Introduce new law to tackle e-pharma

The government must use the long-running tussle between the ‘brick and mortar’ pharma retailers and e-pharmacies as an opportunity to solve problems in regulating pharmacies.

Recently, the Madras High Court overruled a judgment by a single judge prohibiting e-pharmacies from engaging in the digital trade of medicines on the Internet. This judgment is yet another episode in the long-running tussle between the ‘brick and mortar’ pharma retail organisations and e-pharmacies, which are new entrants in the market with deep pockets.

The Ministry of Health has been a mute spectator, treating the issue as a typical commercial rivalry between incumbents and new entrants, instead of an opportunity to solve multiple problems in regulating pharmacies. A bit of history may offer some perspective on how the government can use this as an opportunity to reform the pharmacy sector.

Currently, ‘brick and mortar’ pharmacies are regulated under three sets of laws.

The first is the Pharmacy Act, 1948, which requires that only pharmacists registered with the Pharmacy Council of India engage in the profession of dispensing drugs. It is an open secret that in India many pharmacy owners do not employ registered pharmacists to dispense drugs. Sustained protests by associations of pharmacy owners delayed the implementation of this requirement across India till 1984!

One reason was the reluctance among owners of pharmacies to bear the higher costs of employing trained pharmacists. This attitude is very problematic from a public health perspective since the lack of a pharmacist increases the possibility of prescription errors, especially in India where brand names of drugs are confusingly similar. It also increases the possibility of prescription abuse and failure to properly counsel patients on possible adverse reactions to the various drugs they are consuming.

The second law regulating pharmacies is the Drugs & Cosmetics Act, 1940, which provides the licensing framework for both wholesalers trading in drugs and retail pharmacies selling to patients. Both are critical cogs in the distribution chain because if drugs are not stored properly during transport and distribution, especially in a country like India with a hot and humid climate, they will degrade substantially, rendering them ineffective to patients. In many countries, the entire distribution chain is subject to ‘Good Distribution Practices’ which includes specific equipment like humidity and temperature sensors, record-keeping requirements, etc.

The Indian regulations are silent on this issue, despite it being raised by state drug controllers in the meetings of the Drugs Consultative Committee — in pertinent part, one demand was to ensure all pharmacies had basic air-conditioning with backup generators, especially during summers. No action has been taken on this front and even if the government does introduce an Indian version of the ‘Good Distribution Practices’, it is likely that existing associations of retail pharmacies will raise a ruckus because of the cost to upgrade their infrastructure and hire qualified personnel to meet record-keeping requirements.

The third law that impacts pharmacies is the Competition Act, 2002. In the last two decades, there have been close to 20 investigations by the Competition Commission of India (CCI) into rampant cartelisation by retail associations of ‘brick and mortar’ pharmacies. Multiple state-level associations have been accused of colluding to fix the prices of drugs, instead of competing. These inflated prices due to cartelisation are one of the reasons that existing pharmacies are sometimes willing to give deep discounts to repeat customers and still make healthy profits.

All three of the above problems can be solved to an extent by putting in place a coherent policy to regulate e-pharmacies. Since e-pharmacies are typically large, organised businesses, often backed by corporations with deep pockets, they can make the necessary investments to hire pharmacists and invest in proper storage equipment for drugs. Additionally, since e-pharmacies are likely to ‘bulk procure’ drugs, they will be able to achieve economies of scale and even pass on the discount to the customer. However, the most compelling and immediate reason to encourage the growth of e-pharmacies is that they can offer credible competition to the existing ‘brick and mortar’ pharmacies which are artificially inflating drug prices through rampant cartelisation.

It would be a mistake, however, to continue with e-pharmacies under the current regulatory framework. E-pharmacies require additional regulations on the issue of prescriptions, data privacy, and home deliveries. For example, the current regulations are for paper prescriptions which are required to be marked by the pharmacist on every use to prevent re-use. This is not suited for e-pharmacies, many of which operate with photographs of prescriptions. One solution is to switch to an e-prescription mechanism, where a doctor’s prescriptions will go directly to e-pharmacies and the drugs get delivered to the patient’s home.

Regardless of whether e-prescriptions are adopted, there will be concerns about data leaks from e-pharmacies and the law must mandate technical standards for the storage of data and privacy requiring the deletion of records from the databases of e-pharmacies at regular intervals.

The government must prescribe technical standards to ensure proper storage of drugs during the delivery to the home of the patient. Drugs are like food since many are sensitive to heat and humidity. It is important that they are stored and handled properly during transit.

The government should seriously consider introducing a new law to tackle the above problems by creating a well-designed regulatory framework for e-pharmacies. Done right, e-pharmacies can help resolve both quality and pricing concerns with ‘brick and mortar’ pharmacies.

(The writers are co-authors of The Truth Pill: The Myth of Drug Regulation in India)