The rise of the digital economy has led to a fast-paced change in the business landscape which the policy can’t keep pace with. India’s online pharmacy sector, which has seen a rapid spread in the past few years, is now hanging in a regulatory limbo. The promise of immediate scaling up in the digital business has led to a spawning of online pharmacies in India. But aggressive sales models and lack of clarity on regulation have jeopardised their future. The budding sector now runs the risk of getting banned.

Online pharmacies not only provide easy access to common medicine but also to critical illness medicines which are not available all the time and everywhere with offline chemists. When most of the commerce is going digital, medicine too will be sold online. But online sale of medicine has raised several concerns, especially in the absence of any regulation specifically for them.

India’s online pharmacy segment is backed by some of the world’s top investors, including Tiger Global, Sequoia Capital, Temasek and Prosus, in addition to having large conglomerates such as Reliance Industries and Tata group investing in companies such as NetMeds and 1mg.

The Covid-19 pandemic triggered a consolidation in the sector and saw the entry of large players such as Reliance Industries and the Tata Group, which picked up Netmeds and 1mg, respectively. Amazon, Flipkart and Apollo are other big names in this sector which has close to a dozen large pharmacies. Early this year, Reliance Retail made a foray into standalone pharmacy stores under its subsidiary, Netmeds. Less than two years ago, two big online pharmacies, Tata-owned 1mg and its rival PharmEasy, had planned to go offline to have an omni-channel presence to widen their user base.

The concern around online pharmacies
A chemists’ organization has written to the Cabinet Secretary, urging him to intervene and ban online pharmacies for violating norms and putting people’s lives at risk. Online pharmacies are accused of predatory pricing, compromising data privacy, unrestrained and irrational use of prescription drugs, and unlicensed sale of drugs.

Early this month, medicine retailers and distributors in Delhi urged the state government to issue an order restraining online, and many offline, pharmacies from offering discounts. They claimed that these pharmacies advertise heavy discounts ranging from 10% to 80%. The practice of heavy discounting is “unethical” and may lead to influx of substandard and spurious medicines, “which in turn can play havoc with the lives of the patients”, they said.

Online pharmacies have been accused of providing easy access to narcotic drugs, pregnancy termination kits, antibiotics and sedatives. Another concern is that a large number of children use the Internet and they could be victims of wrong medications. Many online pharmacies collect area-wise data related to the consumption of medicines which increases the risks involved with patient safety. However, the main issue is the sale of medicine by online pharmacies without license. Is a ban in the offing?
The chemists demand a ban on online pharmacies for selling drugs without license. But existing drug laws do not mention online pharmacies so they cannot be licensed or regulated under them.

The Ministry of Health and Family Welfare issued the draft amendment to the Rules, 1945, for inclusion of the rules to regulate online sale of drugs vide its August 28, 2018 notification and had called for objections and suggestions from all stakeholders. But a chemists body challenged the ministry’s notification, claiming that the draft rules were being pushed through in serious violation of the law, ignoring the health hazards caused due to sale of medicines online without proper regulations. In December 2018, the Delhi High Court, in an interim order, had stayed the sale of drugs without licence by online pharmacies while hearing the chemists body’s PIL.

The Drugs Controller General of India (DCGI) in February this year issued show-cause notices to 20 e-pharmacies, including Tata 1mg, Amazon, Flipkart, NetMeds, MediBuddy, Practo, and Apollo, over the online sale of drugs in alleged violation of norms. The notice stated that the DCGI had forwarded the order to all state and Union Territories in May and November 2019 and again on February 3, 2023, for necessary action and compliance. The regulator said the online platforms were doing the business in contravention of the Drugs and Cosmetics Act, 1940.

The Delhi High Court recently granted six weeks to the Centre to inform it about the outcome of consultations and deliberations with stakeholders on draft rules to regulate e-pharmacies. The court made it clear that the pendency of the present matters will not come in the way of the Union of India in taking action against the persons who are violating the interim order dated December 12, 2018.

The government is preparing a new law to replace the existing drug regulations. The New Drugs, Medical Devices and Cosmetics Bill, 2023, which seeks to replace the existing Drugs and Cosmetics Act of 1940, is expected to have stringent norms for online pharmacies. The revised draft, which has been sent for inter-ministerial consultation, states, “The central government may regulate, restrict or prohibit the sale or distribution of any drug by online mode, by notification.” A group of ministers had earlier stated that they were in favour of banning online pharmacies.

What online pharmacies say
Online pharmacies have claimed that despite multiple communications being sent by their representatives seeking audience with the health ministry on this issue, there has been no response. Industry sources told ET in March that there is an impasse between the government and industry on several matters. “The government has done its own analysis of the sector and its business model, and companies are looking to have conversations,” the sources said. Industry executives said health ministry officials had met select executives of some of the top e-pharmacies prior to issuing show-cause notices.

In written representations to the government sent following the show-cause notices, online pharmacies argued that the notices served by the DCGI to companies was “a cause for anxiety” for the industry. “The retail pharmacy sector needs a lot of supply chain, technology and access solutions to make healthcare delivery more efficient and affordable, and a prerequisite for this is a simple and clear regulatory pathway for innovation to thrive in this important space,” a Ficci communication read. “The recent show-cause notice may cause regulatory uncertainty at ground level in several states. Hence, there is a need for direct engagement/dialogue between sectoral players and relevant government stakeholders to avert any further state-level market disruptions,” it added.

A few days ago, API Holdings, the parent of PharmEasy, sought the Union Health Minister’s intervention for quick notification of the draft rules to remove regulatory uncertainty regarding their existence after the DCGI issued show-cause notices.

“We seek your support towards the quick notification of the draft e-pharmacy rules and the New Drugs, Medical Devices and Cosmetics Bill 2022 to remove any uncertainty and to harmonise all the existing regulations under which the e-pharmacy is already compliant,” the letter said.

In March this year, a parliamentary committee urged the Ministry of Health and Family Welfare to notify the draft e-pharmacy rules. It said it was “appalled” that the rules had not been finalised till date. The committee, headed by Congress leader Abhishek Manu Singhvi, said while tabling the report on ‘Promotion and Regulation of E-Commerce in India’ that undue delay in adopting a definitive regulatory framework results in uncertainty, which is not conducive for the fast-paced digital markets. It recommended that the draft e-pharmacy rules be finalised and implemented without further delay.