Online drugstore chief cheers Abe on in deregulation fight

by Ayako Mie

Staff Writer

Genri Goto, CEO and founder of online drugstore Kenko.com, senses victory after Prime Minister Shinzo Abe announced in his growth strategy earlier this month that the government would relax rules for online sales of nonprescription drugs.

Four years ago, Kenko.com sued the health and labor ministry over an ordinance banning the sales of over-the-counter drugs online. His saga appeared to be over when the Supreme Court ruled in January that the ordinance was excessive and illegal. But despite the ruling, a loophole has allowed the restriction to remain in place.

“What’s harder to scrap are regulations designed to benefit a particular party, (such as) vested interests with long and deep ties to politicians and bureaucrats,” Goto said.

The fight over whether to lift the ban on sales of nonprescription drugs over the Internet underscores the difficulty of revamping the heavily regulated ¥1 trillion market.

While the nation watches to see if the so-called third arrow of Abe’s economic plan — deregulation — can spur economic growth and innovation, questions remain as to whether the plan will close loopholes, like one created in 2009 that had prohibited online sales of over-the-counter drugs.

In 2006, the Diet revised the law on over-the-counter drugs for the first time since 1960, allowing convenience stores to sell nonprescription drugs. Although the law did not mention any restrictions on online sales, the ministry drafted an ordinance requiring “face-to-face” sales for all drugs — including aspirin — citing safety concerns. This effectively banned online sales.

Since the Supreme Court overturned the ordinance in January, saying the face-to-face requirement was not included in the original law, the health and labor ministry has held 11 consultative roundtable sessions to set rules for online sales of over-the-counter drugs.

“During the course of discussion, they claimed face-to-face was important because it allowed them to get a ‘smell’ of the patient,” implying that pharmacists dealing face to face know more about the customers, said Goto, whose company, like drugstores, has certified pharmacists to assist customers. “I can’t ‘smell’ my customers over the Internet. But I have all their names and addresses. Drugstore chains have no idea who their cash customers are.”

Online sales of over-the-counter drugs would help elderly and disabled people who cannot shop on their own. The current deregulation only covers prescription drugs. But any future deregulation would also expand the market as so-called big data, including digital medical records, are more widely utilized.

While Abe has touted all-out deregulation, there are exceptions. Some 25 drugs that became over-the-counter less than four years ago and drugs with potentially severe side effects cannot be sold online, even though a number of them are widely used.

“It would be problematic if people started using twice the drugs they need, just because of the convenience” of buying medicine online, health minister Norihisa Tamura said earlier this month.

As the Upper House election — expected to be held July 21 — draws closer, lawmakers from the ruling Liberal Democratic Party have demanded more exceptions, partly because the nation’s approximately 300,000 pharmacists have historically been a powerful vote-gathering tool for the LDP.

“If online sales should be allowed, it will destroy the pharmacists,” one LDP lawmaker said earlier this month during a party health and labor committee meeting.

Although Abe was able to hold off this opposition within the party, his growth strategy included a clause that online sales should be allowed under appropriate rules to ensure consumer safety, which could leave some wiggle room against Internet sales.

“Whether Abe can reform Japan really depends on if he can push for deregulation,” Goto said. “Japan really needs a driving engine, which would create more business opportunities.”

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