy would be on par with the brick & mortar stores, as far as supply of drugs are concerned.

Fourth, perhaps the most absurd stipulation under the draft rules is upon cancellation of licence of the e-pharmacy registration holder in two or more states, the central licence will be deemed to be automatically cancelled. The draft rules don’t expr­e­s­s­ly provide for the requirem­ent of an e-pharmacy registr­a­tion holder to also obtain re­quisite state licences. Thus, in the absence of expr­ess pr­ovisions, the cancellation of licence from the state licensing authorities consequently leading to cancellation of ce­ntral licence is confusing.

The issuance of draft ru­l­es signals the positive intent of the government to cater to demands on the online pharma industry. Considering th­at India is seeing significant growth in e-commerce with increasing internet penetrat­i­on, arming e-pharmacies wi­th the right regulatory env­i­ronment would be a game-c­hanger for the pharma sector and will ensure welfare of public at large. A clearly dr­a­f­t­ed set of rules governing sa­le of drugs by e-pharmacy, de­void of ambiguities, would go a long way in ensuring it.

 (Shantanu Jindel and CV Srikant, J Sagar Associates partners, also contributed to this write-up)