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.
(CV Srikant, Senior Associate and Shantanu Jindel, Principal Associate at J Sagar Associates also contributed to this write-up).