Daybreak - How e-pharmacies are living but still on the edge

Episode Date: April 23, 2023

Ever since they came up a little less than a decade ago, e-pharmacies have been fighting a constant battle. On one hand there is the severe pushback from traditional pharmacy lobbies and on the other, the lack of a regulatory mechanism.It was only in 2017 that the government officially acknowledged their existence. It was a small win, but a win nonetheless. But the draft e-pharmacy rules that the government came up with a year later were never notified.Despite this, e-pharmacies continued operating and their importance was only highlighted further during the pandemic.But in February this year, the Central Drugs Standard Control Organisation (CDSCO) sent show-cause notices to 20 e-pharmacies. These included Tata 1mg, Amazon, Flipkart, Reliance Retail-owned NetMeds, MediBuddy, Practo and Apollo.However, e-pharmacies are here to stay.Tune in to find out more

Hi, this is Rohan Dharma Kumar. If you've heard any of the Ken's podcasts, you've probably heard me, my interruptions, my analogies, and my contrarian takes on most topics. And you might rightly be wondering why am I interrupting this episode too. It's for a special announcement. For the last few months, I and Sita Ramon Ganeshan, my colleague and the Ken's deputy editor, have been working on an ambitious new podcast. It's called Intermission.

We want to tell the secret sauce stories of India's greatest companies. Stories of how they were born, how they fought to survive, how they build their organizations and culture, how they manage to innovate and thrive over decades, and most importantly, how they're poised today. To do that, Sita and I have been reading books, poring over reports, going through financial statements, digging up archives, and talking to dozens of people. And if that wasn't enough, we also decided to throw in video into the mix. Yes, you heard that right. Intermission has also had to find its footing in the world of multi-camera shoots in professional studios, laborious editing, and extensive post-production. Sita and I are still reeling from the intensity of our first studio recording.

Intermission launches on March 23rd. To get alert, as soon as we release our first video. episode, please follow intermission on Spotify and Apple Podcast or subscribe to the Ken's YouTube channel. You can find all of the links at the ken.com slash I am. With that, back to your episode. E-pharmacies across the country are currently breathing a sigh of relief. This is after their discussion with officials from the health ministry in Goa last week. In the meeting, representatives of the ministry are said to have given them signs that are completely complete ban on the online sale of medicines is unlikely.

E-farmacies in India have been fighting a long drawn-out battle with offline pharmacies and government regulations. It's been almost a decade now. There have been protests, Dharna's strikes, chemists have called for nationwide shutdowns of medical stores, statues and effigies have been burned, even death threats have been sent over the matter. But why? You see, just like most things that were born out of the internet, e-pharmacies too came into the picture much before there were laws put in place to regulate them. Most of them came up around 2014 to 2015 and they slowly began to grow. Until the day, the hundreds of thousands of small and big offline pharmacies that they were hoping to disrupt finally saw them as their enemy. Now, this was a time when sector after sector was

collapsing under the onslaught of e-commerce. And offline pharmacies did not want to be one of them. So they lobbied hard against e-pharmacies and used threats of shutdowns. They were no more to share the multi-billion dollar farmer market with anybody else. Not long after, with the help of outdated laws drafted as long as the 1940s, drug regulators in multiple states across the country began coming after. e-pharmacies. By 2016, funding into the sector began to dry up. This was despite many of these online pharmacy start-ups successfully challenging state drug regulators in the courts. A year later,

though, the health ministry finally uploaded a public notice acknowledging e-pharmacies. It was a small win, but a win nonetheless. And there were martyrs too, like Ziggy. The online pharmacy started by former Infusis Senior Executive and Igate CEO, Farnish Murthy. The draftee pharmacy rules were finalized after taking public comments into consideration. They were very close to being notified. But suddenly, out of the blue, after being referred to the Central High Command, they were sheled. The matter was said to be sensitive. It's important to note here that offline chemists have a strong lobby and they are massive in terms of numbers. So e-pharmacies again were left in limbo fearing the worst.

And then in February this year, the Central Drug Standard Standard Control Organization sent show-cause notices to 20 e-pharmacies. These included Tata 1MG, Amazon, Flipkart Reliance Retail-owned NetMeds, Medibati, Practo and Apollo. It was about an alleged violation of rules. After this, companies, through industry associations, had reached out to the health ministry to explain their viewpoint. So you see, the battle is not over yet for e-pharmacies in India. Welcome to Daybreak, a business podcast from the Ken.

I'm your host, Snigda Sharma, and I Don't Chase the News Cycle. Instead, thrice a week on Mondays, Wednesdays and Fridays, I will come to you with one business story that is worth understanding and worth your time. Today is Monday, the 24th of April. To begin with, let us try to understand why, e-pharmacies constantly come under the scanner. It all has to do with the lack of adequate regulations. The main laws that they have to comply with are the Drugs and Cosmetics Act of 1940 and the Drugs and Cosmetic Rules of 1945. Now, obviously, these rules were made for actual brick-in-mortar

medical stores, and this is what creates a lot of confusion. For example, offline pharmacies have to get their licenses from the state that they operate in. But in the case, of online pharmacies, this is not the case. So do they go to each and every state government then in order to get a license? Then there is the issue of prescriptions. For example, the law required stamping prescriptions to avoid someone using the same prescription to buy drugs from multiple pharmacies. Similarly, it wasn't possible to ensure that drugs were handed over to an adult. Next comes a problem of data harvesting. E-pharmacies have been accused of collecting the personal data of their consumers. The risks with e-pharmacies were too many, so regulators

and most states decided to crack the whip. All the government wanted to do was level the playing field. But when it advised traditional chemists to digitize their supply chain in a public notice on the offline and online sale of drugs, traditional chemists made a huge hue and cry about it. The Health Ministry's regulations that came in 2018 sought to legitimize even. pharmacies. But like I told you earlier, it was shelved and ever since everything is moving at snail space. Coming up next, we look at how e-pharmacies have been dealing with this. But before that, my colleague Akshya, the newest addition to the Ken's podcast team, has a message for you. Hi, I'm Akshire from the Ken's podcast team. I'm here to tell you about cost to company.

Another podcast from our audio offering. On cost to company, we ask deep questions about modern Indian workplaces and get answers through solid reporting. In tomorrow's weekly episode, my first as a host, I hope to put the CA versus MBA debate to rest. Many of the top finance roles are now being taken over by MBAs. I speak to some of the biggest and the brightest CFOs of our times, especially the ones who have done both a CA and an MBA to get an on-ground perspective on what's happening. Tune in to find out more. You can catch episodes of CTC on Spotify. iTunes or wherever you get your podcast every Tuesday.

Before we get into how e-pharmacies have been handling the intense opposition against them, let us get one thing out of the way. E-pharmacies are convenient. Say, for example, I was home alone with high fever. I won't want to go to a medical store to buy medicines. The convenience that e-pharmacies bring for us was only highlighted during the pandemic. But to take on an entire sector that is offline pharmacies and also deal with the government while at it, e-pharmacies could not afford to stay fragmented.

So they all got together and formed an organisation called the Indian Internet Pharmacy Association or IIPA in 2015. The IIPA committed itself to explaining its business model to policy makers. Its model involved the collection of prescriptions which, were then forwarded to licensed drugstores run by registered chemists. These would then deliver the medicines. So e-pharmacies argued that the only difference between them and a traditional chemist was that they collected the prescription online and delivered the medicines to doorsteps.

And since the record of sales are super important when it comes to the sale of medicines, they also drew attention to the fact that e-pharmacies actually had an edge over traditional pharmacies when it came to maintaining this data. So basically, they went straight for the Achilles heel, which is the lack of computerized records and digital operations. The IIPA successfully turned their business model into a compliance weapon against offline pharmacies. And as for the concern about the sale of fake medicines, here is what Prashant Tundan,

the CEO of 1MG told Ruhi Kandhari, who writes for the ken in 2017. And I'm quoting, just like there are pharmacies that do not ask for prescriptions and sell fake products, the same thing could happen in the online space. It was not about an online versus offline pharmacy. The debate needed to shift from a compliant pharmacy to a non-compliant pharmacy. We wanted the government to actively monitor and crack down on those who are not compliant. End quote. But despite putting up a good fight,

e-pharmacies are still not entirely out of the doghouse. So what is next? Stay tuned to find out. E-farmacies have been using a combination of techniques to get customers. For example, MedLife, a leading online pharmacy, acquired customers through digital marketing, mass advertising and heavy discounts. OneMG, meanwhile, used digital content. It almost turned itself into a sort of Wikipedia of medicines.

It offered a database of... all the brands that sell a particular drug and at what price. While this did work to a certain extent, most e-pharmacies have been following MedLife's style of acquiring customers over 1MG's more sustainable approach. But huge discounts and mass advertising are only pushing e-pharmacies away from becoming profitable. So e-farmacies are also betting on services like e-diagnostics and e-consultations to help drive up revenues. Meanwhile, there is no doubt how convenient e-pharmacies are for us.

Nearly 8.8 million households used home delivery services during the COVID-induced lockdown. So while banning them seems unlikely appropriate laws to regulate e-pharmacies as soon as possible is the need of the hour. Daybreak is produced from the Newsroom of the Ken India's first subscriber-focused business news platform.

What you're listening to is just a small sample of our subscriber-only offerings. A full subscription unlocks daily long-form feature stories, newsletters, subscriber-only apps and podcast extras. Head to the ken.com and click on the red subscribe button on the top of the website. I am Snigda Sharma, your host, and today's episode was edited by my colleague Rajiv Sien.