Prescribe the right regulation

By K Narasimhan

During the nationwide lockdown, there was an approximate 2.5x growth in the number of households using e-pharmacy services. Big players are now moving towards sector-consolidation in a bid to capture a market expected to be worth $2.7 billion by 2023. However, even with the obvious advantages, e-pharmacies have been marred by controversies.

The primary reason for this is the lack of regulatory clarity. Pharma sales in India are regulated by Drugs and Cosmetics Act, 1940 (DCA) and the Drugs and Cosmetics Rules, 1945 (DGR). The legitimacy of e-pharmacies in India currently hangs by the thin thread of a notice issued by Drug Controller General of India (DCGI) in December 2015, which stated that the DCA and DGR do not distinguish between online and offline sales and that provisions of DGR have to be followed in both cases.

The government, in 2018, made a draft amendment to the DCR, to provide specific rules for online sale of medicines. While the draft rules for e-pharmacies were welcome , certain points need reconsideration.

The draft rules define e-pharmacies only as a business of distribution, sale, stock, or exhibit of medicines through online portals. Presently, e-pharmacies follow three major models: Marketplace online pharmacies, which provide an online marketplace to brick&mortar pharmacies; inventory-led e-pharmacies, where a company procures medicines directly from brands and stocks it; and franchise-led e-pharmacies. The present definition clearly includes franchise and inventory-based online pharmacies, but is unclear about marketplace e-pharmacies.

The definition leaves out major players in the industry. The government should explicitly include “facilitators” of online sale of drugs in the definition, to provide equal opportunity to all e-pharmacies in India. This will remove ambiguity in the interpretation of the rules and attract investment.

The definition of online pharmacies also creates ambiguity for applicability of other provision of the draft rules. For instance, the rules require an online pharmacy to supply medicines against a cash or credit memo generated through the e-pharmacy portal, and stipulates that such memos should be maintained by the e-pharmacy registration holder. This provision ignores the different business models of e-pharmacies, with some platforms merely acting as facilitators, without actually engaging in transactions.

Another significant issue with the draft rules is the distribution of powers between the Centre and states. While e-pharmacies will be granted registrations by a central licensing authority, they would also have to get licences from the state governments. Furthermore, if the licence of an e-pharmacy gets cancelled by two states, then its registration will be suspended by the central authority. This requires e-pharmacies to juggle multiple central- and state-compliance needs for maintaining registration. The government should resolve this and explore centralised registration and monitoring.

In addition to these, certain requirements of information disclosures by the e-pharmacy should also be reconsidered. Real-time production of vast amounts of dynamic data on the constitution of seller firms, details of the logistics service providers, names of the registered pharmacists may be tedious and counter-intuitive. However, tracking these data points and enabling accountability is important, and these should be available with the marketplace for reproduction when necessary.

The present situation does not encourage growth. There have been erratic bans by courts and other authorities. Certain actors have even called e-pharmacies illegal businesses. The regulatory black hole not only discourages e-pharma start-ups but also creates an unpleasant investment climate.

The author is Advocate, Madras High Court