Dear Health Ministry, Why Should Brick-and-Mortar Facilities Be Compulsory For E-Pharmacies?

The Ministry of Health and Family Welfare (MoHFW) is planning to track the country’s entire drug supply chain using an electronic platform. In a recent public notice, the ministry has proposed that all drug manufacturers, distributors, stockists, wholesalers, retailers, chemists, and e-pharmacists in India would have to mandatorily register themselves on its proposed e-platform to conduct business.

The registered entities would be required to input details relating to their sale and purchases including batch number, quantity sold/purchased, expiry date, etc. Drugs that are listed in Schedule H, H1 and X would be dispensed only against prescription of a registered practitioner. In such cases, additional details like prescribing doctor’s registration number, name and registration number of the dispensing chemist, and quantity supplied would have to be given by the registered entities.

The ministry believes that the platform would be an efficient way of tracking drug sales in the country.

The proposal is expected to propel the central and state drug regulators into modern tracking and tracing trajectory, and ensure that quality drugs are delivered to patients. However, one provision in the notice is worth a re-look: “No sale by e-pharmacy shall be permitted to be carried out by any person or entity unless it has a licensed brick and mortar facility in each of the Licensing Authority’s jurisdiction.”

To understand the issue, we need to understand how e-pharmacies function. The operation of e-pharmacies in the organised space can be classified into two models.

(i) Marketplace model - In this setup, the e-pharmacy plays the role of an aggregator. It only connects the buyers and sellers of medicines. Therefore, the e-pharmacy website empanels licensed chemists and exhibits and sells their products on its website.

(ii) Inventory model - In this setup, the e-pharmacy website owns the inventory of medicines. It is responsible for taking orders, checking for prescriptions, punching the details of the order, and dispensing them to the customers. Outside this space, there are also unorganised and illegal players who flout rules and regulations by dispensing medication without validated prescriptions.

Thus, to come up with a holistic arrangement, in the new proposed regime, for any e-pharmacy to operate:

a) It needs to mandatorily register on the e-platform of MoHFW; and

b) It needs to have a licensed brick-and-mortar facility in each of the licensing authority’s jurisdiction.

Effectively, it means that all marketplace-model e-pharmacies need to shift to an inventory model. One can question: Why is MoHFW interested in imposing the brick-and-mortar requirement on e-pharmacies? The story unfolds as follows.

Backdrop

The backdrop to this story is the fights that erupted between the All India Organisation of Chemists and Druggists (AIOCD) (representing the traditional brick-and-mortar chemist shops) and e-pharmacies.

AIOCD threatened national strikes several times last year to drive the point home that e-pharmacies like www.1mg.com, www.netmeds.com, and www.medplusmart.com were detrimental to the ‘health’ of the society.

AIOCD also alleged that e-pharmacies were grabbing their market share by ‘illicit’ means. They argued that e-pharmacies were promoting self-medication, dispensing medicines without checking for valid prescriptions, and some were even peddling spurious, mis-branded and adulterated drugs.

Meanwhile, some high-profile e-commerce companies like Snapdeal, Amazon and Flipkart came under the regulatory scanner when they were caught flouting the Drugs and Cosmetics Act, 1940 for selling Schedule H, H1 and X drugs without prescription.

The organised players in the e-pharmacy space sensed the brewing trouble and united to form the Indian Internet Pharmacy Association (IIPA) in order to protect their interests. They tried to build their support around organised players in e-pharmacy who, they claimed, were not indulging in any of the alleged rogue practices and were in fact promoting customer convenience, patient privacy, ease of access, and better pricing.

Eventually, the Drug Consultative Committee (a statutory body under the Drugs and Cosmetics Act, 1940) constituted a sub-committee to examine sale of drugs on the Internet. The sub-committee consulted a variety of stakeholders. The table below summarises the list of stakeholders, their position on e-pharmacies, and their views/concerns.

MoHFW’s response to the concerns

At the outset, the move to createan e-platform is a step in the right direction. The e-platform serves to build an overarching vigilance network under the Pharmacovigilance Programme of India (PvPI). PvPI was initiated in 2010 to improve patient and drug safety and reduce risk associated with the use of medicines. The e-platform can be used to monitor detailed online records of vendors, stockists and e-retailers along with other mandatory disclosures.

However, by imposing the requirement to have a brick-and-mortar facility on e-pharmacies, the policy clearly favours the existing shop establishments. The concerns of stakeholders have nothing to do with having a brick-and-mortar facility.

The proposed policy should focus on the key problems. Instead, it creates another layer of the problem that could be detrimental to the growth and innovation in pharmacy retail. To meet the objectives, a principles-based approach must be adopted by the regulator. Similar approaches have been taken under the FSLRC (Financial Sector Legislative Reforms Commission) for formulating guiding principles on consumer protection.

Making the e-pharmacy market work

The state drug regulatory authorities are responsible for issuing licenses for manufacturing of drugs, distribution of drugs, monitoring the quality of drugs, and investigating and prosecuting in case of contravention of legal provisions. While carrying out these functions and exercising their powers, regulatory authorities should be guided by some broad principles.

A suggested approach may be, lowering entry barriers and promoting competition.

Regulatory authorities should promote healthy competition among drug suppliers of all types. MoHFW should set minimum standards for registration and conducting operations that do not discriminate between different types of players in the market, and at the same time, are not restrictive for new entrants.

In principle, the brick-and-mortar requirement for e-pharmacies acts as an entry barrier and imposes an additional cost on existing e-pharmacies that may potentially make their business model economically unviable. In countries like the UK and US, a new entrant is only required to register with the competent authority by providing basic details such as name, contact information, location of registered offices, and particulars of their operations.

Promoting innovation

The state drug regulators should encourage innovation among service providers. Through e-pharmacy and telemedicine, drugs can responsibly and easily be dispensed to consumers who are otherwise difficult to reach. Therefore, technology should be leveraged and regulators should promote and not hamper innovation.This will require amendments and resolving conflicts regarding certain provisions of the Drugs and Cosmetics Act, 1940, and the Drugs and Cosmetics Rules, 1945. It will enable moving towards a secure e-prescription space that would be compliant with legal provisions and allow for more innovations to follow. It would further pave the way for initiatives like e-diagnosis, e-insurance, and tele-medicine.

Protecting the consumer

There is wide information asymmetry in the drugs market. Unless assisted, consumers do not understand what drugs they should consume. The drugs market (comprising over-the-counter drugs, prescription drugs, ayurvedic medicines, nutritional supplements, etc.) is also influenced by information that comes through unverified channels such as marketing and advertising.

Regulators should require drug suppliers to provide maximum disclosures and information to consumers. MoHFW should make it mandatory for drug retailers to comply with a public disclosure policy. For example, internationally, the Online Pharmacy Consumer Protection Act, 2008 provides for e-pharmacies to mandatorily disclose information such as name and address of the pharmacy, contact details, professional degree and license of the pharmacist, and list of states where the e-pharmacy is licensed to dispense medicines.

The advisory functions of the regulatory bodies must include informing the public at large about fraudulent advertisements, fake websites, and e-pharmacies that do not comply with guidelines.

Responsibility of the consumer

Consumers need to take reasonable responsibility for their own behaviour and decisions. In order to ensure that consumers are able to take informed decisions, the regulators can create awareness about safe drugs, how to identify and source quality drugs, etc.

MoHFW should use accreditation, verification, rating and logos to alert and inform the consumer about safe practices and guard against possible frauds. For example, the US-FDA provides a mechanism to communicate to consumers, tips for buying online, health hazards, frauds and scams in drugs, and information about illegal practices by suppliers.

The drug regulatory agency of UK uses ‘EU Pharmacy Logo’ to differentiate between accredited and unaccredited e-pharmacies. In addition, the regulatory authorities can use the e-platform to make public the details of enforcement actions, compliance status of e-pharmacies, and their quality check metrics.

Way forward

Going forward, the issues are primarily of building regulatory capacity for effective monitoring. There has been a growing consensus among various stakeholders that the e-pharmacy model aligns well with the national objectives of using digital platforms and making the nation a single market.

The growth of e-commerce is also said to be complementary to the traditional retail business as there are mutual gains from expanding, collaborating and strengthening businesses by reaching out to customers.

At a time of implementing major policy initiatives such as the Goods and Services Tax (GST), it is appropriate to build a regulatory framework for allowing successful development of the drugs market.

This piece was first published on Ideas for India and has been republished here with permission.