E-pharmacies in India — Regulatory landscape and challenges

Sarthak Sarin (Principal Associate) and Bharat Gupta (Associate), Khaitan & Co, give an insight on the need for better regulations for governing e-pharmacies

The e-commerce sector has grown exponentially over the last decade and has revolutionised the interplay between Internet and commerce worldwide. The growing infiltration of Internet and mobile phones coupled with the intrinsic convenience to indulge in retail activities online indicates that this sector is not only unrelentingly expanding in developed countries but is also contagiously spreading to developing geographies and markets as well.

India is not aloof from this unprecedented growth story. While online travel and ticketing continues to be the predominant driving force behind the growth of this industry in India, the online market for the sale of pharmaceutical drugs in India has (of late) stimulated considerable attention and investments. However, given the sensitive nature of the pharmacy business and the overwhelming layers of the compliance obligations that engulf the various aspects of the sale and storage of pharmaceutical products; the rise of e-pharmacy activities in India has unfortunately been viewed with suspicion by the local regulatory authorities and consequently has been marred by controversies. At the same time, the legal developments in this sector have not kept pace with this new business enterprise and its appears that the existing legal regime (which had been enacted keeping in view the traditional brick and mortar pharmacies) is inadequate to govern e-pharmacies. Some of the key challenges and concerns that arise from the application of the existing legal regime to e-pharmacies are as follows:

1. The license obtained by a pharmacy is pegged to a physical store from where the sale is proposed to take place and/ or where the medicines are proposed to be stored, which physical store is required to meet the prescribed standards of hygiene, temperature control etc. However, as opposed to a sale from a brick-and-mortar store, in case of an online sale of medicines, it is very difficult to ensure that the medicines are being delivered/ sold from the same licensed premises, as the consumer is not physically present to verify this. This in turn raises concerns as to the conditions of the place wherein the medicines could be stocked by an e-pharmacy to manage costs.
2. There is also a risk of the same medical prescription being used multiple times for procuring medicines across different e-pharmacies or medical stores. This is especially a red flag in case of narcotic and psychotropic drugs, tranquilizers, habit forming drugs and Schedule X drugs.
3. Drug sale is regulated by state licensing authorities, which framework is feasible for brick-and-mortar stores, given that they are expected to be approached by the consumers who reside within the vicinity of the location of the stores (and hence within state borders). However, such a model of regulation may not be feasible for e-pharmacies since an online marketplace is accessible from any location or state, without there being any checks or control on cross border sales etc.
4. As e-pharmacies rely upon a home delivery model, there is a possibility of pilferage, loss of potency and degradation of drugs and medicines during transportation to the consumer’s house, especially if they are being transported over long distances or are of certain specification that requires safe handling, cold storage etc.
5. Given the absence of any physical interface between the consumer and a pharmacist, concerns arise in relation to the process of compounding, preparation, mixing or dispensation of drugs by a pharmacist as the customer has no way of verifying if such activities have been carried out by licensed pharmacist and /or have been done as per the prescription.

With the absence of an apposite legal framework coupled with an effective monitoring and enforcement mechanism, neither are e-pharmacies able to secure their footing in the market nor are the consumers fully confident of purchasing medicines online. This has led to e-pharmacies offering deep discounts on their merchandise just to make themselves visible in the market, which practice in turn has triggered an antagonistic response on part of brick-and-mortar pharmacies.

Given these state of affairs, while the regulator had on 30 December 2015 clarified that there was no restriction on the online sale of medicines provided that such sale complied with the existing legal regime, no constructive steps have yet been taken by the government to address the concerns highlighted herein. Nevertheless, the recent news reports suggest that the government will soon be formulating regulations for governing e-pharmacies.  It will be interesting to see how these regulations will address the challenges engulfing this new business enterprise, while balancing the interests between e-pharmacies and the traditional brick and mortar pharmacies.

[The contents of this document do not necessarily reflect the views/ position of Khaitan & Co but remain solely those of the author(s)]