Fairval

Notes on Indian equities, sectors and economy

The thuggery of AIOCD needs to be stopped

Posted by fairval on October 14, 2015

Chemists in several large cities today shut their shops in a ‘strike’ called by their powerful industry body – All India Organisation of Chemists and Druggists (AIOCD). The strike was to protest against online pharmacies, a few of which have been springing up in recent years.

Online pharmacies have been around in India since the last 2-3 years. But so far, most of them (bar one, which managed to raise PE funding) were tiny, under-funded players, who carried out their business in a modest way. These players have also attempted their business in amateurish fashion, not making adequate effort to confirm to the law of the land. Some of them were selling medicines without prescription, while many openly promote substitution. Both of these are illegal activities.

AIOCD could muzzle the early entrants quite successfully. Its modus operandi with these players was quite simple – find a legal violation in their procedures, and approach legal authorities and get them to shut down (or seriously scare) the online pharmacy. Even marketplace Snapdeal got caught out by AIOCD, when it was found allowing sale of medicines without prescription. That was a stupid error by Snapdeal, but it wasn’t the first online player to make it (which makes it even more stupid).

As a result, so far there has been no significant online pharmacy player. Existing incumbents have mostly been too scared of AIOCD to advertise. They think the moment they try to grow big, AIOCD will find a way to shut them down.

In the last couple of months, though there has been a change. Finally, couple of serious players have entered the market. These are Netmeds, an outfit from Chennai, and more importantly, PM Health and Life Care, an outfit promoted by experienced IT veteran – Phaneesh Murthy. Both of these know are openly advertising on mass media, something which no earlier entrant had either the guts, or the resources to do.

It does appear AIOCD has realised that the serious players are now in the business. Both Netmeds, and PM Health have reasonable understanding of the pharma retail business. They have made sure their business model is quite robust. Which means AIOCD could not try their earlier tactic – find the online player violating a legal guideline, and pin them down on it.

AIOCD knows there is no legal way to can shut down law abiding online pharmacies – namely PM Heatlh and Netmeds. Hence the strike.

But it is time the government takes action against AIOCD. There are several grounds to do this:

  1. This a strike for a flimsy reason. The law of the land does not prohibit online pharmacies. So what business does AIOCD have to call a strike?
  2. The neighbourhood chemist does all kinds of violations of the Drugs and Cosmetics Act (the applicable law). Shouldn’t AIOCD be prosecuted for it?
  3. India has a very high percentage of spurios drugs in the markets. By some estimates as much as 15-20%. That is one in five. This is scary, and many lives are regularly lost because of this. As the industry body, AIOCD certainly bears some culpability

Professional online players can seriously help the consumer – by giving assurance of quality drugs.

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