Proposed e-pharmacy amendments: Will govt align it with e-commerce rules?

The surge of e-pharmacies in the recent past has put in place a quick supply chain for delivery of drugs across the country. E-pharmacies offer the promise of bridging the gap in ensuring access to medication in India’s remote locations. However, using e-commerce for pharma under the current regulatory regime is proving to be more complicated, given that the government has stipulated stringent norms for offline pharma. The country is awaiting a set of amendments to the primary legislation, Drugs and Cosmetics Act, 1940, for e-pharmacies.

Offline pharma is governed by the primary set of regulations such as the Drugs and Cosmetics Act, 1940, the Drugs and Cosmetics Rules, 1945, the Indian Medical Council Act, 1956, and the Pharmacy Act, 1948, among others. While there currently exists no definition of an ‘e-pharmacy’, it is expected that a definition may soon be introduced under the proposed amendment.

The definition of e-commerce, as included under the extant foreign exchange regulations, provides for buying and selling of goods and services, including digital products, over digital and electronic networks. The regulations also differentiate between a ‘marketplace model’ and an ‘inventory-based model’ of e-commerce, where foreign investment in the latter model is prohibited.

In view of the extant foreign exchange regulations, an e-pharmacy can operate either as an online portal undertaking B2B (business-to-business) sales or a marketplace (given how foreign direct investment or FDI in these sectors is permitted up to 100% under the automatic route), offering only a platform to vendors to dispense drugs (under the supervision of registered pharmacists) to end customers.

Interestingly, the Drugs and Cosmetics Rules, 1945, provide that a licence in Form 20 and Form 20-A is required for selling, stocking, exhibiting, offering for sale or distributing drugs (other than those specified in Schedule C, C (1) and X) by retail and wholesale, respectively. Specifically, the licence in Form 20 and/or Form 20-A is required to be procured in respect of each of the premises from where such activity is being undertaken. Further, the licences for sale and manufacture of drugs are issued by respective state governments.

An e-pharmacy, given the lack of boundaries in the virtual world, operating across cities and providing logistics, will find it difficult to obtain registration(s) which are location-specific. The existing framework under the Drugs and Cosmetics Act, 1940, and the corresponding rules do not contemplate a pure-play marketplace and hopefully, the authorities while framing the law on e-pharmacies will take the nuances into account to ensure that the flexibility of an e-pharmacy is not lost. It is not certain if the law on e-pharmacies will create a distinction between ‘B2B’ and ‘B2C (business to customer)’ as included under foreign exchange regulations and whether the amendment will grant any exemptions in this regard.

Further, the amendments may also need to clarify if an e-pharmacy which does provide logistics service by delivering the drugs to end consumer(s) on behalf of the vendor, will need a separate registration for rendering such a service, given how distribution of drugs requires a licence under the Drugs and Cosmetics Act, 1940.

Of course, India Inc. is awaiting guidance from the legislature on which categories of drugs an e-pharmacy will be able to exhibit/offer on its portal and if this will be limited to ‘over-the-counter’ or also include ‘prescription medicines’.

India Inc. is also taking data protection seriously and proposes to introduce data protection norms for all entities engaged in the healthcare sector, who collect personal sensitive information. The proposed amendment to the Drugs and Cosmetics Act, 1940, will also need to feature the provisions for stringent data protection norms for e-pharmacies, especially in light of details of the patient and the sensitive medical information that will be available with the e-pharmacy. It remains to be seen if these amendments will strike the right balance between adequate safeguards against misuse and the potential that the e-pharmacies offer.

Rabindra Jhunjhunwala is partner and Deepti Agheda is senior associate at Khaitan & Co.

Views are personal.