The government will soon come out with clarifications on the sale of medicines online, acceding to requests of start-ups seeking a legal framework for e-pharmacy business.

"The Ministry of Health is working on clarifications on this issue," said, Nirmala Sitharaman, Commerce and Industry Minister. The Drugs and Cosmetics Act— which regulates the import, manufacturing, distribution and sale of drugs and cosmetics in the country — doesn’t explicitly disallow the sale of medicines online with a valid prescription, although more clarity is required on this issue, some analysts have said.

E-pharmacy players, in recent months, have come under attack from off-line chemist stores that allege that the former are violating foreign direct investment (FDI) rules by offering discounts. Off-line chemist stores have also raised concerns about the quality of drugs sold by online players.

Already, the uncertainties have hit some start-ups. Phaneesh Murthy-backed online pharma market place Zigy.com has trimmed operations substantially following court cases brought by offline chemists and druggists.

The Department of Industrial Policy and Promotion (DIPP) has initiated discussions with certain financial sector regulators like the Insurance Regulatory and Development Authority (IRDAI) and the Pension Fund Regulatory and Development Authority (PFRDA) on allowing insurance companies like LIC as well as pension funds to invest in start-ups, Ramesh Abhishek, Secretary, DIPP said.

The DIPP move follows comments by various start-ups that while large insurance firms invest mainly in risky assets like stocks, they don’t fund start-ups.

The DIPP has convened a meeting on February 2 of SIDBI, venture capitalists, various incubators and accelerators associated with start-ups, Sitharaman said after holding a comprehensive meeting devoted to only incubators that play a major role in boosting the start-up eco-system. SIDBI manages the ‘fund of funds’ of Rs10,000 crore, which was part of the package announced by Prime Minister Narendra Modi last year to help start-ups. The fund is supposed to invest in Sebi-registered Alternative Investment Funds which, in turn, will invest in start-ups.

In the meeting with Sitharaman, some incubators have pitched for adequate tax incentives. The Department of Industrial Policy and Promotion has sought the approval of the expenditure finance committee of the finance ministry for setting up a credit guarantee fund, Abhishek said. The proposed Rs 2,000-crore fund, a part of the corpus meant for the fund of funds, will provide up to 80 per cent risk cover for collateral-free credit being given by banks to start-ups.