E-Pharmacy IPO Prospectus: Revolutionizing Online Pharmaceutical Retail

What Is an E-Pharmacy?

E-pharmacy, also known as online pharmacy, refers to pharmacies that operate via the internet and deliver orders to customers through postal or courier services. Broadly speaking, online pharmacies in the market can be categorized into three types.

1. Organization-based Online Pharmacies:Two models exist within this category. One is the marketplace model, in which technology companies connect nearby authorized pharmacies with end users. The other is the inventory-based model, whereby online pharmacies serve as the digital storefronts of offline authorized pharmacies.

2. Non-organizational Online Pharmacies:In this model, prescription drugs can be ordered without any verified prescription. Due to the lack of qualified pharmacists, there is no verification of order authenticity. Meanwhile, inadequate record-keeping and the absence of audit mechanisms are major concerns in this field.

3. Illegal international trade conducted through online pharmacies:In this model, drugs are shipped across international borders without any prescription or approval from relevant authorities. This model is often used to order cheaper medications, such as Viagra.

The above three models are often misunderstood and used interchangeably. Due to the lack of clear guidelines for online pharmacies, the public finds it difficult to distinguish between legitimate, organized operators and illegal, unorganized ones. The European Union has introduced a unified logo for use by all legally operating online pharmacies and retailers in EU member states, thereby combating illegal online pharmacies.

Advantages and Features of Online Pharmacies
1. Unrestricted by geography, with a broad consumer base encompassing the entire internet user population. Unlimited listing of pharmaceutical products.
2. Through features such as navigation, categorization, and search, consumers can quickly locate the medications they need and promptly confirm their orders, thereby providing a more convenient entry point for purchasing.
3. Lower costs and relatively larger profit margins for medications make online drug purchases cheaper than those at traditional brick-and-mortar pharmacies.

Risks and Concerns of Online Pharmacies
◆Illicit or unethical pharmacies sometimes sell expired, substandard, or even counterfeit medications.
◆Children can order medications without adult supervision.
◆There are also some concerns, including lack of confidentiality, inappropriate packaging, undetectable drug interactions, and a range of other issues.
◆In India, many online pharmacies are controlled by underworld gangs or organized crime networks.

Current Status of Online Pharmacies Abroad

◆United States
The most attractive aspect of online pharmacies is the price of medications. Buyers can obtain discounts of 50% or even 80% when purchasing online. In 2006, 80% of Americans preferred to purchase medications from Canada or other countries. President Obama’s healthcare plan allowed people to buy cheaper drugs from other countries. A report indicates that U.S. consumers are facing significant risks of purchasing counterfeit medicines due to the growing volume of online drug sales.

The National Association of Boards of Pharmacy (NABP) offers two verification programs for online pharmacies. The first is VIPPS, established by the NABP in 1999. The other is LegitScript, which had verified the legitimacy of 340 online pharmacies and identified more than 47,000 “rogue” online pharmacies as of 2010. All Canadian and non-U.S. online pharmacies that sell medications to Americans, regardless of whether they hold relevant credentials, are ineligible for certification under the VIPPS and LegitScript programs.

◆United Kingdom
In the United Kingdom, more than two million people are accustomed to purchasing medications from online pharmacies. While some of these operations are legitimate, others constitute “dangerous practices” that may even pose risks to children. In 2008, the Royal Pharmaceutical Society of Great Britain (RPSGB) introduced a green cross logo to help identify online pharmacies that have been verified and accredited. Under reciprocal agreements among registered pharmacists in Europe, they can operate in the UK by completing a simple registration with the General Pharmaceutical Council.

The United Kingdom is a pioneer in online pharmacies, with its first such entity, Pharmacy2U, commencing operations in 1999. In the UK, online pharmacies are invariably associated with online clinic physicians. These doctors provide online consultations and issue prescriptions. Physicians employed by online clinics must be registered with the Care Quality Commission (CQC). Online clinics are limited to prescribing a restricted range of medications and therefore do not replace physicians in conventional clinical settings. Doctors employ various methods to deliver online consultations, which are sometimes conducted entirely through questionnaires. The fees paid by consumers typically encompass the consultation fee, prescription issuance fee, and the cost of the medications.

◆India
In India, there is no specific legislation explicitly governing online pharmacies; however, numerous related laws indirectly regulate this sector. These statutes collectively oversee food, health, cosmetics, pharmaceuticals, and dietary supplements. Due to their outdated nature, these laws are ill-equipped to address the novel challenges posed by technological advancements in these fields, thereby creating a regulatory gray area. It is only a matter of time before online pharmacies are brought under the purview of amended legislation.

◆Bulgaria
All online pharmacies in Bulgaria must be registered with the Bulgarian Drug Agency (BDA). The BDA regulates the domestic pharmaceutical trade and conducts analyses when there are uncertainties regarding the quality and safety of medications. Typically, a BDA logo along with the pharmacy’s registration certificate serves as proof of the pharmacy’s legitimacy. When consumers click on this logo, they will be directed to the official website of the Bulgarian Drug Agency, which provides information such as the pharmacy’s name, address, registration number, and details about the manager of the regulatory department.

◆Finally, let us examine the development overview of online pharmacies in China.

In China, state regulation of online pharmacies is significantly stricter than that of general e-commerce. As of the end of July 2013, only 112 enterprises in China had obtained qualifications for online drug sales, including 61 B2C companies, none of which had achieved break-even. As online drug purchasing gains wider acceptance, the market capacity of the pharmaceutical e-commerce sector is projected to reach RMB 15 billion over the next five years. In the United States, the scale of the pharmaceutical e-commerce market accounts for nearly 30% of the entire pharmaceutical distribution sector. Although online retail sales in China’s pharmaceutical e-commerce market are growing, they have only just surpassed the RMB 100 million mark. The key factors constraining its development lie in various aspects, including regulatory frameworks, the business environment, and platform infrastructure.

Therefore, the decisive factors that will shape the future development of pharmaceutical e-commerce are as follows: First, ensuring that drug safety no longer poses a barrier to consumers’ online purchases requires stricter domestic regulation of pharmaceutical e-commerce, including the implementation of stringent regulatory policies and rigorous certification of drugs sold online. Second, the domestic e-commerce industry must achieve greater maturity and earn broader consumer recognition. Finally, substantial progress in the domestic logistics sector, particularly in third-party pharmaceutical logistics, will pave the way for the growth of the pharmaceutical e-commerce industry.

Text | Xu Huiting Editor | Mo Renying

VCBeat’s Chief Advisor for the Glossary of Trending English Terms in Internet Healthcare: Zhao Xinyuan, current CEO of Beijing InTechLong Technology Co., Ltd., and member of the Technical Steering Committee of HL7 China.

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