Online pharmacies: Reach vs risk
Online pharmacies offer increased convenience, but also increased
risks. So will the model work in India? Sachin Jagdale weighs the pros
pharmacies have been a preferred channel of purchasing medicines in most European
countries but India is still taking baby steps in this retail mode. However,
it comes as no surprise that online pharmacy players are looking to expand their
presence in the Indian market, as Indian consumers already have access to much
cheaper generic medicines available here.
Estimating the exact numbers of online pharmacies is not an easy task, especially
when illegal entities share space with legitimate enterprises. Muralidharan
Nair, Partner, Advisory Services, Ernst & Young, provides the countrywide
figure of online pharmacies. He says, "Location of online pharmacy is determined
by the country in which it is hosted. According to a survey carried out by MarkMonitor
(2008) more than 2,986 online pharmacies exists. Of which, 50 percent of online
pharmacies were hosted in US, 14 percent in UK, nine percent in Germany, seven
percent in Netherlands and the balance in countries like Canada, Mexico, China,
India, South Africa and Thailand. In addition, there were approximately 400
B-2-B listings online, out of which 31 percent were located in China, 26 percent
in US and 19 percent in India. Many of these listings in India fulfill the order
received from other online pharmacies located in Canada or U.S."
In India a limited numbers of online pharmacies are operational through different
channels. Giving examples, Nair elaborates, "Apollo Pharmacy has installed
fax machines in clinics of doctors, from where prescriptions are faxed to Apollo
stores, which then deliver the medicines to customers at the desired location.
Lifeken (Religare Wellness) has a feature to post the requirement of drugs on
the website, based on which medicines are dispensed at the desired location.
Typical online pharmacies such as in.keegy.com, realpharma.com, chennaiclassic.com,
worldwide online pharmacy. B-2-B online pharmacies which cater to other online
pharmacies abroad make up the third channel."
pharmacies have changed the global pharmaceutical distribution chain quite
significantly. The era of online pharmacies began more than a decade ago
with the launch of drug distributing websites in Canada in the late 1990s"
- Jumana Barnagarwala
consumers prefer to stick to the drugs prescribed by the doctor unless they
have full trust in the dispensing pharmacist. This limits the capability
of online pharmacy to substitute the ordered drugs with low cost generics"
- Muralidharan Nair
Partner, Advisory Services
Ernst & Young
Though online pharmacies are not that abundant in India, online
pharmacies based overseas have been showing keen interest in India to buy much
cheaper generic drugs available here. According to Jumana Barnagarwala, head,
healthcare consulting, Datamonitor, India, online pharmacies have changed the
global pharmaceutical distribution chain quite significantly. The era of online
pharmacies began more than a decade ago with the launch of drug distributing
websites in Canada in the late 1990s. Barnagarwala informs, "According
to the Datamonitor report, 'On-line pharmacies: a comparison of the US and EU
business models: Management Brief; 21st Century Insight' dated December 1999,
the on-line pharmacy sales of prescription-only medicines (PoM) and OTC drugs
were forecast to reach $11 million and $15 million respectively, in 1999. The
same report indicates that by 2003 the online sales of PoM and OTC drugs would
reach $3.2 billion and $0.5 billion respectively in the US. The online pharmacy
scene was very sketchy in the EU in the late 1990s and it was believed to be
about three-four years behind that in the US. Hence the online sales of PoM
and OTC drugs were forecast to reach $1.0 billion and $0.2 billion respectively
in the EU by 2006 "
Te Smith, Vice President, Communications, MarkMonitor, provides
some outcomes of their analysis. She says, "Tracking global sales requires
close examination of the books for the pharmacies, so we rely on estimates based
on a variety of factors. We track the number of online pharmacies that use specific
drug brands in an illicit manner to promote their pharmacies, then use industry
traffic figures, conversion rates and average order sizes to make our estimates.
In our most recent study in summer 2008, based on these industry traffic figures,
we estimated the trade in illicit prescriptions at $12,000,000,000 (twelve billion)
Online pharmacies could have been a welcome change in the
drug distribution system however, invasion of this system by illegal operators
has put safety of the consumer/purchaser at stake. The consumer is handicapped
in a sense that he has no source to check the reliability of his service provider.
"In recent times there have been a number of changes to the online pharmacy
scene which has been complicated by the large number of illegal sites that have
mushroomed. Many of them remain functional for just a few weeks to a few months
and then are shut down and restarted under different names. Thus, it is now
very difficult to estimate the exact size of this market because one can never
be sure of exactly how many such sites are operational at a given time,"
opines Barnagarwala. She adds, "Globally the main argument against online
pharmacies is the potential hazard that a few illegal operations have created.
Many online pharmacies do not have adequate checks in place and end up selling
harmful prescription drugs to underage people. Some pharmacies actually promote
themselves as 'no prescription required' pharmacies and induce consumers to
buy counterfeit or spurious medicines. Due to the poor regulatory framework
and inadequate implementation of rules in India, nearly 20 percent of the global
burden of illegal online pharmacies is based in India."
Survival is the key
Presence of many national and multinational pharma companies in India, availability
of huge and diverse patient pool and moreover the cost of medicine in the Indian
market, should have lured online pharmacies. Even after the presence of all
such required ingredients, online pharmacies are present in small patches in
India. Dr R B Smarta, Managing Director, Interlink Marketing Consultancy, provides
the rationale for this discrepancy when he says, "In order to prosper,
'online pharmacies' are suppliers to patients. Wherever access to doctors is
very costly, online pharmacies thrive. While in India, access to doctors, specifically
general practioners (GP's) is relatively economic and internet is still not
the viable option for all.Therefore online pharmacies (as a concept) have not
prospered. It is also true that the success of such pharmacies depend on huge
premiums on products which patients are willing to pay."
Nair echoes Smarta's views. He says, "Online pharmacies have not picked
up in the Indian market due to many reasons. Low e-tailing penetration, high
market penetration of drugstores/ pharmacies, lower cost of drugs in India compared
to western countries, branded drug prescription and lack of regulation to govern
online pharmacy are some of those. Entire e-tailing market (non-travel) in India
was approximately $ 0.2 billion (0.04 percent of retail market) in 2006-07 compared
to around 8 percent in US. India has more than five lakh pharmacies compared
to around 60,000 pharmacies in US and 56,000 pharmacies in Brazil, hence locating
a pharmacy is not very inconvenient. Increasingly more and more pharmacies in
India have started offering home delivery services thereby offering convenience
similar to online pharmacies."
In any form of business cost is always a deciding factor. This is the area where
India scores over European countries. Highlighting this fact, Nair adds, "Cost
of drugs in India is significantly low compared to western and European countries
since India is largely a generic market. Also both organised players (such as
Medplus) as well as community pharmacies offer discounts upto 10 percent on
purchase of drugs. Prescriptions in India generally contain brand name and hence
substituting the same without doctor's consent or pharmacist counseling could
be difficult. Also, Indian consumers prefer to stick to the drugs prescribed
by the doctor unless they have full trust in the dispensing pharmacist. This
limits the capability of online pharmacy to substitute the ordered drugs with
low cost generics."
Members of the medical fraternities who traditionally believe in examining the
patient and writing prescriptions expectedly show little interest in the online
pharmacy model. Dr F D Dastur, Director Medical Education and Hospital Quality,
Hinduja Hospital and Medical Research Center raise his doubts. He says, "Online
pharmacies work well in certain developed countries that have a highly educated
population but I do not think we in India are yet ready for it. Doctors working
with online pharmacies are totally dependent on the accuracy of the patient's
symptoms for making a decision; these symptom are often exaggerated or dramatised
and need further probing to obtain the correct picture."
access to doctors is very costly, online pharmacies thrive. While in India,
access to doctors specifically general practitioners (GP's) is relatively
economic and internet is still not the viable option for all"
- Dr R B Smarta
Interlink Marketing Consultancy
our most recent study in summer 2008, based on these industry traffic figures,
we estimated the trade in illicit prescriptions at $12,000,000,000 (twelve
- Te Smith
Unfortunately, as of now, in India, the drawbacks of online
pharmacies overshadow their benefits. The lack of separate regulations is a
serious lacuna. As Smarta informs, "Although, there is no absence of 'online
Pharmacies', very handful of them are present in India. There are no separate
regulations for them. Rule 64 & 65 of Drugs and Cosmetics Act applies to
even 'online pharmacies." According to Nair pharmacy retail in India is
governed by Drugs and Cosmetics Act, 1940 which does not separately recognise
online pharmacy as a retail channel and hence no specific provisions to address
the needs of this channel exists currently.
Online pharmacies have always been looked upon suspiciously
as a channel used by counterfeiters. Pharma companies are wary of online pharmacies
as they can act as a brand spoiler. Nair opines, "Proliferation of online
pharmacies could result in an increase in drug trafficking through unauthorised
sale of drugs. Unauthorised import of medicines resulting in increase in spurious/
counterfeit drugs and absence of encryption tools to protect customer data resulting
in misuse of personal information are other serious concerns." The US is
home to more than 50 percent of the world's online pharmacies but this huge
share is perhaps not so welcome by pharma companies operating in the US as they
have to work harder to preserve their brand value. Barnagarwala provides a more
detailed analysis saying, "The most important impact that the proliferation
of online pharmacies in the major pharmaceutical markets like the US have had
is the impetus it has given to parallel imports. This has significantly undercut
the market for branded (and in some cases, even generic) drugs in the US since
the drugs imported through the online pharmacies operating in other countries,
particularly Canada, are often priced at significantly lower levels than those
available in the US."
In a damage control effort, according to Barnagarwala, "Many
pharma companies have tried to reduce this damage by stopping the supply of
their drugs to these online pharmacies. However this has only resulted in online
pharmacies procuring the generic versions of these drugs from other Eastern
European countries, at even lower prices. Some pharma companies have raised
the prices of their brands in lower-cost markets, thus shaving off the margin
for many of online pharmacies in countries outside US."
According to Smarta, the negative fall out of online pharmacists could be a
rampant substitution as well as sales of such drugs, which are not allowed as
per Drugs and Cosmetics Act. It is not only an impediment to the companies but
also could become a concern for the community.
If contained within regulations and laws, online pharmacy will prove a very
good concept and Smarta, Smith, Nair and Barnagarwala all vouch for this fact.
Genuine efforts of some legitimate operators were eclipsed by opportunistic
online pharmacists who give it a bad name. "Online pharmacies are not as
detrimental to pharma companies as some reports seem to indicate. In fact if
regulators are vigilant and if adequate checks are in place, legal full service
online pharmacies that operate within domestic markets can help ensure that
patients refill their prescriptions and hence improve compliance rates,"
says Barnagarwala. Smith feels that online pharmacies are no different from
other business categories that seek to lower their costs and increase their
market size by taking advantage of the efficiencies offered by e-commerce and
the global reach of the internet. Smarta rightly sums up, "If online pharmacy
serves patients and customers in the right sense, it can become a part of healthcare
or medical care information systems."