The draft Rules comprise of some ambiguous clauses and in some cases restrictive norms that can hurt both offline and online pharmacies.
By Abhinav Saikia & Aparajita Bharti
E-pharmacies, in recent years, have been able to fulfil unmet medical needs of the large Indian population by enabling access to affordable medicines to people in remote areas. In addition, they are also ensuring efficacy, transparency and reliability in delivering these items. Despite their noticeable advantages, e-pharmacies in India operate in a grey area from a regulatory standpoint. They have found themselves facing several litigations following concerns raised by traditional offline chemists and entities from the medical fraternity. To remedy this, the government resolved to introduce the final version of the draft e-pharmacy rules of the amended draft Drugs and Cosmetics Rules, 2018, within 100 days of its formation as part of its 100-day agenda.
Subsequently, the Rules were approved by two committees, the Drugs Consultative Committee (DCC) and the Drugs Technical Advisory Board (DTAB), this year. Despite this, the government has been unable to reconcile the demands of online and offline pharmacies within these Rules, leading to further delay in formalisation.
Although the Rules seek to mitigate regulatory confusion and bring about a measure of uniformity in registration and licensing of all pharmacies, both offline and online, various stakeholders have taken objection to different aspects of the law. They have argued that the Rules do not provide sufficient clarity on FDI norms. This is partly due to the vague definition of e-pharmacies in the Rules that do not distinguish between the marketplace and inventory-based models. They feel FDI provides unfair advantage to e-commerce entities who are incentivised to introduce offers and discounts on medicines and offer them at cheaper prices. They fear that predatory pricing can hurt local players.
Another objection that the All India Organisation of Chemists and Druggists (AIOCD), a lobby group comprising 8 lakh offline chemists, has put forward is that the Rules allow snapshots of prescriptions to be uploaded (while the original Drugs and Cosmetics Act requires the original prescription to be submitted). According to them, not only does this water down the prescription verification system, but they also allege it will likely help facilitate fraud, such as allowing consumers to forge or reuse prescriptions, resulting in exploitation of prescription drugs.
Licensing and monitoring clauses are yet another area of concern. Though the Rules provide that the e-pharmacy business premises will be periodically monitored by the central and state licensing authorities, this will be hard to impose given how e-pharmacies are websites anchored online. The resulting ambiguity has thrown up questions as to whether e-pharmacies will require separate licences to operate across multiple states, so as to allow state authorities—who traditionally regulate drug sale—to monitor them?
Brick-and-mortar stores are not alone in their concerns, e-pharmacies too have voiced issues, such as ambiguity around clauses of state licensing and FDI norms. They also find the Rules compliance-heavy in many respects. For instance, the Rules dictate that e-pharmacies record large amounts of data for every transaction and drugs dispensation verification on submitted prescriptions, which makes compliance extremely onerous and will result in poor-quality customer experience.
Another pressing concern is the Rules’ prescription regarding securing customer data. In order to address the issue of data security, the Rules prohibit disclosure of information gathered through the online platform and do not make any exceptions for such data to be shared internally for improving the functionality of platforms.
The Rules insist all e-pharmacy portals operating in India should be registered in India and the data generated by them be stored and processed locally. E-pharma organisations, such as Myra, have expressed concerns that such a requirement would hinder local companies from sharing critical information with drug manufacturers who maybe based abroad. Certain Indian pharma companies are of the opinion that more clarification is required on how doctors will access records data hosted on these platforms.
The data localisation requirements in the draft Rules are also not in sync with either data processing requirements provided in the soon-to-be-tabled law on data privacy, the draft Personal Data Protection Bill, 2018 (PDP Bill), in its current form nor the proposed regulation for health data under the Digital Information Security in Healthcare Bill, 2018 (DISHA). While the PDP Bill allows cross-border flow of health data, on the prerequisite that the individual has explicitly consented to it or because the transfer is necessary for emergency services, DISHA does not provide a mandate for localisation of data. Such difference in requirements can lead to regulatory confusion for handling health data for privacy purposes.
The way forward
The draft Rules comprise of some ambiguous clauses and in some cases restrictive norms that can hurt both offline and online pharmacies. The government should ideally leave the subject of localisation of health data under the purview of the PDP Bill, and provide more clarity with respect to ambiguous norms, such as FDI and state licensing. In drafting these Rules, the government has largely adopted norms relating to offline chemists and has not acknowledged the observable distinctions between the offline and online models. E-pharmacies come with multiple advantages such as increased selection, less information asymmetry, vast reach, better tracking systems and more effective consumer redressal mechanisms. This is an opportunity to correct the huge imbalance in availability of drugs across the country riding on the increasing internet penetration. Given the huge positive externalities associated with e-pharmacies, it is imperative for the government to create an enabling regulatory environment for them to thrive.
Saikia is a policy analyst and Bharti is founding partner at The Quantum Hub