Draft guidelines for online pharmacies raise over-regulation worries

The recently released draft guidelines for the online pharmacy industry have raised several questions for players operating in the burgeoning space, including on a possible overlapping role of state governments. The gazette notification, released on August 28, states that all e-pharmacies have to register with the Central Drugs Standard Control Organisation, the apex drug regulator and central licensing authority. But the rules also give state governments the power to cancel registrations, leading to fears of over-regulation in a space that has emerged as a sunrise sector over the last three years.

“While the draft rules clearly mention a central licensing authority, as far as e-pharmacy marketplaces are concerned, there is also Rule 67T (3), which talks about the power of the state governments to cancel the registrations. The confusion lies around the question of where this power is coming from,” Mr. Atul Pandey, partner at law firm Khaitan & Co, was quoted as saying in an Economic Times report.

Additionally, it is yet unclear if offline pharmacy retailers selling on online platforms will also have to register with the central licensing authority, and if online platforms have to register with the states as well. “There is also a requirement under existing rules for each and every drug, retailers and wholesalers to obtain license from the state authorities. It is not clear if the online portals will have to register with the state authorities in relation with the drugs sold through the portal,” Mr. Pandey said.

A 45-day period has been set by policy-makers to receive recommendations and comments from the stakeholders and public on the draft rules, post which the rules will be notified formally. The e-pharma industry, thus far, has reacted positively to the draft guidelines, seen as the first attempt to bring it under regulatory oversight, having operated in what was perceived as a grey area since inception.

India’s pharmaceutical sector was valued at $33-bn in 2017, according to the India Brand Equity Foundation. It is expected to expand at a CAGR of 22.4% over 2015-2020 to reach $55-bin. The country is expected to be among the top three pharmaceutical markets by incremental growth and the sixth largest market globally in absolute size by 2020. The domestic e-pharmacy market has captured less than 1% of the overall pharmaceutical market but is projected to touch $3-bn by 2024, according to Kuick Research.