Indian E-Chemists Decry Regulatory ‘Witch Hunt’ Amid Offline Rival Opposition

NEW DELHI - India's online pharmacies say they are prime examples of the start-ups the government envisions in its drive to promote a "digital India" connecting the country through the internet. But instead of providing an enabling commercial environment, the e-chemists say they're being subject to a regulatory "witch hunt" aimed at shutting them down.

Now, the Indian Internet Pharmacy Association (IIPA) has gone public with its president, Prashant Tandon, calling on the national government to "end the harassment at the local regulatory level by local inspectors."

"There's a witch hunt going on...mainly due to opposition from [offline] pharmacies. This has to stop. We want a level playing field," Tandon, founder and chief executive of 1mg, an online chemist chain that serves 11 cities, told PharmAsia News.

Recently, Maharashtra Food and Drug Administration agents raided leading e-chemist retailer, PharmEasy, after allegations the chain was selling drugs without prescriptions, the IIPA said. Dharmil Sheth, co-founder of PharmEasy which operates in six cities, said he was taken to a Mumbai police station at 10 pm and "interrogated for 10 hours." "None of the allegations was found to be true," he said.

"It was a terrible experience," Sheth told PharmAsia News. "Our employees were even threatened they'd be behind bars."

The IIPA said first information reports or FIRs, the initial step in an Indian police investigation, had reportedly also been lodged against two other companies - mChemist and Merapharmacy. The founder of mChemist is pharmaceutical industry veteran Rajiv Gulati, ex-global pharma president of generics giant Ranbaxy Laboratories Ltd. bought by domestic rival Sun Pharmaceutical Industries Ltd. in 2015.

"Mr. Gulati has now received a notice from Maharashtra police. He is not a criminal," said Tandon. "Most of the founders of the other online pharmacies are graduates from leading Indian and foreign education institutes and they're being harassed and treated unfairly," he added.

Old Vs New

The conflict between the online pharmacists and mainly small family-owned small pharmacies is part of a wider battle between e-commerce and the highly fragmented traditional retail industry which has been a strong supporter of Modi's ruling Bharatiya Janata Party and constitutes an important political lobby in the country.

Conventional retailers - from grocers to chemists - have long been hostile to e-commerce, saying it’s stealing revenues and could force some of them out of business.

Last October, chemists across India shut shop for a day to demand a halt to e-pharmacy sales in a strike that left patients struggling to fill prescriptions. The All India Organization of Chemists and Druggists, which says it represents hundreds of thousands of chemists and their employees, calls the Internet sales illegal and a threat to public health - accusing online sites of failing to verify prescriptions (Also see "Indian Chemists’ Strike Seeks Halt To E-Pharmacy Sales" - Scrip, 18 Oct, 2015.).

In January, India's national drugs watchdog told state regulators to crack down on any online pharmacies acting illegally after hearing allegations that "gross” violations of the law were putting lives at risk. The Office of the Drugs Controller General did not go into specific details about the nature of the alleged offences, but said it received a "spate of representations against e-pharmacy" from individuals, organizations and trade bodies (Also see "India Wants E-Pharmacies’ ‘Gross’ Violations Punished" - HBW Insight, 12 Jan, 2016.).  

The IIPA says it supports any action against law-breakers whether online or offline but asserts its members are fully compliant with the law. Tandon notes patients only upload their prescriptions to online pharmacies and that the portals depend on offline pharmacists to fill the orders so retailers actually gain business.

The only conditions for chemists to join the online network are that they have to have computerized billing, an internet connection and links with authorized distributors, he said. "We're making the business more transparent, safer, there are receipts, every transaction's tracked," he said.

Vested Interests?

But observers suggest transparency may not be so popular in a country where bribery and corruption is still a problem at many levels. Although India has improved in ease of doing business since Modi came to power in 2014, according to World Bank 2016 rankings, it is listed 130th out of 189 countries.

While the law stipulates antibiotics and other strong drugs can only be sold with prescriptions, those rules are widely flouted. "Self-medication is rampant in India," noted PharmEasy's Sheth, while many retailers operate on a cash basis so tax evasion is rampant.

"The challenge these [e-pharmacies] companies face is of stiff resistance, including unwarranted disruptions, from the government machinery, particularly in [the southern states of] Maharashtra and Karnataka, and the prevailing trade association that is averse to any new models or transparency," the IIPA said in a statement.

"There is also tremendous pressure on small pharmacy owners who want to partner with digital platforms and grow their business - they are threatened with excessive and aggressive regulatory action. The move by the trade association and regulators is anti-competitive," said the IIPA.

As of now, there's no provision in Indian law to specifically govern e-pharmacies, although different aspects of their operations fall generally under existing legislation. The government is working on a new drugs law to take account of changes in the fast-moving pharmaceutical sector, including online portals.

Last July, the Drugs Consultative Committee, a statutory body under India's drugs legislation, set up a subcommittee to establish guidelines for online pharmacies. The panel, headed by the Maharashtra Food and Drug Administration commissioner Harshadeep Kamble, was supposed to come up with its recommendations in three months but has yet to release them.

"We were very optimistic when the central government set up this committee, we felt there was positive momentum, that the government would support the industry with action on the ground," Tandon said. "But it's been a year, we don't understand why things are held up."

An official of India's central drug licensing authority, noted to PharmAsia News the government is seeking to overhaul drug legislation and had sought feedback from state drug controllers by June 21 on changes. But the official could give no indication of when Kamble's committee might announce its proposals.

Investors Worried

India, known as "pharmacy to the world" for its supply of inexpensive generic medicines, has been a global late-comer in tapping domestic Internet retail opportunities. Now, Tandon, whose company is backed by Sequoia Capital, said online e-pharmacists' problems are creating cold feet among potential investors in what should be a buzzing sector.

A report by Silicon Valley venture capital firm Kleiner Perkins Caulfield Byers says India's Internet users mushroomed by 40% in 2015 to 277 million with around 850 million people still to come online.

"There's been a significant business cost. The interest in Indian healthcare among global investors, because of the sector's huge needs is very high, but these problems with government regulators and police are having a chill effect," he said.

Because of regulatory worries, Bookmeds, based in Hyderabad in southern India, "is refocusing efforts toward markets like Malaysia and Indonesia owing to lack of clarity in India" and other e-pharmacy start-ups have closed, he said.

He said 60% of consumers need medicines immediately "so at best e-pharmacies are addressing 40% of the available market and usually only for chronic conditions [like diabetes]." Even in developed markets, e-pharmacies hold just 15-20% of the pharmaceutical retail segment, he noted.

With India's pharmaceutical market growing by 14%-to-15% annually "there's big headspace for online and offline retailers," he said.