Uncertainty grips e-pharmacy startups as Centre mulls rolling back approval

The e-pharmacy startups in India which clocked a 25-65 percent growth amid the raging Covid-19 pandemic, are now shrouded in extreme uncertainty, as the Centre mulls rolling back approvals given to these companies — the reason? Flouting the Drugs and Cosmetics Act, 1940.

These online pharmacies are under fire from retail chemists and drug organisations over the way they operate and disburse medicines to consumers. The allegations against these online retailers are of — misuse of patient’s data, sales of medicines without prescriptions and predatory pricing.

The All India Organisation of Chemists and Druggists (AIOCD), a lobby of over 12 lakh pharmacists, threatened to launch a country-wide agitation if the government didn’t act.

AIOCD on March 20 wrote a letter to FICCI and said that, “Business of e-pharmacies is against the laws in our country and suggested one should not support the illegal business of e-Pharmacies which is detrimental to Public Health.”

The move by AIOCD comes days after FICCI wrote to Union Health Ministry on show-cause notices to e-pharmacy companies, showing concern over the issue.

“The FICCI e-Pharmacy Working Group, comprising industry leaders, has been relentlessly addressing challenges faced by the sector through various representations, conferences, and knowledge sessions. FICCI has also assisted the industry in developing an “e-Pharmacy Code of Conduct” to ensure high standards of operation,” read the letter.

It further added, “India requires a future-ready digital health system, as highlighted in the Covid-19 pandemic. To achieve affordable and effective universal health coverage, e-pharmacies offer a robust digital foundation with complete tracking and traceability of medications, a vital component in the pharmaceutical supply chain. By improving access and compliance, e-pharmacies have proven to be essential services, as demonstrated during the pandemic when they were allowed to function.”

AIOCD in its letter to FICCI said their support for e-pharmacies amounts to advocating for an illegally operating business. It gives a false narrative that e-Pharmacy is compliant despite an injunction notice against their operations. It also contained a statement by Prashant Tandon, CEO, TATA 1mg, that all e-pharmacies are “compliant today under the provision of the Drugs & Cosmetics Act” which is absolutely false and misleading to general public and against the Public Health, it mentioned further.

In a conversation with CNBC-TV18, Prashant Tandon, co-founder and CEO of TATA 1mg, who is also the Chairperson of the FICCI e-Pharmacy Working Group, said that the company is in compliance with the regulations and is engaging in continuous dialogue with the government.

The Drug Controller General of India (DCGI) had in February issued show-cause notices to 20 companies including Tata-1mg, Flipkart, Apollo, PharmEasy, Amazon and Reliance Netmeds, for violation of the Drugs and Cosmetics Act 1940, as they were found to be selling schedule H, H1 and X without a valid licence.

Following the government notices, Tandon wrote to Union Health Minister Mansukh Mandaviya, requesting an audience on behalf of top founders and CEOs of e-pharmacy companies.

“We proactively went to the government to engage with the government on progressive regulations. After a lot of consultations and engagements alot of progress has happened over the last 7-8 years. The intent is only to meet with the government and understand is there are any other outstanding concerns that they would like to talk about. If so we would like to engage in the conversation and implement the necessary solutions. We have always been positive about engaging with the stakeholders,” added Tata 1mg chief.

Responding to the allegations of violations, Tandon added, “It’s not just an online debate, if any sale is happening without licence, without prescriptions, fake medicine. There are laws which govern that and take care of these issues.”

He also said that e-pharma companies see the issues as business imperatives and asserted that 1mg treats patient’s data with privacy and complies with all existing regulations.

Not just this, e-pharma players have also seen a discount war since the space picked up pace amid the pandemic. On allegations over predatory pricing and heavy discounts on drugs, Tandon said pricing is a competitive market. “It’s an important issue to deliberate on for which the government has set up a committee. Pricing regime should work for the consumers and over the long term, it should be low for the consumers.”

India’s e-pharmacy sector is backed by some of the world’s top investors, including Tiger Global, Sequoia Capital, Temasek and Prosus, in addition to having large conglomerates such as Reliance Industries and Tata group investing in companies such as NetMeds and 1mg.

The draft e-pharmacy rules, which were originally intended to whip e-pharmacy businesses into shape were floated by the Health Ministry in 2018 but the proposal was abruptly halted after being referred to a Group of Ministers as the matter was considered ‘sensitive’. Since then, multiple court orders including those from Bombay, Madras, Delhi and Patna High Court have called for regulating e-pharmacies.

The e-pharmacy market is expected to see CAGR of 42% over FY21-25 to reach market size of Rs 230 billion which Omni channel sales to see CAGR of 43% to reach Rs 25 billion and online to see CAGR of 42% over FY21-25 to reach market size of Rs 205 billion, as per Axis Securities report dated February 2022.

In an eco-system that is moving towards a hybrid model, all eyes are on the Centre which is working on rules for e-pharmacies and had issued a draft bill seeking comments from stakeholders, to enable a new way of doing e-commerce in the drug space. CNBCTV18