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LEGAL ANALYSIS OF ONLINE PHARMACIES IN INDIA

Introduction

The exponential rise in the number of smartphone users in India has opened the floodgates for various sorts of digital services to be made available at our fingertips over the past few years. As a result, services ranging right from ride-hailing apps to even telemedicine portals have come up quickly and become mainstream. Citizens can also access most government-related facilities and utilities through their personal devices. Another essential service that has adapted and remoulded itself to the digital space's needs at a quick pace is that of pharmacies. The fact that medicines could easily be ordered at one’s doorstep without the need to step out ensured that ailing and at-risk individuals could have an uninterrupted supply of medicines during the coronavirus-induced lockdown. This article aims to study the legal mechanisms in place to regulate the functioning of such online pharmacies and examine any gaping holes required to be plugged at the earliest.

Background

The advent of online pharmacies was one of the key pieces required to complete the jigsaw creating an online marketplace in India. After the arrival of the COVID-19 crisis sent the world into a frenzy of lockdowns, the role of such e-pharmacies was crucial in delivering medicines to patients while following curfew guidelines and social distancing protocols. In fact, the sector is expected to grow in valuation to around 2.7 billion dollars by the end of 2023. Online pharmacies offer a very wide range of product availability than the pre-existing local network of pharmacies in India. In this backdrop, there is a lot of scope for the online counterparts to pose a challenge to the 85% market-share currently being enjoyed by the traditional pharmacies.

The need for specific rules and regulations to govern online pharmacies' functioning has been felt strongly after reviewing recent developments that can transform and bring about a paradigm shift in how Indians go about buying their medicines. These are:

1. With the entry of retail giants Reliance Industries Limited and Amazon India into the pharma sector, the former buy a whopping Rs. 620 crore worth of stakes in Netmeds and the latter by launching its own online pharmacy.

2. Two of the smaller players in the pond, PharmEasy, and Medlife, are entering into a deal to merge their businesses and create one of India's largest online pharmacies, with their combined valuation being pegged at around $1 billion.

Inadequacy of the Existing Laws

Up until now, the only legal requirement for selling medicines was that the retailer adheres to the norms of the Drugs and Cosmetics Act, 1940 and its subsequent rules. Thus, online pharmacies currently function as marketplaces where a customer can place an order for medicines from sellers who operate as per the norms. While other legislation such as the Information Technology Act and the Narcotic Drugs and Psychotropic Substances Act would also seemingly apply to such online pharmacies, the lack of comprehensive rules and regulations leaves several grey areas. For instance, there was no clarity on the question as to whether an online pharmacy could itself stock and sell medicines through their networks and how that would be regulated. Moreover, the fact that there did not exist any definition of what would constitute an e-prescription to buy medicines from online pharmacies meant that several disputes would arise and prove to be a stumbling block in the development of the sector.

The Drugs and Cosmetics Act does not differentiate between the sale of medicines by brick-and-mortar pharmacies and online pharmacies. Under this Act and its Rules, the two requirements for the legal sale of drugs are acquiring a valid license and selling specific medicines only based on doctors' prescriptions. Moreover, according to Section 18(c) of the Act read with Rule 65 of the 1945 Rules, it is mandated that no drug that is adulterated, misbranded or is not of a standard quality be sold by any person. How this essential provision is to be brought into practice in the case of online pharmacies was not dealt with by the makers of the law. At the time of the drafting of this statue, the thought of medicines' online sale was too far-fetched.

Therefore, it is abundantly clear that this legislation is not properly equipped to deal with the online medicine sale mechanism. The Delhi High Court had recognized this problem of lack of regulation. It even banned the sale of medicines online due to the possible risk of harmful self-medication and unregulated medicines through online platforms[1].

Critical Analysis of Draft Rules on Online Pharmacies

In light of the points raised above, the Government had prepared the Drugs and Cosmetics (Amendment) Rules, 2018, based on the recommendations given by the sub-committee formed at the 48th Meeting of the Drugs Consultative Committee. It is pertinent to note that these rules still haven’t seen the light of the day and are yet to be notified. Let us understand the crux of these rules in brief.

The Draft Rules first define the term e-pharmacy as any “business of distribution or sale, stock, exhibit or offer for sale of drugs through the web portal or any other electronic mode.” Further, it has been explicitly mandated that any person(s) who wishes to set-up an e-pharmacy to sell drugs online would be required to get themselves registered from the licensing authority as per the procedure and norms specified in the Rules. A prescription has been referred to as any “instruction from a Registered Medical Practitioner to a patient, written by hand or in any electronic mode duly signed, to dispense a drug and quantity of the drug to a patient.

An interesting question to ask at this juncture would be whether a pharmacy taking orders for medicines through messaging apps like WhatsApp would come under the ambit of e-pharmacies? The rules have been defined as E-pharmacy portals to mean “a web or electronic portal or any other electronic mode established and maintained by the e-pharmacy registration holder to conduct the business of e-pharmacy.” It is clear from the definition that any electronic means can be used to conduct the business of an e-pharmacy and not just through an app or website. Thus, orders taken through messaging apps would also come under the ambit of an e-pharmacy. They always provided that proper registration has been granted by the licensing authority separately for the e-pharmacy.

Another important provision that requires to be highlighted is Rule 67K(1), which requires that any information received from customers by the e-pharmacy, be it in the form of a prescription or any other manner, cannot be disclosed any other person. Further, it is also stated that the data generated by the e-pharmacy should be localised and in no case shall it be sent or stored outside India. However, clause (2) of this Rule carves out an exception that the registration holder would be duty-bound to disclose any such information to the Central/State Government whenever the need arises for public health purposes. This provision is very important in quelling the doubts expressed over data privacy and the security of sensitive data. Yet, there is a significant amount of ambiguity present in the clause relating to “public health purposes”, as the Government can very well misuse the data so obtained.

One of the essential conditions of acquiring registration from the licensing authority, listed in Rule 67M, is that the registration holder should comply with the Information Technology Act, 2000 and ensure that the patient's details are kept confidential. This requirement, combined with the provisions explained in the preceding paragraph, goes a long way in providing a legal safeguard for the privacy of users of online pharmacies. Rule 67P regulates the procedure to be followed by an online pharmacy while dispensing medicines to a customer.

It states that the registered pharmacist working on behalf of the registration holder must first verify the patient's details and the Registered Medical Practitioner who has issued the prescription and only then proceed to dispense the drugs required. One of the possible benefits of online pharmacies is that it would result in a far stricter implementation of rules such as dispensing medicines only based on a valid prescription. In this manner, a customer can be stopped from purchasing counterfeit drugs. If any doctor is found to be writing prescriptions of spurious medicines, they can be apprehended. This will be particularly useful in countering the counterfeit drugs' menace, which is reported to constitute a quarter of India's medicine market.

Online Pharmacies as Intermediaries under IT Act

Another interesting facet of the debate surrounding online pharmacies is the question of whether e-pharmacies that merely receive orders from customers and relay them to licensed pharmacies actually to dispense the medicines can be interpreted as intermediaries under Section 2(1)(w) of the Information Technology Act. This question bears great importance because the status of e-pharmacies as intermediaries is affirmed. They would be allowed to escape liability for any third-party data or information hosted by them by way of Section 79 of the IT Act.

As per the definition provided in section 2(1)(w) and conditions outlined in sub-section(s) (2) and (3) of section 79, online pharmacies can be categorized as online marketplaces of medicines and are entitled to claim immunity for data hosted them. This is so because most online pharmacies' business models do not involve storing an inventory and selling medicines themselves but tying-up with physical pharmacies and relaying customers' orders to dispense them. Hence, their function is limited to providing a channel of communication between a customer and a pharmacy.

The Way Forward

In conclusion, the author believes that the Draft Rules are quite comprehensive and must be put into force immediately to take control of the situation before it spirals out of bounds. Yet, there is scope for revising certain provisions, such as disclosing patients' sensitive information to the Government for public health purposes. The author suggests that the Rules lay down precise procedures to be followed by the Government for obtaining such data rather than leaving it upon the discretion of the authorities so that any misuse and nuisance can be prevented. This has also been outlined in the Aadhar judgment, where the Supreme Court held that for disclosure of information on the grounds of national security, a determination of such grounds must be made by an officer of the rank higher than the Joint Secretary.

Previously, the author has used the example of a pharmacy taking orders over WhatsApp to explain the wide ambit of e-pharmacies. However, it is pertinent to ask that if a brick-and-mortar pharmacy wishes to expand its business through any electronic means, would it be required to go through the tedious process of seeking registration from the licensing authority all over again? It can be argued that such a process would be an unnecessary and burdensome hindrance on the business and would diminish the prospects of existing pharmacies to expand their foothold over the market and compete with the growing online marketplaces. However, it is also important to note that registration would entail the pharmacy to follow all norms and guidelines for data privacy, not prevalent for physical stores. Further, suppose a physical pharmacy operates an e-pharmacy. In that case, they must also be stripped of an intermediary's status under the IT Act. This is something that the policy-makers must think about.

Therefore, the time is ripe for the Government to notify the Rules regarding online pharmacy regulation. Their lack thereof has for long caused chaos among the market players and customers alike.

[1] Dr. Zaheer Ahmed Vs. Union of India & Ors., W.P.(C) 11711/2018. 12 Dec 2018. High Court of Delhi.


Title Image: EPM Magzine


This article has been written by Ritwik Tyagi. Ritwik is a student of law at National Law University, Nagpur