India’s budding e-pharma industry has just received a sickening blow

Hard pill to swallow.
Hard pill to swallow.
Image: Reuters/Brendan McDermid
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Indians can’t purchase medicines online legally anymore.

On Dec.12, the Delhi high court ordered a complete ban on online pharmacies across the country with immediate effect, asking the central government to implement the order.

The court order is in response to a petition which stated that the sale of drugs and prescription medicines online was illegal and without any mandate of law and, therefore, a health risk:

Unlike common items, drugs are highly potent and its misuse or abuse can have serious consequences on human health, not just for the one person consuming it but for humanity at large as some drugs can be addictive, habit-forming and harmful to the body. A large number of children/minor or people from uneducated rural background use the internet and can be victims of wrong medication while ordering medicines online.

India’s pharmacy laws are derived from the Drugs and Cosmetics Act, 1940, Drugs and Cosmetics Rule, 1945, and the Pharmacy Act, 1948. These laws predate the advent of online commerce in India, leaving the business out of the purview.

Despite the order, most e-pharmacy portals are currently operational. “We have come to know about the court ruling through the media and we are awaiting a copy of the order,” Pradeep Dadha, founder and CEO of Netmeds, told Quartz in a statement. Tushar Kumar, founder and CEO of Medlife, said, “We have to yet see the order copy…We continue to operate legally with the valid licenses in place.”

The ban comes at a time when the government has issued draft guidelines which recommend regulating the online pharmacy industry and licensing the players.

“The fact that the government has come out with draft regulations means it is not keen on killing it,” Sanchit Vir Gogia, founder and CEO of Greyhound Research, said. “It is a regular course of evolution of an industry which is very nascent. It is important to weed out the unruly players.”

Ebb and flow

Over the past two years, under the All India Organisation of Chemists and Druggists (AIOCD) banner, over 800,000 traditional medical shops have been protesting against the proliferation of e-pharmacies.

It is estimated that more than 250 online pharmacies have sprung up in India in recent years, cornering Rs1,000 crore ($140 million) of the Indian drug market. The country’s overall drugs and medicines retail market is worth over Rs1.2 lakh crore annually.

Online pharmacies, just like other e-commerce business models, offer deep discounts of up to 60%, besides providing value-added services and free home delivery.

All this has evoked keen interest among investors.

In September, Chennai-based online pharma chain Netmeds raised $35 million in a series C funding from existing investors and medicine distributor and importer Daun Penh Cambodia Group (DPCG). The same month, online healthcare and pharma aggregator Pharmeasy also raised $50 million from Eight Roads Ventures India, the proprietary investment arm of Fidelity International. Subscription-based online pharmacy platform LifCare in July raised $11 million from SAIF Partners, Nexus Ventures, and Infrastructure Leasing & Financial Services Limited (IL&FS).

The government, too, is not completely averse to the business.

According to the draft guidelines that are yet to be formalised, e-pharmacies have to register for a licence with the Drug Controller General of India (DCGI), which will be valid for three years. They do not allow e-pharmacies to sell narcotic drugs, tranquilisers, and Schedule X drugs, and neither are they allowed to advertise.

These draft guidelines are along the lines of laws in the US, where the regulators monitor e-drug sales. The National Association of Boards of Pharmacy (NABP), the apex pharmacy body in the US, gives registration and certification for e-pharmacies and they have to display the certification logo on their website.

The opposition

The traditional pharmacists’ and government’s contention has been that if such websites are not regulated, fake, expired, contaminated, and unapproved drugs may find their way into consumers’ hands.

In November, the Madras high court had granted an interim injunction restraining the online sale of medicines till further orders. This order was based on a plea from the Chennai-based Tamil Nadu Chemists and Druggists Association.

Since 2015, a number of other state governments have cracked down on online drug sales. For instance, in 2016, Maharashtra’s Food and Drug Administration filed cases against several such e-retailers, including MeraPharmacy, mChemist, and Pharmeasy, besides their offline partners. It also made a case against former Snapdeal CEO Kunal Bahl and the company’s directors for selling prescription drugs via e-commerce.

Karnataka’s Drugs Control Department canceled the licences of all online pharmacies in the state the same year, while the Gujarat FDA raided Prowisor Pharma, a Surat-based online pharmacy.

Although the central government has taken the lead in changing regulations, even in the face of heavy opposition from traditional pharmacists, the constant flip-flop in the industry in the past two years has taken a toll.

For one, funding saw a sharp fall, with just $28.45 million invested in the sector in 2016, compared to $62.20 million in 2015, according to data sourced from Tracxn. Zigy.com, another online pharmacy founded in 2015 by an ex-Infosys director and ex-CEO of iGate Corp, Phaneesh Murthy, ran into financial trouble after battling irregular regulations. The online pharmacy platform stopped operations in February 2017.