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www.expresspharmaonline.com FORTNIGHTLY INSIGHT FOR PHARMA PROFESSIONALS
16-31 July 2009  
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Home - Market - Article

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 and cons

Online 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.

Global presence

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."

Market stats

"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"

- Jumana Barnagarwala
Head
Healthcare Consulting
Datamonitor, India

"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"

- 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) (US)."

Online worries

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."

Negative fallouts

"Wherever 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
Managing Director
Interlink Marketing Consultancy

"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) (US)"

- Te Smith
Vice President
Communications,
MarkMonitor

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."

sachin.jagdale@expressindia.com

 


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