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26 September, 2018
The Indian Pharmaceutical industry is in its prime phase of growth today at 11-12% per year. While exports occupy a huge chunk, the country meets nearly 95% of its own domestic demands through indigenous production and the domestic retail market is growing by leaps and bounds.
Sale of drugs in India is currently governed by the Drugs and Cosmetics Act, 1940 (D&C Act) and the Drugs and Cosmetics Rules, 1945 (D&C Rules). At present, the law permits sale of drugs through brick-and-mortar pharmacies only. The law as it currently stands is somewhat out of tune with the times in that it is still to catch up with the concept of online sales of drugs.
E-Commerce has become a part of daily life now- a service that proliferated through websites, mobile applications and other electronic portals. The consumer can review, select and order products without actually going to a retail store. Initially the ambit of online transactions was limited to fast moving consumer goods (FMCGs) and other service industries such as travel and tourism. Now, the pharmaceutical industry has also stepped into the arena of e-commerce to form a part of this rapidly growing industry.
Much to the chagrin of the industry, however, there are to date no well-defined and structured laws governing online pharmacies. A major issue for all is the need to ensure that drugs that are made available to the public through online channels are safe, efficacious and most importantly conform to established quality standards that are laid down in the D&C Act and Rules. There is wide recognition that drugs are different from normal merchandise and that the sale of drugs is a licenced activity, which must be carried out in terms of the Act and Rules – at the licenced premises, under the supervision of a qualified pharmacist and in compliance to the provisions prescribed under the Drugs and Cosmetics Rules, 1945.
Online sales in contravention to the provisions of the said Act and rules should not be permitted. Keeping in mind these considerations, therefore, and further recognising the need to regulate the sale of drugs online, the Government , on August 28, 2018, acting through the Ministry of Health & Family Welfare (MOH&FW) and in consultation with the Drugs Technical Advisory Board (DTAB) notified a draft amendment to the Part VI of the D&C Rules (addition of a new Part VIB -‘Sale of Drugs by E-Pharmacy’.) (Draft Rules) pertaining to the regulation of the sale of drugs through e-pharmacies.
The proposed addition as above, comes in the wake of a report dated 30thSeptember, 2016, which was submitted by a sub-committee constituted by the DTAB[1] to examine issues pertaining to the regulation of sale of drugs over the internet[2]. The Government entrusted this sub-committee to prepare a Report after taking into account the concerns and risks of such online sales while looking at practices followed by other countries in this regard. The sub-committee has inter-alia recommended the following:
(a) Creation of a Nation Portal, which shall act as the nodal platform for transacting and monitoring online sale of drugs.
(b) Creation of geographical restrictions for operation of e-pharmacies.
(c) Existing licensees involved in retail sale of drugs could also register on the National Portal for carrying out online sale of drugs.
(d) Requirement of registration with CDSCO under the Drugs and Cosmetics Rules, 1945.
(e) Certain categories of drugs viz. the Narcotic and Psychotropic drugs, tranquilisers, habit forming drugs and Schedule X drugs that are prone to being abused or misused must be excluded from sale through e-pharmacies.
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Salient Features of these Draft Rules:
The Draft Rules define an ‘e-pharmacy’ as a ‘business of distribution or sale, stock exhibit or offer for sale of drugs through web portal or any electronic mode’[3]. Thus, it includes within its ambit not only sales through websites but also any other electronic mode such as applications accessible through any hand-held electronic device termed as an ‘e-pharmacy portal’.
All e-pharmacies are required to mandatorily register with the Licensing Authority to distribute and sell, stock or exhibit or offer for sale drugs through an e-pharmacy. All orders for sale have to be routed through the e-pharmacy portal. At the time of renewal of the registration licence, a separate application has to be filed by the registration-holder in accordance with the established procedure under the D&C Rules.
In terms of timelines, an application for licence is to be reviewed and disposed of within a period of 30 days (excluding time taken for receipt of information from the applicant), whereas rejection of any application/curing of any defect is to be communicated to an applicant within 30 days.
In order to carry out sale of prescription drugs (i.e. drugs listed under Schedule H, H1 of the D&C Rules) a prescription by a Registered Medical Practitioner has to be uploaded by the customer. Such a prescription has to be written/in electronic mode and duly signed, and mention the drug(s) as well as quantity of the drug(s) to a patient. For Over the Counter Drugs (OTC Drugs) no separate prescription needs to be uploaded.
There has to be a registered pharmacist to verify the details of the patient and a Registered Medical Practitioner who has prescribed the drug(s) and to arrange for the dispensation of the drugs as per the prescription.
The e-pharmacy portal has to be established in India to conduct the sale and all data generated has to be kept confidential and localised.
An e-pharmacy cannot deal in drugs covered by the Narcotic Drugs and Psychotropic Substances Act, 1985 (NDPS Act), tranquilizers as well as drugs listed under Schedule X of the D&C Rules.
An e-pharmacy registration holder shall comply with the provisions of the Information Technology Act, 2000 (IT Act) and Rules.
Advertisement of drugs is prohibited on radio/television/internet/print/any other media for any purpose by an e-pharmacy.
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Implications for the Industry & Consumers
Improves access to drugs as sales via the internet ensures the delivery of drugs at the convenience of the consumers. For the pharmaceutical companies, e-commerce will provide much deeper market penetration and a broader customer base.
The benefit of online sales over physical sales is that every party to the transaction can be traced and every transaction can be recorded. However, this necessarily entails greater scrutiny by the regulator to address issues of non-compliance and quality of products. One of the issues with physical sales is that there is no record of each and every transaction as the pharmacist sells the drug without any prescription or invoice in return. Also, even if there is a record, the storage and retrieval thereof is arduous and prohibitively expensive.
From a commercial point of view, brick and mortar retail sales will face competitive pressure in pricing due to the nature of discount strategies and offers, available in e-commerce as no front-end retails costs are involved in the latter.
Compliance with provisions of the IT Act also entail compliance with Section 3 of the IT Act, which states that when a document is required to be signed under the law, the document would be deemed to be in compliance with the law only if such information or matter is authenticated by means of an electronic signature. The Draft Rules currently define a prescription as: Thus, while on one hand the Draft rules allow the customer to upload a handwritten prescription, they also mandate compliance with the IT Act, which requires digital signature for authentication of a document submitted electronically. The Draft rules do not provide any clarity on the issue except for providing that the prescription should be ‘duly signed’.
67 I (d).“Prescription” means an 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 drug to a patient.
The Draft Rules prohibit advertisement of any drugs through the e-pharmacy. It is to be emphasised here that the definition of drug is very wide under the D&C Act[4] and includes not just traditional medicines used for external or internal use, but also substances to affect the structure/function of the human body, substances to destroy vermin or insects, components of drugs, Ayurvedic, siddha or Unani medicines, as well as all medical devices.
Conclusion
In view of the burgeoning retail industry via e-commerce, this move by the Government to embrace advances in technology in regulation is a heartening measure. Prior legislation on the issue did not distinguish between conventional and online sale/distribution of drugs. The Draft Rules, if implemented, will provide much-needed regulatory certainty and a definitive framework for the smooth functioning of this industry. It is to be noted that the Draft Rules in their current shape only allow India-based portals and websites to operate an internet-based sale of drugs in line with the Government’s pitch to encourage indigenous manufacturers and retailers.
These Draft Rules have been published to inform all persons likely to be affected; objections and suggestions will be considered by the MOH&FW for a period of up to 45 days pursuant to which these Draft Rules will be given effect. It is to be noted that as soon as these Draft Rules come into effect, all existing businesses involved in selling drugs via the internet will have to mandatorily register under the D&C Rules as an e-pharmacy.
We will be following this closely.
For further information, please contact:
Ashwin Sapra, Partner, Cyril Amarchand Mangaldas
ashwin.sapra@cyrilshroff.com
[1] The issue of distribution of medicines by e-pharmacy service providers through internet was deliberated by the Drugs Technical Advisory Board (DTAB) in its 69th meeting held on 22.04.2015. http://www.cdsco.nic.in/writereaddata/69th%20DTAB%20minutes.pdf
[2] http://www.cdsco.nic.in/writereaddata/Sub-Committee%20Report%20on%20e-pharmacy.pdf
[3]Section 67-I (a) of the D&C Rules, proposed to be inserted.
[4] 3. 1. (b) “drug” includes–
10 (i) all medicines for internal or external use of human beings or animals and all substances intended to be used for or in the diagnosis, treatment, mitigation or prevention of any disease or disorder in human beings or animals, including preparations applied on human body for the purpose of repelling insects like mosquitoes;
(ii) such substances (other than food) intended to affect the structure or any function of the human body or intended to be used for the destruction of vermin or insects which cause disease in human beings or animals, as may be specified from time to time by the Central Government by notification in the Official Gazette;
12 (iii) all substances intended for use as components of a drug including empty gelatin capsules; and
(iv) such devices intended for internal or external use in the diagnosis, treatment, mitigation or prevention of disease or disorder in human beings or animals, as may be specified from time to time by the Central Government by notification in the Official Gazette, after consultation with the Board;
