Online Pharmacy in India, What Laws are saying to Ecommerce Companies

There is lot of material on internet regarding legality of online pharmacies in India. Most of this material is written by amateurs who do not have much understanding of Indian Law. Also, ‘online pharmacy’ is a very generic word that can be interpreted in many ways. Prior to founding BookMEDS, we consulted several lawyers including lawyers who have experience at Supreme Court regarding the same. We wanted to identify clear-cuts rules as per Indian laws and regulations.

Following are the key points highlighted by our lawyers:

Laws for Pharmacies in India are derived from Drug and Cosmetics Act 1940, Drugs and Cosmetic Rules 1945, Pharmacy Act 1948 and Indian Medical Act 1956. Apart from this, there are few high court judgements that have provided further insights and interpretation of the laws.Indian Laws related to pharmacies were written prior to arrival computers, let alone internet. India doesn’t have any concrete laws defined for Ecommerce Companies. The only laws related to internet in India are defined under Information Technology Act, 2000. As per several media a report, Indian Government is currently drafting new set of laws for Ecommerce companies.
After analyzing the various laws, our lawyers have come up with the following ‘zones’ for online pharmacies in India. Below, GREEN ZONE refers to activities that are legal under Indian Laws, GREY ZONE refers to activities that are uncertain under current legal system and RED ZONE refers to activities that are illegal. An online pharmacy must operate under GREEN ZONE.

Green Zone:
Following items are allowed as per Indian Laws:
Medicines can be sold only by a registered pharmacy that has retail license. The pharmacy should have a registered pharmacist on payroll.
It is mandatory for the customer to have a prescription for the medicines he/she is ordering. Over the Counter products can be sold without prescription.
Orders can be taken from the customer either over the phone or internet only from the areas where the pharmacy retail license applies. For example, if the pharmacy has license is issued by Telangana State Government, orders can be taken over phone or internet only in Telangana State.
All the medicines that go out for delivery has to be verified and certified by the registered pharmacist.

Grey Zone:
Rules related to shipping medicines from one state of India to another aren’t clear. Every state has a Drug Department that grants license for certain medicines to be sold within a state. There is a possibility that, certain medicines valid in one state might not have license in another. Hence, there is ambiguity regarding shipping of medicines from one state to another.
There is ambiguity in the Indian law whether a pharmacy is allowed to take money prior to delivery of medicines. Certain provisions of the law mandate, money to be collected from the customer only after medicines are physically handed over to the customer.

Red Zone:
Exporting medicines outside of India directly to the customers (patients) is highly regulated. There is no provision in the Indian law to recognize the prescription written by the foreign doctor. (Note: India is one of the largest exporter of medicines but these exports happen to authorized agencies with the approval from the Drug departments of respective countries)
Selling Schedule X medicines to customer without prescription is a crime. Proper customer record including name of the patient, doctor and address needs to be maintained for every Schedule H and Schedule X medicines sold by the pharmacy.
Selling medicines to minors (under age 18).
Selling banned drugs/medicines i.e. selling any medicine that is not approved by the State’s Drug Department.
Selling medicines at cost higher than MRP unless customer is upfront told about delivery or service charges.

Based on the above analysis, we decided to operate BookMEDS in the green zone, which has legal basis as per Indian Laws. We will soon be releasing a white paper on future of pharmacies in India, especially online pharmacies. There are 6 primary factors that have inhibited the growth in this sector:

1. 1. Regulation & its understanding: The Drug & Cosmetics Act is from the 1940’s. No surprise that the online model was never contemplated. However, what this means is that the ePharmacy is also under the purview of the existing Act. As per the Drugs and Cosmetics Act, there is no concept of digital prescriptions. While as per the recent IT act, digital documents have full legal sanctity and this Act takes precedence over all other acts where digital documents are in question, the fact is that the bible for drug controllers (Drugs and Cosmetics Act) is enforced by inspectors who do not always understand/ recognize the provisions of the IT Act. Additionally given that the regulation is a Central as well as a State license subject under a very entrenched system of inspectors and controllers, it is common to see different interpretations and views taken in different neighborhoods. A consistent and clear interpretation of the rules, or rather a clear explanation of the law to all officials is required.
2. 2. Different standards for online vs offline: Everyone knows how pharmacies operate in India. Most do not have a pharmacist on premises, they generally do not ask for prescription, dispense without bill and substitute medicines openly. However, an organized player should and is expected to adhere to all key provisions of the letter of the law (simply because the size of the organized player makes it more visible both to the law makers and also to the fragmented market). In such cases, if the offline context was equally enforced, then transactions would move online at a much faster pace.
3. 3. Lack of Technology: This industry is a bit like agriculture: very small operations that are unable to leverage the economies that come with technology (like tractors in small fields), since technology used to be expensive in the past. This is critical for this industry to grow. Most pharmacies do not have basic inventory management systems, do not have online presence etc. and as a result are ill-suited to scale or support an at scale player.
4. 4. Vested Interests/ Lobby groups: This industry is heavily unionized and the industry association of pharmacies actively opposes any new models. This group blocks new entrants into the ecosystem, stifles price competition and actively dissuades pharmacies from working with ePharmacies. The small vendors do get scared making it a challenge to find partners). If this were a free market, all good pharmacies who want to grow their business would love to work with any scale player (or scale their own business).
5. 5. No Parallel examples in evolved markets: For multiple reasons, US/ Europe did not see significant ePharmacy models. While the context of operation, the pain points and quality of organized competition is very different and mobile has really changed the game; the model in India needs to be made to solve local problems. There is no model to copy-paste from the west and hence investors have been hard to come by. However, this is starting to change.
6. 6. Structural opacity for the consumer: Unlike a few other sectors, when it comes to healthcare, a consumer is not used to choice in this sector. Too many middlemen, too much opacity and very little reliable information make the consumer a follower, and he/she does not demand quality in the same way as one would for food or entertainment or any other sector. Hence not much has happened to drive innovation. This is changing – and at a hearteningly rapid pace. As transparency and understanding evolves, people will demand service and the ecosystem will have to deliver  Net Net – Spring is coming! 🙂

Almost everything that had been holding this sector back is getting solved (by a variety of players) and we are hopeful that there will be massive innovation in the coming years in this sector!
Here are a few reasons.

1. 1. Regulations. You may be surprised but India has you laws on pharmacies and such. Although no one enforces those laws but the laws are a huge detriment. You need to have a trained and registered pharmacist on the shop at all times. You need to have some 20 licenses, including one from the state medical association etc. So, you need a strong legal expert on your side even before you setup one.
2. 2. Immediacy. Most of the times, people would need medicine at a very short notice. And most doctors and hospitals are surrounded by multiple pharmacies. So if you are going to see the doctor, it’s not really convenient to actually pick the medicines on the way.
3. 3. Internet. I don’t think Internet is a deterrent. People are very comfortable in buying things online now.
4. 4. It may work if you club pharmacy and daily household stuff. So what if I order a Disprin and a talcum powder together?
5. 5. Risk. People still have that, touch/feel issue. And especially with their health, they may not compromise.
6. 6. Misc things. Like ticket size. It costs about 30 bucks to deliver something in a city. To make money on it, I must have an order that is above 300. Then issues like inventory control. Then I am not sure what kind of discounts is available on drugs. Then how do I go about delivering prescription drugs? It would be interesting to know the percentage of prescription and OTC drugs used in India. There are many more factors but IMHO the top four are the ones that I have listed above.

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