Vivek K Chandy: Web pharmacies throw up interesting legal questions

The Indian e-commerce space has witnessed tremendous growth in the recent past. From big all-comprehensive marketplace created by the likes of Amazon, Flipkart and Snapdeal, to niche players like BigBasket, Urban Ladder and Jabong, there has been an explosion in the number of websites offering goods and services.

E-commerce companies have recently entered the pharmacy space. Like many other sectors of the new economy, online pharmacies throw up some interesting challenges from a legal perspective. These challenges mainly relate to the enforcement of laws, many of which were drafted in a different era and did not contemplate the present commercial reality or the technology currently available.

The retail sale of pharmaceutical drugs is regulated under the Drugs and Cosmetics Act, 1940 (DCA) and the Drugs and Cosmetics Rules, 1945 (DC Rules). Section 18 of the DCA prohibits the sale of any drugs or cosmetics without a licence. Each separate premise from where a pharmacy operates requires a separate licence.

Further, the DC Rules provide that the retail sale of any drug on the prescription of a registered medical practitioner would only be under the personal supervision of a registered pharmacist. The DC Rules prescribe that a pharmacist has to be registered under the provisions of the Pharmacy Act, 1948.

The above regulations raise an interesting question as to whether the sale of drugs by an online pharmacy with no physical place of business would be in accordance with law. The practice being followed by many online pharmacies is to require customers to upload a scanned copy of their prescription, and to then deliver the drugs to such customers. The question that would arise is whether the sale can be said to have occurred under the personal supervision of a registered pharmacist from a registered location, or whether such a sale would violate the restrictions under the DC Rules. This appears to be the contention of the Maharashtra Food and Drug Administration, when it filed an FIR against a large e-commerce company for sale of prescription drugs earlier this year.

The contention being taken by online pharmacies at present appears to be that as long as they have a scanned copy of a prescription uploaded by a patient, they have complied with the provisions of the DC Rules. It remains to be seen whether the Maharashtra FDA would be able to successfully prosecute the e-commerce player referred to above. A successful prosecution could open up the entire sector to scrutiny by various regulators.

One possible solution to this issue could be to have the drugs delivered through registered pharmacists. Once regular pharmacists see the volume of business transacted over the internet, they may be willing to work with e-commerce companies and cause drugs to be delivered to retail consumers, using the wherewithal of the e-commerce companies.

Another interesting issue is the question of whether foreign direct investment (FDI) would be permitted in online pharmacies. The extant foreign exchange regime only permits FDI to be received by companies engaged in B2B e-commerce, and prohibits FDI in companies engaged in retail trade via e-commerce. Pursuant to this prohibition, companies like Flipkart, Snapdeal and Amazon have started online marketplace, where many retailers offer their listings and sell their products to customers. In this model, the inventory is not actually held by the e-commerce company, but is actually held by the various entities that sell their products on the marketplace. The entity hosting the online marketplace only offers ancillary services such as warehousing, logistics and cash management.

A similar model appears to have been adopted by certain new online pharmacies. In this model, the e-commerce company merely sets up a marketplace for pharmacists and customers. Any ordinary brick and mortar pharmacy may then sell its drugs online by registering on the website. Without expending large monies on retail space, a resourceful pharmacist may be able to sell significant volumes.

The online pharmacy sector throws up some interesting legal questions, which have not been answered yet. These questions would have to be examined both by the industry and by the regulators, in order to ensure that the interests of all stakeholders are protected.