Tech

Amazon faces resistance as it moves into the online pharmacy space in India

Key Points
  • Amazon is launching an online drugstore in India, starting with a trial in Bangalore. 
  • It's already facing some resistance on the ground. 
  • "We will not give up," said a representative of The All India Organization of Chemists & Druggists, which represents retail pharmacies and distributors. "We will fight (Amazon) tooth and nail."
A man wearing a facemask, amid concerns over the spread of the COVID-19 novel coronavirus, pays for groceries in a local market in New Delhi on March 14, 2020.
Jewel Samad | AFP | Getty Images

Amazon announced last week it's launching its online drugstore in India, starting with a trial in Bangalore. 

The Amazon Pharmacy service offers prescription medicines, over-the-counter drugs for common ailments like cough and colds, and some traditional medicine. There are also healthcare devices available for sale online, including glucometers and blood pressure monitors. 

Amazon's pilot in India follows its recent efforts to penetrate the U.S. market, after it acquired an online pharmacy start-up called PillPack. PillPack, which Amazon bought in the summer of 2018, makes it easy for consumers to get their medications delivered. 

The push into India comes when the pandemic is driving more people around the world to order their medications and seek care online, rather than in-person. The market is one of the largest in the world and is continuing to grow. A 2019 report from the research firm Frost & Sullivan estimated that the Indian pharmaceutical industry would increase from more than $29 billion in estimated revenues in 2019 to $55 billion in 2020. 

"This is particularly relevant in present times as it will help customers meet their essential needs while staying safe at home," an Amazon spokesperson said in a statement to the media. 

Local insiders say it won't be easy to scale the service without resistance, even for a company with Amazon's resources.

Within a few days of Amazon's announcement to pilot in India, The All India Organization of Chemists & Druggists, an industry group that claims to represent hundreds of thousands of retail pharmacies and distributors, drafted a letter to Amazon CEO Jeff Bezos and Amit Agarwal, an Amazon executive based in India.

"We are writing to you as we came to know that www.amazon.com has decided to enter 'Online Pharmacy' space, probably oblivious to the fact that the E-Pharmacies are illegal and not recognized by the laws under Drug & Cosmetic Act & Rules there under," the letter dated August 14 reads. "This space has been marred by extreme controversies, court cases and legal issues in the last few years." 

A slew of online pharmacies in India have emerged in recent years, but many have struggled given the lack of clear regulations. Laws for e-commerce have been ill-defined and are subject to interpretation in India, research reports have found, as they were written at a time when computers were less prevalent.

Amazon is also dabbling in food delivery in India with a trial this summer, which is likewise starting in Bangalore. 

In the past few years, retail pharmacies have organized strikes to protest online pharmacies, claiming that these businesses could put their livelihoods at stake

In response, local online pharmacy companies like 1mg have argued there's a growing need for these businesses and there's a strong code of conduct to protect patients. But groups like The All India Organization of Chemists & Druggists have argued that allowing pharmacies to sell medicines online will result in misuse and overuse of medications. Some studies have uncovered sales of counterfeit medicines for sale on online pharmacies in India. 

Because of these challenges, making a successful play into the online pharmacy space requires "deep pockets" and a "long-term commitment," said Vinod Melvani, president at Pharma Channel Consulting, a research and consulting firm. 

Despite these challenges, the pandemic may have moved the needle for a player like Amazon.

"There are macro trends that would suggest there's a growing need for online pharmacy in India," he added. 

In light of its concerns about online pharmacies, the All India Organization of Chemists & Druggists' Yash Aggarwal told CNBC that his group will do everything in its power to resist Amazon. 

The organization has said it will talk with government officials to make its case that Amazon's move is illegal.

"We will not give up," he said. "We will fight (Amazon) tooth and nail, and we'll even go to the Supreme Court." 

"This is about the bread and butter of 800,000 people," Aggarwal said, referring to its network of community pharmacists and distributors. "And we will not hand over that bread and butter to corporations." 

1mg, which could also find itself competing with Amazon, said it doesn't expect the company to quickly dominate the space. 

"We will have to wait and see," said Prashant Tandon, co-founder and CEO of the venture-backed digital health start-up 1mg. Tandon has said his company is working with the government to move towards a "good regulatory mechanism" for the space, which could open up investment. 

"This is a tough market and Amazon will be under scrutiny," he said. 

Amazon did not respond to a request for comment. 

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