Candlemakers and other people involved in the lighting industry in France petitioned the government to protect them from the unfair competition imposed by the sun, wrote Frederic Bastiat in 1845. Bastiat’s sarcastic observation highlighted the tendency of incumbent businesses to turn to the government for protection from competition.
The government has had about seven years to create meaningful regulations. In 2018, the ministry of health released draft e-pharmacy rules, but it was shelved after being referred to a group of ministers who recommended slamming on the brakes. (SHUTTERSTOCK)
In February, the Central Drugs Standard Control Organisation issued show-cause notices to e-pharmacies over alleged violations of the Drugs and Cosmetics (D&C) Act, 1940. The allegations included transgressions, such as selling controlled narcotic and psychotropic drugs without prescriptions. The notices were apparently prompted by the All India Organisation of Chemists and Druggists, a lobby of over 1.2 million retail pharmacists, which said it would go on a strike if the government didn’t crack down on e-pharmacies.
The D&C Act requires a pharmacist to have a valid licence and a registered premise to safely store and sell drugs. To comply with this, e-pharmacies fulfil online orders through physical outlets, either on their own or with tie-ups with retail outlets. Further, the government noted its concern over patients’ identity and data privacy when they upload prescriptions, and the sale of medicines, especially those under Schedule H and Schedule X, without prescriptions. The final point of concern, which perhaps played a disproportionate role, is one of political economy — e-pharmacies offer discounts and concessions, threatening retail businesses. E-pharmacies have been in existence since 2016; the industry has grown to about $41 billion in 2021 and is expected to grow to $65 billion by 2024. They are expanding to new markets, increasing consumer choice and convenience while reducing prices and creating jobs and livelihood.
The government has had about seven years to create meaningful regulations. In 2018, the ministry of health released draft e-pharmacy rules, but it was shelved after being referred to a group of ministers who recommended slamming on the brakes. Since then, multiple court orders and a parliamentary standing committee report have asked for an update on the regulation, only to be met with silence. Without clear rules, online drug stores work according to the D&C Act, 1940; D&C Rule, 1945; Pharmacy Act, 1948; and IT Act, 2000.
To be sure, some genuine concerns about e-pharmacies need to be addressed by nuanced yet firm regulations. Insisting on registration and a licence for practice is a fair ask, but this can be done at an all-India level, allowing for the inter-state movement of drugs. Sales without prescriptions are a problem, even in physical retail stores. The chance of e-pharmacy dispensing medicine without a prescription is lower since you have to upload the prescription online, and the pharmacy keeps a record of it. Unlike physical retailers who rely on paper-based prescriptions, online pharmacies rely on electronic records, which are easier to store and track. Online records of prescriptions can help in the case of recall of a bad batch of a drug. Adverse reaction reporting of the drugs is also easier. Anonymised data collected by e-pharmacies can be used to analyse and scrutinise drug usage in a population. For instance, we can track antibiotic (ab)use in a district and use that to tackle antimicrobial resistance.
Security and privacy of patient data are areas of concern. But players are operating in a policy vacuum as the personal data protection bill is still waiting to see the light of day. Until then, the fear of online leaking of patient data or the misuse of personal information, when the pharmacist asks you for a phone number to provide discounts, will remain.
The online and offline worlds are co-evolving. E-pharmacies are vertically integrating and opening physical stores through which they want to service online orders, and physical retailers are taking orders via WhatsApp and providing home delivery. The next step of evolution could be an aggregated marketplace for pharmacies, where different retailers can be listed.
Finally, enforcing bans on new service providers for fear of market dominance and protecting the incumbents is a tried and failed move. We have been on this path before, for instance, with e-commerce and cab aggregators. We tried to retrofit anachronistic policies onto new technologies, which threatened to slow down the growth of the industry, hamper innovation and reduce consumer welfare. The government would best help consumers by ignoring the candlemaker’s petition.
Anupam Manur and Harshit Kukreja are researchers at the Takshashila Institution The views expressed are personal
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