Online pharmacy players are opposed to any kind of regulatory or licensing framework and are likely to take up the matter with the ministry of health which has recently come out with a draft Bill to regulate such entities. One of the points likely to be highlighted by the online players is that they are intermediaries who work with wholesalers and distributors, who are already licensed, so why repeat the process.

Currently, there’s no law which regulates online sale of medicines by the likes of PharmEasy, NetMeds, Tata 1MG and many others. However, these players follow sales and safety protocols listed under the Drugs And Cosmetics Act (1940) regarding prescriptions, safety, and quality standards. The Drugs And Cosmetics Act, 1940 mandates only brick-and-mortar pharmacy stores to acquire a licence for selling medicines offline and does not address online sales.

On July 9, the health ministry put out a draft Bill titled ‘Drug, Medical Devices, and Cosmetics Bill-2022’ that for the first time addresses online pharmacies. The Bill stated that no person or entity should ‘stock or exhibit or offer for sale, or distribute, any drug by online mode except under and in accordance with a licence or permission issued in such manner as may be prescribed’.

Although the outlines of the licensing regime haven’t been discussed in length in the current draft Bill, it does mention that Central government would consult with industry players and other advisories before coming out with a larger set of guidelines for e-pharmacies. Apart from allopathic drugs, the draft Bill also looks to license the sale and stocking of Ayurvedic and medical devices as well.

Lawyers and policy experts FE spoke to are divided between the introduction of a licensing regime as some believe that a self-regulatory regime would be sufficient for the sale of medicines online.

Mayank Mehta, partner of Pioneer Legal said that online pharmacies currently operate as intermediaries or as a platform that connects sellers with buyers. He added that most online pharmacies work with large-scale distributors or wholesalers, who sell their inventory through the platform, and operate as a marketplace hence a licence isn’t required under current laws.

“Most online pharmacies work just like e-commerce marketplaces such as Amazon which does not stock or sell its own inventory. It helps other sellers and distributors to find a new channel of sales. But online pharmacies have group or associate companies who stock, distribute and sell drugs, and some of them create proxy selling entities to buy and stock medicines…This has caught the attention of the government and hence the ministry is now coming hard on them,” Mehta said.

Experts, however, say that a licensing regime is still unlikely to hamper the barrier of entry for new start-ups or create challenges for expansion for existing online pharmacies unless the licensing regime is introduced state-wise.

“Most Indian licensing norms are framed territory-wise, and even the current licensing norms for offline chemists require shops to get a retail drugs licence from the state government. Online pharmacy start-ups usually ship country-wide and hence the new licensing regime that will be put in place for such business models under the proposed new law should provide for a pan-India licence,” said Vinod Joseph, partner, Argus Partners (Solicitors & Advocates).

Earlier, the retail pharmacy lobby and a few policy analysts in the past had raised questions about safety, lack of dosage instructions, tracking of prescriptions, and potentially unregulated sale of prescription drugs through online mediums. But Joseph of Argus partners believes that online pharmacies can maintain databases of their sales records and users’ prescriptions to better comply with government norms and audits.

“The existing brick and mortar chemist stores aren’t exactly very compliant and it’s in fact very easy to buy drugs offline without a prescription in the country. Start-ups offering online sales can keep a database record for any future audits which can easily track the identity of patients, prescription records, location, and the doctor prescribing the medicine,” added Joseph.

Apart from e-commerce marketplaces, online pharmacies benefited largely from Covid-induced lockdowns as many Indian were compelled to buy essential drugs online. As demand for online pharmacies shot-up so did investments into the segment. API Holdings, which owns an umbrella of brands, including online pharmacy brands PharmEasy, had filed draft papers to raise Rs 6,250 crore through its proposed IPO in November 2021. Prior to this, PharmEasy was valued at $5.6 billion (Rs 42,197.79 crore) in a Rs 2,635.22-crore pre-IPO round in October 2021.

A report by KPMG-FICCI in April, suggested that the online pharmacies market has grown at an annualised rate of 40-45% due to increasing internet connectivity compounded with high demand for e-commerce post-Covid. The report also said that the online pharmacy market size was above $50 billion in 2020-21 with a potential to touch $130 billion by 2030.


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