Why retail pharmacies have a bone to pick with their online counterparts

On June 25, the Madras High Court overturned a ruling by a single-judge bench that restricted online pharmacies from delivering medicines to customers. 

This follows a November 2018 ruling by the court, based on a plea from the Chennai-based Tamil Nadu Chemists and Druggists Association that placed an interim injunction restraining online sales of medicines. 

What did the association demand?

The association demanded the court block sales of drugs from online sites, as purchasing drugs from unlicensed retailers could be risky as they may sell fake, expired, or unsafe products which could risk the customer’s health. 

This ruling followed a set of draft rules put out by the Union Health Ministry in September 2018 on the sale of drugs by e-pharmacies to regulate the online sale of medicines across India. 

But the Centre is yet to finalise the policy and the Delhi High Court in March this year granted the Union Ministry of Health and Family Welfare a final four months to frame the policy. 

Online vs traditional pharmacies

Online sale of medicines is a nascent industry. Most of its growth and expansion was propelled by the pandemic, with large-scale investments from major players like TATA and Reliance into the sector. 

However, the traditional retail pharmacy sector, which includes organised players such as pharmacy chains like Apollo, Medplus, and GenMart, and unorganised players with one or two retail outlets, has highlighted concerns against the up-and-coming online pharmacies. 

In 2017, pharmacies nationwide went on a one-day strike, called by the All India Organisation of Chemists and Druggists, to highlight these issues. 

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Why traditional pharmacies are upset

The Tamil Nadu Chemists and Druggists Association highlighted their concerns in a petition, leading to a temporary ban on online pharmacies in 2018. These included:

• Deep discounts: Online pharmacies often offer steep discounts on medicines, which traditional pharmacies say attract customers unfairly.
• Counterfeiting concerns: Traditional pharmacies worry that customers might unknowingly purchase fake or expired medicines from unlicensed online sellers.
• Data privacy fears: They raise concerns about online pharmacies potentially mishandling customer health data.
• Unregulated Prescription Drugs: They fear the lack of regulations could lead to misuse of prescription drugs sold online.
• Unlicensed Drugs: Traditional pharmacies argue online sales might increase the circulation of unlicensed drugs.

The association also added that permitting the sale of drugs online defeats the purpose of the Drugs and Cosmetics Act, of 1940 which regulated the manufacture and sale of drugs under prescribed storage conditions by qualified pharmacists. 

The rise of online pharmacies and their advantages

Increased accessibility: Online pharmacies offer greater convenience, especially for those in remote areas or those unable to visit physical stores.

Track and trace systems: They promote transparency by potentially enabling better tracking of medicine origin and distribution.

Improved learning for pharmacists: Online platforms can offer learning opportunities for pharmacists, potentially improving healthcare outcomes.

Data recording for regulation: Some online pharmacies record prescriptions electronically, offering a potential tool for regulatory oversight.

Desire for collaboration: Online pharmacies are open to working with traditional pharmacies within a well-defined regulatory framework.

The legal rollercoaster

The legal battle between online and traditional pharmacies has been ongoing for years, with many court rulings and government actions.

• June 2017: Pharmacists across the country go on a strike to demand their concerns be heard by the government on threats faced by brick-and-mortar pharmacies amidst competition from online pharmacies. 
• September 2018: The Union Health Ministry publishes a draft of rules to be followed by e-pharmacies to regulate online sales of medicines in the country.
• November 2018: Madras High Court grants an interim injunction that restrains the sale of drugs by online pharmacies based on a plea filed by the Tamil Nadu Chemists and Druggists Association.
• However, a day later, the court clarified that the injunction applies to online pharmacies operating without a license. 
• December 12, 2018: The Delhi High Court orders a complete ban on e-pharmacies across the country with immediate effect, pushing the central government to implement the order. 
• December 17, 2018: The Madras HC requests the central government to notify the proposed Drugs and Cosmetics Amendment Rules, 2018 by January 31, 2019, to bring about a regulatory framework for the sale of drugs. 
• December 20, 2018: Madras HC imposed an interim ban on the online sale of medicines until the government notified the regulations.
• January 02, 2019: Madras HC lifts the ban on e-pharmacies citing that sudden prohibition of online sale of medicines will cause hardships to patients. 
• February 11, 2023: The Drugs Controller General of India serves show-cause notices to online pharmacies, seeking an explanation on why no action should be taken against them for selling and distributing drugs without a license. 
• March 17, 2024: The Centre requests the Delhi High Court grant some time to finalise a policy framework on the online sale of medicines due to the issue being “complex”. The High Court grants the Union Ministry of Health and Family Welfare four months as the last and final opportunity to frame the policy. 
• June 25, 2024: Madras HC sets aside the ban imposed on digital sales of medicines in a boost for online pharma companies. 

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How has the legal attention on the sector affected investments?

Investment in the online pharmacy sector dropped sharply in 2020 to $7.45 billion from $32.71 billion in 2019, according to data provided by Tracxn. 

However, funding coming into the sector reached its peak in 2021 amidst the global pandemic when India went under lockdown, restricting people from venturing out from their homes to visit medical shops. The sector saw a total funding of $48.95 billion. 

But the years after saw a slowdown in funding, with companies in the sector raising only $4.41 billion in 2023.  

Why does this matter?

The Indian pharmaceutical market supplies over 50% of global demand, according to a report by the Indian Brand Equity Foundation (IBEF). Its domestic pharmaceutical market is likely to reach $65 billion by this year and about $130 billion by 2030, IBEF adds. 

This size has boosted investments flowing into the sector and necessitated an additional need for regulations to provide retail and online pharmacies an opportunity to complement this growth. 

However, on a consumer level, the Indian pharmacy sector offers a range of options, including scheduled pick-up of medicines, home delivery, online consultation platforms, and online prescriptions. These are some of the features propelling a digital revolution in the healthcare sector in India. 

Taking away the ease and convenience of online pharmacies could prevent people from receiving medicines from the convenience of their homes, or limit patients who cannot travel or visit a brick-and-mortar store for their medicines. 

The takeaway

The future of online pharmacies in India hinges on creating a regulatory framework that addresses the concerns of traditional pharmacies while allowing the online sector to flourish. This will ultimately benefit consumers by offering more choices, accessibility, and potentially lower prices.