Tough Times Call for Tough Measures: The Immediate Need to Regulate E-Pharmacy Industry
“I think the biggest innovations of the twenty-first century will be the intersection of biology and technology.”
– Steve Jobs, as told to Walter Isaacson
In the era of digital world where everything is available at your doorstep, e-pharmacy is a new ray of hope to the e-commerce industry, the present economy and is in sync with the Indian Government initiative of Digital India. The term ‘e-pharmacy’ means “the business of distribution or sale, stock, exhibit or offer for sale of drugs through a web portal or any other electronic mode.”[i] There are two models that are frequently adopted in this arena i.e. inventory-based model (e-pharmacy having their own licensed pharmacies) and the marketplace model (e-pharmacy acting as a facilitator between licensed pharmacies and consumers).[ii]
India is one of the fastest-growing markets in Asia for e-pharmacy and according to EY, a leading consulting firm in its report ‘E-pharma: delivering healthier outcomes’, e-pharmacy market is estimated to reach US$18.1 billion by 2023 as compared to US$9.3 billion in 2019 at a Compound Annual Growth Rate of 20%.[iii]Economic Times reported that a staggering growth of 63% is predicted for e-pharmacy sector and Prashant Tandon, CEO and founder of 1mg (an e-pharmacy company) stated that the reason behind growth is consumer needs and their appreciation of a better model of access through these times of pandemic.[iv]
There are approximately 282[v] e-pharmacy start-ups in India, including the leading players such, Netmeds, Medlife, 1mg, mChemist, PharmEasy and Myrameds.[vi] The growth in e-pharmacy can also be attributed to various factors including but not restricted to, rise in population, internet penetration and smartphone ownership, cost-effectiveness, easy interface, access to web-based services and delivery tracking system.[vii]
Intention of the Legislature
There has been a constant tussle about the fact that the e-pharmacy hasn’t been recognised by the government and their modus operandi is totally against the Drugs and Cosmetics (DC) Act, 1940, the Drugs and Cosmetics Rules, 1945 and the Pharmacy Act, 1948 which would be an incorrect approach to address the issue. The efforts to self- regulate this sector was started by the formation of Indian Internet Pharmacy Association (IIPA) now renamed as Digital Health Platforms (DHP) in 2015.[viii] The Government recognised the Code of Ethics by DHP and is working in close proximity with these platforms to link Aadhar UID with prescriptions to promote genuineness of the document. Additionally, e-pharmacies also promote the government’s aim to provide accessible healthcare through Jan Aushadhi Program whose mission and vision is to promote accessibility of quality generic drugs at affordable prices.[ix] Since e-pharmacies sell drugs approximately at 30% cheaper rates due to their lower supply chain and inventory management costs it will help the rural population to benefit with quality healthcare at affordable prices.[x]
The intention of the government to regulate this sector can formally be traced through its efforts to recognise and regularise the legitimate players in the industry. In 2018, the Ministry of Health and Family Welfare in consultation with Drugs Consultative Committee and Drugs Technical Advisory Board notified the ‘Draft Rules’ (DRs) and recommended that the DRs should be finalised after considering the suggestions and comments of stakeholders. Thus, the addition of Part VI B- ‘Sale of drugs by E-pharmacy’ has been proposed to be added to the DC Rules.[xi] Since the DRs are yet to come in force, the legal status of both the models of e-pharmacies will continue to be governed under the Information Technology Act, 2000[xii] (IT Act) under the concept of an intermediary.[xiii] Additionally, e-pharmacies having an inventory-based model (like Medlife) needs to have a license under DC Act[xiv] and its Rules[xv] as they have their own pharmacy whereas e-pharmacies with marketplace model (like PharmEasy) should ensure that they engage only with those pharmacies that have fulfilled the licensing requirements under the same. Moreover, recently due to Covid-19 crisis, the government came up with interim notification of ‘Doorstep Delivery Notification’[xvi] which will further ease out the way for operations of e-pharmacy and recognise their true contributions to the society.
Need for Regulatory Framework
The demand for delivery of medicines has clocked 10-15% spike in the cities due to Covid-19[xvii] and the need for having a strong and clear regulatory pathway for e-pharmacy is the need of the situation. The benefit of e-pharmacy over physical sales is that every part of the transaction under e-pharmacy can be tracked and recorded from the inception of placing order till its delivery thereby ensuring efficacy, transparency and reliability in delivering these items. If the medicines are prescription drugs (i.e. drugs listed under Schedule H, H1 of the DC Rules),[xviii] sales under e-pharmacy are approved after uploading a valid prescription. In contrast, under physical sales through brick and mortar shops, most of the pharmacists sell the drugs without prescription or invoice in return.[xix]
E-Pharmacy, despite being a non-regulated sector has been able to garner huge amounts of funding.[xx] This conclusively determines the investor’s aspirations and indulgence in this sector and the possibility and vision to make the future of Indian e- pharmacy bright. The lack of a regulatory framework in the e-pharmacy sector has led to nationwide strikes and filing of unnecessary litigations. Recently, Delhi[xxi] and Madras High Court (HC)[xxii] questioned the legitimacy of e-pharmacy but soon after Madras HC vacated its order and directed the government to come up with regulations expeditiously.[xxiii]
E-Pharmacy sector founders and CEO’s claims that their model is not illegal and they operate under the self-regulated Code of Ethics of DHP.[xxiv] Just because e-pharmacy sector is not regulated does not mean their modus operandi is illegal. Also, when it comes to the compliance of legal provisions, the sector does not deal with any kind of drugs under the category of narcotic drugs and psychotropic substance as specified in Narcotics and Drugs Psychotropic Substances Act, 1985 and under Schedule X of the DC Rules.[xxv]
Taking into consideration the concerns regarding data privacy and its transmission, there is a conflict between the proposed Personal Data Protection Bill, 2018 (PDP Bill) and the much anticipated Digital Information Security in Health Care Bill, 2018 (DISHA).The PDP Bill allows cross-border flow of the health data on the grounds of emergency services while DISHA does not provide for any such localisation of the health data which may lead to regulatory confusion and data privacy issues.[xxvi]Since e-pharmacies deal with large amounts of data in daily transactions, ambiguity concerning disclosure requirements, transmission and storing this data can hinder the growth of the sector to a large extent. Therefore, any interpretation should only be governed by balancing the safety interests of patients without severely affecting the capabilities of e-pharmacy industry. Moreover, the e-pharmacy industry is rooting for regulations to come in place so that the recognition and contribution of legitimate players can be acknowledged to enhance the clarity and improve the quality of players in the market.
Where there are so many compliances of laws, there is no modicum of doubt that proper regulations will significantly curb e-pharmacies who along with accomplice of offline chemist shops indulge into unethical practices.[xxvii]Therefore every effort should be ensured, which is a step ahead for the regulation of e-pharmacies, which will have their model duly registered under the Central Licensing Agency, a licensing authority appointed by the Union Government under the DC Rules wherein their operation will be monitored by licensing authority to ensure their functioning according to prescribed rules and regulations.
Although the DRs have been put into the picture, there are various challenges that the e-pharmacy sector is facing hurdling its way to the growth. The problem relating to accessibility of medications to the rural population due to lack of proper protocols, the debate over production of valid prescription in compliance with Section 4[xxviii] and Section 5[xxix] of the IT Act which talks about electronic records and signatures respectively, counterfeiting of medicines, data privacy issues still persists.
There is currently no system in place to verify whether the prescription submitted while ordering medicine is genuine or fraudulent.[xxx] Due to lack of regulatory measures, the problem with regards to fake doctors prescribing medicines over a call and issuing a forged prescription, an online platform selling medicines without getting registered or following the basic code of conduct still subsists. The DRs have also raised concerns with respect to FDI norms as the DRs have not distinguished between the inventory-based and marketplace models thus leading to predatory pricing[xxxi]and licensing requirements as to whether there will be a uniform licensing system or each state will have their own licensing rules for their operations.[xxxii] The authors are of the view that final rules and control regulation should specifically deal with the issue to provide legalisation and comfort to e-pharmacies and should provide them with means to expand their business without any hurdles.
The present e-pharmacy sector in India showcases a lot of opportunities. However, it is at a nascent stage and regulatory measures and guidelines of establishment, registration and control will help the industry to mature and align with the vision of India’s government campaigns. In a country where access to medicine is seen as a luxury, e-pharmacy industry will immensely help in the development of the e-health market by making medicines available in the remote and rural areas.
The uncertainty in the industry due to lack of regulations hampered the effective growth of the e-pharmacy but as the government is actively addressing the issue through DRs, policies and campaigns, one can hope that this positive outlook and support will help the industry to sustain and thrive in future. Progressive changes taken in public interest are beneficial for all, regulators, innovators, investors and public at large.
Some of the measures to make the industry self-sufficient and robust that can be taken into consideration include an introduction of a nation-wide framework for ‘Electronic Health Records’ where the healthcare data used by companies can be put in one place reducing the concerns over privacy issues. The development of a comprehensive list of medicines can also be prepared under which only the medicines in the list will be permitted to be dispensed via online platforms. Moreover, awareness campaigns for increasing digital literacy and its intersection with essential health services to the weaker sections of the society can be carried out.
The government can also engage with foreign jurisdictions to adopt the successful measures like issuance of ‘E-prescriptions’ which is directly issued by pharmacists through electronic transmission as practised in the USA, usages of which reported reductions in misuse of prescription by patients. Further, the government can also come up with a framework where Indian doctors can provide medical guidance and services to patients situated in countries where there is a need for healthcare services. A separate license registry for e-pharmacy companies can be created, where a logo and registration number can be used to verify the regulator’s website as adopted by the European Union for its member states.
Interim regulations for the sale of medicines by e-pharmacy are the need during the current crisis, and then revised regulation and legislation can be enacted after the aftermath of the pandemic. E-pharmacy can act as a catalyst that will enable genuine prescription drugs to be available to every person in each corner of India.
[i]Draft E-pharmacy Rules, Draft GSR 817(E), Department of Health and Family Welfare under the Ministry of Health and Family Welfare (Aug. 28, 2018).
[ii] E-Pharmacy in India: Last mile access to medicines, Indian Bar Association & Frost & Sullivan available at https://www.indianbarassociation.org/wp-content/uploads/2019/05/E-Pharmacy-in-India-Last-Mile-Access-to-Medicines_v6.pdf (last accessed on May 5, 2020).
[iii]Indian e-pharma market poised to touch US$2.7 billion by 2023: EY, Economic Times HealthWorld(May 29, 2019) available at https://health.economictimes.indiatimes.com/news/pharma/indian-e-pharma-market-poised-to-touch-us2-7-billion-by-2023-ey/69557064(last accessed on May 5, 2020).
[iv]Garima Bora, Unclear regulations on e-pharmacies may hinder investments: 1mg’s Prashant Tandon, ET Rise (Jan. 27, 2020) available at https://economictimes.indiatimes.com/small-biz/startups/newsbuzz/unclear-regulations-on-e-pharmacies-may-hinder-investments-1mgs-prashant-tandon/articleshow/73652797.cms (last accessed on May 5, 2020).
[v]Have e-pharmacies found the growth pill?, The Economic Times (Nov. 5, 2017) available at https://economictimes.indiatimes.com/small-biz/startups/have-e-pharmacies-found-the-growth-pill/articleshow/61515197.cms?from=mdr (last accessed on May 6, 2020).
[vi]Alnoor Peermohamed, Medlife acquires Myra, to expand express medicine delivery service, ETtech (May 6, 2019) available at https://tech.economictimes.indiatimes.com/news/startups/medlife-acquires-myra-to-expand-medicine-delivery-service-to-22-cities/69192602 (last accessed on May 7, 2020).
[vii]E-pharma growth, supra note 3.
[viii]Sunny Sinha, Know all about the Electronic- Pharmacies in India,Pharmatutor, available at https://www.pharmatutor.org/articles/know-all-about-the-e-pharmacies-in-india (last accessed on May 8, 2020).
[x] G Naga Sridhar, Drug Prices to get cheaper, thanks to e-pharmacies Jan Aushadhi, BusinessLine, available at https://www.thehindubusinessline.com/companies/drug-prices-to-get-cheaper-thanks-to-e-pharmacies-janaushadhi/article29522278.ece#:~:text=Both%20generic%20drug%20outlets%20as,chain%20management%20and%20inventory%20management, (last accessed 10 May 2020).
[xi]Ashwin Sapra, Medicines in Your Mail: The India Regulatory Story, India Corporate Law (Sept. 25, 2018) available at https://corporate.cyrilamarchandblogs.com/2018/09/medicines-mail-india-regulatory-story/ (last accessed on May 10, 2020).
[xii]Information Technology Act, 2000, ss. 2(w).
[xiii]Amaninder S. Dhillon, Is ERx the missing link of E-Pharmacy jigsaw puzzle?, ET Heath World (Feb. 27, 2020) available at https://health.economictimes.indiatimes.com/news/pharma/is-erx-the-missing-link-of-e-pharmacy-jigsaw-puzzle/74334778 (last accessed on May 9, 2020).
[xiv]The Drugs and Cosmetics Act, 1940, ss. 18.
[xv]The Drugs and Cosmetics Rules, 1945, Rule 61.
[xvi]Dr. Milind Atnani, Darren Punnen, et al., Digital Health in India: Legal, Regulatory and Tax Overview, Nishith Desai Associates (April, 2020), available at http://www.nishithdesai.com/fileadmin/user_upload/pdfs/Research_Papers/Digital_Health_in_India.pdf (last seen on May 11, 2020).
[xvii]TNN, Orders at e-pharmacies see bumper surge, The Times of India (May 5, 2020) available at https://timesofindia.indiatimes.com/business/india-business/orders-at-e-pharmacies-see-bumper-surge/articleshow/75544083.cms (last accessed on May 14, 2020).
[xviii]Prescription drugs, supra note 10.
[xix] E-Pharmacy in India: Last mile access to medicines, Indian Bar Association & Frost & Sullivan available at https://www.indianbarassociation.org/wp-content/uploads/2019/05/E-Pharmacy-in-India-Last-Mile-Access-to-Medicines_v6.pdf (last accessed on May 8, 2020).
[xx]Investment perspective, supra note 15.
[xxi]Dr. Zaheer Ahmed v. Union of India and Ors., W.P.(C) 11711/2018.
[xxii] Tamil Nadu Chemists and Druggists Association v. Union of India and Ors., W.P. No. 28716/2018.
[xxiii]Digital Health, supra note 15.
[xxiv] Code of ethics, supra note 4.
[xxv] Usha Sharma, E-pharmacies: Waging a Battle for Survival, Express Pharma (Dec. 12, 2018) available at https://www.expresspharma.in/amp/cover-story/e-pharmacies-waging-a-battle-for-survival/(last accessed on May 11, 2020).
[xxvi]Abhinav Saikia & Aparajita Bharti, E-Pharmacy rules: Clear regulatory direction needed, The Financial Express (Dec. 13, 2019) available at https://www.financialexpress.com/opinion/e-pharmacy-rules-clear-regulatory-direction-needed/1792529/ (last accessed on May 12, 2020).
[xxvii]Compliances and regulations, supra note 1.
[xxviii]Information Technology Act, 2000, ss.4-Legal recognition of electronic records- Where any law provides that information or any other matter shall be in writing or in the typewritten or printed form, then, notwithstanding anything contained in such law, such requirement shall be deemed to have been satisfied if such information or matter is-
(a) rendered or made available in an electronic form; and
(b) accessible so as to be usable for a subsequent reference.
[xxix]Information Technology Act, 2000, ss.5-Legal recognition of [electronic signatures]-Where any law provides that information or any other matter shall be authenticated by affixing the signature or any document shall be signed or bear the signature of any person, then, notwithstanding anything contained in such law, such requirement shall be deemed to have been satisfied, if such information or matter is authenticated by means of [electronic signature] affixed in such manner as may be prescribed by the Central Government.
[xxx]ET Bureau, Do you buy medicines online? Know these risks, The Economic Times(Jun. 13, 2017) available at https://economictimes.indiatimes.com/magazines/panache/do-you-buy-medicines-online-know-these-risks/articleshow/59119019.cms?from=mdr (last accessed on May 15, 2020).
[xxxi] FDI Norms, supra note 25.
[xxxii]Licensing requirements, supra note 25.
By Pragya Gupta and Anunay Shrivastava, 5th year students of NMIMS Kirit P. Mehta School of Law, Mumbai. This blog is part of the RSRR Blog Series on Digital Healthcare in India, in collaboration with Nishith Desai Associates.