Daybreak - Why retail chemists in India wanted BJP manifesto to include an e-pharmacy ban

Episode Date: April 24, 2024

A few weeks ago, retail chemists got together to draw BJP's president JP Nadda's attention to the dangers of e-pharmacies. AICOD urged BJP to promise to include this ban in their election manifesto, along with a ban on discount advertising. They said e-pharmacies should be done away with nationwide to protect public health and prevent drug abuse among the youth.However, this isn't the first time that offline chemists have approached the government to express their woes against e-pharmacies. In fact, they have been lobbying so hard for that the government was forced to shelf the much-required policy on the online sale of drugs saying the matter was "sensitive."But e-pharmacies aren't taking this lying down either. What can bring an end to this long-drawn battle?Tune in.Daybreak is produced from the newsroom of The Ken, India’s first subscriber-only business news platform. Subscribe for more exclusive, deeply-reported, and analytical business stories.

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 Raman Ganesh, 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. You know, a few weeks ago, India's retail chemists approached the BJP President JPM Nader to ban e-pharmaciesies like 1MG and Pharmacy. In fact, the industry body that represents India's retail chemist called AICOD, asked the BJP to include this as a promise in their manifest manifest to this election, along with a ban on discount advertising. Their letter to NADA said that

the government of India should ban e-pharmacies nationwide in the interest of public health and to protect the younger generation from drug abuse. Now, of course, e-farmacies have not been taking this lying down. Last year, they met with officials from the health ministry in Goa and And in the meeting, representatives of the ministry are said to have given them signs that a complete ban on the online sale of medicines is unlikely. You see, e-farmacies in India have been fighting a long drawn-out battle with offline pharmacies or retail pharmacies and government regulations. It's been almost a decade now. There have been protests, dharanas, strikes, chemists have called for nationwide shutdowns of medicine stores, statues and effigies have been burnt, even death threats have been sent over the matter.

But why? 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 came up around 2014 to 2015 and they slowly began to grow. Until the day that the hundreds and thousands of small and big offline or retail pharmacies that they were hoping to disrupt, finally saw them as their enemy. This was a time when sector after sector was collapsing because of e-commerce. Naturally, offline pharmacies did not want to be one of them.

So they lobbied hard against them and used threats of shutdowns. They were in no mood to share the multi-billion dollar farmer market with anyone else. Not long after, with the help of outdated laws that were drafted as long ago as the 1940s, drug regulators in multiple states across India began going after online pharmacies. By 2016, funding into the sector began to dry up. This was despite many of these online pharmacy startups, successfully challenging state drug regulators in the course. 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 that was started by former Infusis Senior Executive and Igate CEO, Furnish Murthy. But again, after working on draft e-pharmacy rules and taking public comments into consideration, suddenly, out of the blue, the government shelved it. It said that the matter was sensitive. That, dear listener, is the kind of power that offline or retail chemists have because of the sheer size of them. They are huge in number. So, e-pharmacies again were left in limbo, fearing the worst.

And then again in February last year, the Central Drug Standard-Stand-Cetrol organization sent a show-cause notice to 20 e-pharmacies. These included Tata 1MG, Amazon, Flipkart, Reliance Retail-owned NetMeds, MediBuddy, Prato, and Apollo. So you see, this just goes on and on and on. Welcome to Daybreak, a business podcast from the Ken. I'm your host, Nick Da Sharma, and I Don't Chase the New 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. Also, just to remind you, Daybreak Now also drops on Tuesdays,

featuring my brand new co-host, Rahal Philippos. Today is Wednesday the 24th of April. To begin with, let us try to understand why, 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 by are the Drugs and Cosmetics Act of 1940 and the Drugs and Cosmetic Rules of 1945. Those were made for actual medical stores, not for online pharmacies. And that 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.

They operate on a national scale, right? So, do they have to get a license in each state then? Then there is also the issue of prescriptions. For example, the law requires stamping prescriptions to avoid someone using the same prescription to buy drugs from multiple pharmacies. This obviously cannot be done when someone's buying medicines online. Similarly, it's also not entirely possible to make sure that the drugs are handed over to an adult. Next comes the problem of data harvesting. E-pharmacies have been accused of collecting personal data of their consumers. So you see, the risks with e-pharmacies were too many,

which is why regulators in most states decided to go after them. But when the government advised traditional chemists to digitize their supply chain in a public notice on online and offline sale of drugs, they made a huge hue and cry about it. All the government wanted to do was to level the e-pharmacy playing field. The Health Ministry's regulations that came in 2018 sought to legitimize e-pharmacies. But like I told you earlier, it was shelved,

and ever since, everything has been moving at snail space. At the end of last year, even the Delhi High Court pulled up the government and said that in the interest of justice, it was giving one last opportunity to the Union of India to frame the policy with regard to online sale of drugs within eight weeks. Obviously, the eight weeks have long passed and it still has not happened yet. Coming up next, we look at how e-pharmacies have been dealing with all of this. Before we get into how e-pharmacies have been handling the intense opposition that they've been facing,

let us get one thing out of the way. E-pharmacies are convenient. Say I was home alone with high fever. I wouldn't want to go to buy medicines from a store, right? The convenience that they bring for us was only highlighted even more during the pandemic. So when e-pharmacies decided to fight back, they realized one thing. To take on an entire sector that is offline pharmacies and also deal with the government's regulations, they could not afford to stay fragmented.

So they all got together and formed an organization called the Indian Internet Pharmacy Association. or IIPA back in 2015. The IIPA committed itself to explaining its business model to the 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 they argued that the only difference between a traditional chemist and them was that they collected the prescription online and delivered the medicine to the doorstep.

And since records of sales are super important, they also drew attention to the fact that e-pharmacies actually had an edge over traditional or offline pharmacies when it came to maintaining this kind of data. So you see, they went straight for the Gilles' heel of offline chemists, which is the lack of computerized records and digital operations. The IIPA turned their business model into a compliance weapon against offline pharmacies. And as for the concern about the sale of spurious medicines, here is what Prasian Tundan, the CEO of 1MG told Ruhi Kandahari who writes for the Ken back in 2017.

And I'm quoting him, just like there are pharmacies that do not ask for prescriptions and sell fake products, the same thing could happen in the online space. So 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 out of the doghouse. So, what's next?

Stay tuned to find out. E-pharmacies have been using a combination of techniques to get their customers. For example, MedLife, a leading online pharmacy, acquired customers through digital marketing, mass advertising, and heavy discounts. One MG, meanwhile, used digital content. It almost turned itself into Wikipedia of medicines, and it offered a database of all the brands that sell a drug and at what price. While this did work out to a certain extent,

most e-pharmacies have chosen to follow med-lifestyle of acquiring customers. But huge discounts and mass advertising are only pushing e-pharmacies further away from becoming profitable. So, e-pharmacies are also betting on services like e-diagnostics and e-consultations to help drive up their revenues. Meanwhile, there is no doubt about how convenient e-farmacies are for us. Nearly 10 million households used online pharmacies during the COVID lockdown. So while banning them seems unlikely, appropriate laws to regulate these 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 and podcast extras. To subscribe, head to the Ken.com and click on the red subscribe button on top of the Ken website. Today's episode was hosted by Snigda Sharma and edited by Rajiv Siyah.