An Overview Of Two Key Laws On Drugs In India

I. Drugs and Cosmetics Act, 1940, and the rules made thereunder:

(a) Drugs and Cosmetics Act, 1940:

The Drugs and Cosmetics Act, 1940 (DCA) regulates the import, manufacture, distribution and sale of drugs under all systems of medicine, such as Allopathy, Homeopathy, Ayurveda, Siddha and Unani, as well as cosmetics. The DCA, along with the rules framed thereunder, constitute the principal law on drugs.

The DCA contains a very broad and inclusive definition of "drug" which reads as under:

"drug" includes-

(i) all medicines for internal or external use of human beings or animals and all substances intended to be used for or in the diagnosis, treatment, mitigation or prevention of any disease or disorder in human beings or animals, including preparations applied on human body for the purpose of repelling insects like mosquitoes;

(ii) such substances (other than food) intended to affect the structure or any function of the human body or intended to be used for the destruction of vermin or insects which cause disease in human beings or animals, as may be specified from time to time by the Central Government by notification in the Official Gazette;

(iii) all substances intended for use as components of a drug including empty gelatin capsules; and

(iv) such devices intended for internal or external use in the diagnosis, treatment, mitigation or prevention of disease or disorder in human beings or animals, as may be specified from time to time by the Central Government by notification in the Official Gazette, after consultation with the Board;

Further, the definition of "manufacture" is wide enough to cover any process or part of a process for making, altering, ornamenting, finishing, packing, labelling, breaking up or otherwise treating or adopting any drug. Thus, the DCA, by virtue of these wide definitions, seeks to cover a wide range of activities in relation to drugs which not only include what we conventionally perceive as drugs but also other substances and devices as provided in the definition.^[1] By virtue of the definition of "drug", the DCA applies to veterinary drugs as well.

Chapter II of the DCA provides for the constitution of the Drugs Technical Advisory Board ("DTAB")^[2] to advise the Central Government and the State Governments on technical matters arising out of the administration of the DCA and to carry out other functions assigned to it by the DCA. This Board's functions are restricted to drugs other than Ayurvedic, Siddha and Unani drugs^[3]. Who are to be members of the DTAB is also prescribed in the law itself and it includes the Direct General of Health Services (DGHS), the Drugs Controller General of India (DCGI) along with various other officers and persons connected to the field as prescribed. The constitution of the DTAB makes it, at least in theory, an extremely robust body fully equipped to advise governments on all things drugs. It may be noted that the DTAB is only an advisory body and while it would be advisable for the Government to take its advice on technical matters arising out of the administration of the DCA, not all provisions mandate it. The territory within which the DTAB is to operate and exercise its functions is clearly demarcated in various provisions of the DCA.^[4] The Central Drugs Laboratory (CDL)^[5], located at Kolkata, is also constituted under the provisions of this Chapter and it carries out functions entrusted to it under the Act or rules made thereunder. The Central Government is also empowered to constitute an advisory committee called the Drugs Consultative Committee (DCC)^[6] to advise the Central Government and the State Governments and the DTAB on any matter tending to secure uniformity throughout India in the administration of the Act.

Chapter III of the DCA pertains to import of drugs and cosmetics, and Chapter IV to manufacture, sale and distribution of drugs (other than Ayurvedic, Siddha and Unani drugs, save as otherwise provided)^[7] and cosmetics. These two chapters contain several vital provisions. They define terms such as "standard quality", "misbranded drugs", "adulterated drugs" and "spurious drugs" in connection with import and manufacture, and contain provisions prohibiting the manufacture for sale or distribution, sale, stocking or offering or exhibiting for sale drugs without a licence and prohibiting inter alia the import as well as the aforementioned activities in connection with drugs which are not of standard quality or which are misbranded or adulterated or spurious.

The term "standard quality" in relation to a drug means that the drug complies with the second schedule to the DCA. The second schedule to the DCA is therefore significant, for it refers to the standards to be complied with for each class of drug, and also provides that standards as prescribed (by rules) are required to be adhered to. For example, in the case of vaccines, the standards to be complied with are the standards maintained at the International Laboratory for Biological Standards, Stantans Serum Institute, Copenhagen^[8] and at the Central Veterinary Laboratory, Weybridge, Surrey, U.K.^[9], and such other laboratories recognised by the World Health Organisation (WHO)^[10] from time to time, and such further standards of strength, quality, and purity, as may be prescribed. In the case of drugs included in the Indian Pharmacopoeia, standards of identity, purity and strength specified in the Indian Pharmacopoeia and such other standards as may be prescribed are to be complied with, whereas in the case of drugs not included in the Indian Pharmacopoeia but included in the official pharmacopoeia of any other country, standards of identity, purity and strength specified for drugs in such official Pharmacopoeia of any other country and such other standards as may be prescribed are to be complied with. The Drugs and Cosmetics Rules, 1945 (DCR) also prescribe standards to be complied with for various kinds of drugs.

Since the Indian Pharmacopoeia is mentioned in the preceding paragraph, a brief introduction to it would be appropriate. A pharmacopeia is a book, published usually under the jurisdiction of the government and containing a list of drugs, their formulas, methods for making medicinal preparations, requirements and tests for their strength and purity, and other related information. Several countries across the world publish their own pharmacopoeia. The Indian Pharmacopoeia is the official book of standards for drugs included therein so as to specify the standards of identity, purity and strength of the drugs imported, manufactured for sale, stocked or exhibited for sale or distributed in India. It is prepared and revised from time to time by the Indian Pharmacopoeia Commission (IPC)^[11], a body established by the Government of India.

Further, Sections 10A and 26A contained in Chapters III and IV respectively empower the Central Government to prohibit the import or manufacture, sale and distribution of drugs, by way of notification in the official gazette, if it is satisfied that the use thereof is likely to involve any risk to human beings or animals or that it does not have the therapeutic value claimed for it or contains ingredients and in such quantity for which there is no therapeutic justification and that in the public interest it is necessary or expedient so to do. It has been held by the Supreme Court^[12] that "Under Section 26-A, the Central Government must be 'satisfied' that any drug or cosmetic is likely to involve (i) any risk to human beings or animals; or (ii) that any drug does not have the therapeutic value claimed or purported to be claimed for it; or (iii) contains ingredients in such quantity for which there is no therapeutic justification. Obviously, the Central Government has to apply its mind to any or all of these three factors which has to be based upon its 'satisfaction' as to the existence of any or all of these factors. The power exercised under Section 26-A must further be exercised only if it is found necessary or expedient to do so in public interest." and that "If the power under Section 26-A is exercised on the basis of irrelevant material or on the basis of no material, the satisfaction itself that is contemplated by Section 26-A would not be there and the exercise of the power would be struck down on this ground."

In a case arising in the context of a notification issued by the Central Government prohibiting the manufacture and sale of certain drugs pursuant to the recommendations made by the DTAB, the issue which arose was whether a complete prohibition of the manufacture and sale of such drugs unreasonably restricts the right of the petitioners to carry on their trade guaranteed under Article 19(1)(g) of the Constitution, and the Supreme Court rejecting the said contention inter alia held that: "While examining the reasonableness of the prohibition against manufacture and sale of the said drugs the harmful potentialities of the drugs have to be considered in the context of the conditions as prevalent in the country where, on account of illiteracy, people are not aware of the ill effects of the drugs available in the market and are often misled and misguided by quacks and inexperienced doctors. The less drastic course of permitting manufacture and sale of the drugs with a warning about its use, suggested by the learned counsel for the petitioner, would, in our opinion, not be adequate to protect the general public from the harmful consequences. It is, therefore, not possible to hold that the prohibition which has been imposed by the impugned notification on the manufacture and sale of the drug in question imposes an unreasonable restriction so as to be violative of the right guaranteed under Article 19(1)(g) of the Constitution."^[13]

A recent case of exercise of this power by the Central Government was with respect to the drug Oxytocin which was inter alia directed to be manufactured only by public sector undertakings or companies for domestic use and its import was prohibited, while allowing private sector companies to manufacture Oxytocin formulations for export, by way of a notification dated 27.4.2018^[14], subsequently amended to some extent by notification dated 21.8.2018^[15]. The notification dated 27.4.2018 came to be challenged in the Delhi High Court which, vide judgment dated 14.12.2018^[16] quashed the same on the ground that it was arbitrary and unreasonable. It was inter alia held that there was no scientific basis to support the conclusion that the existing availability or manner of distribution of the drug posed a risk to human life or animals, which was one of the preconditions for exercise of power under Section 26A of the DCA. The court also held that the consequence of the notification could be drastic since scarcity or restricted availability of the drug could lead to increased maternal fatalities and that Section 26A did not authorize the Central Government to create a State monopoly. The said judgment was challenged by the Central Government in the Supreme Court, which has recently passed an order^[17] referring the following substantial questions of law to a larger Bench of three Judges: "(i) Whether a drug included in the National List of Essential Medicines published under Schedule 1 of the Drugs (Prices Control) Order, 2013 notified under Section 3 of the Essential Commodities Act, 1955 would be subject to the provisions of Section 26A of the Drugs and Cosmetics Act, 1940?, (ii) Whether the impugned notification has resulted in creating a monopoly in favour of public sector companies, to the complete exclusion of private sector companies, and if so, whether it would be protected by Article 19(6)(ii) read with Article 14 of the Constitution?, (iii) Whether the classification made by the impugned notification between licensed public sector and private sector companies, in the manufacture of the drug Oxytocin for domestic use, would achieve the object and purpose of preventing the unregulated and illegal use of the drug?, (iv) Whether it would be in public interest to restrict the manufacture of a life-saving drug for domestic use, to a single public sector undertaking, to the complete exclusion of the private sector companies, particularly in view of the high maternal mortality rates in the country? (v) Whether there was relevant and objective material before the Central Government to form the basis of satisfaction to exercise the power to prohibit the manufacture of the drug by the private sector companies for domestic use, under Section 26A of the Drugs and Cosmetics Act, 1940? (vi) Whether the object of curbing the clandestine manufacture and unregulated use of the drug Oxytocin, which is covered by Section 18 of the Drugs and Cosmetics Act, 1940, can be achieved by taking recourse to Section 26A by imposing a ban on the manufacture of licensed drugs by private sector companies? (vii) Whether the exercise of power by the Central Government under Section 26A of the Drugs and Cosmetics Act, 1940 is legislative or executive in nature?".

Importantly, under Section 26-B, the Central Government is also empowered to regulate or restrict the manufacture, sale or distribution of a drug if it is satisfied that such drug is essential to meet the requirements of an emergency arising due to epidemic or natural calamities. In the context of Covid-19, on 26.3.2020, the Central Government issued Notification No. GSR 219(E)^[18] directing that sale by retail of any preparation containing the drug Hydroxychloroquine shall be in accordance with the conditions for sale of drugs specified in Schedule H1 to the DCR. On the same day, another Notification No. GSR 220(E)^[19] was issued permitting persons holding license to sell, stock or exhibit or offer for sale, or distribute drugs by retail, to sell drugs as specified by retail with doorstep delivery of the drug, subject to certain conditions.

Contravention of provisions of Chapters III and IV constitutes an offence punishable with imprisonment and/or fine and can result in confiscation of the drugs in question. Provisions pertaining to appointment of Inspectors and Government Analysts, Inspectors' powers (inspection, taking samples, search and seizure, examination of records) and procedure to be followed by them, and provisions pertaining to reports by Government Analysts, are all contained within Chapter III.

Chapter IVA applies only to Ayurvedic, Siddha and Unani drugs and contains similar provisions as the earlier chapters in the context of these systems of medicine.

Chapter V, titled 'Miscellaneous', predominantly contains provisions pertaining to offences by companies and government departments, penalty for vexatious search and seizure, summary trials, specials courts, etc. One important provision in this chapter, Section 33P, empowers the Central Government to give such directions to any State Government as may appear to be necessary for carrying into execution in the State any of the provisions of the DCA or any rule or order made thereunder.

Several provisions in the DCA confer upon the Central Government the power to make rules. While it is not possible to discuss the entire spectrum of the rules made under the DCA in this piece, a brief overview of each of such rules, with reference to a few provisions thereof, is provided hereinbelow.

(b) Drugs and Cosmetics Rules, 1945:

The oldest and most elaborate set of rules made under the DCA are the DCR, which contain a complex network of intricate provisions inter alia relating to various aspects ranging from the duties and functions of the CDL, Inspectors, Government Analysts, qualifications required for appointment of various authorities and procedures to be followed in the exercise of their functions, many aspects of import, manufacture and sale of drugs - restrictions, prohibitions and procedural requirements including issuance, renewal cancellation and suspension of licences and conditions thereof, records to be maintained, labelling and packing of drugs, standards of drugs, requirements for collection, storage, processing and distribution of human blood and its components, forms for various procedural requirements, numerous schedules, etc.

The provisions pertaining to the manufacture for sale or distribution of drugs other than Homeopathic medicines are contained in Part VII of the DCR. A manufacturer is required to obtain a licence from the Central Licence Approving Authority (CLAA)^[20] or the State licensing authority, as the case may be, before he can commence manufacturing of a drug for sale, and such licence is to be issued inter alia after inspection of the facility for manufacturing and testing and if the authority is satisfied that the applicant is in a position to fulfil the requirements laid down in the DCR and several conditions are complied with by the applicant, such as conditions in relation to the manufacturing facility, process, staff including personnel with certain qualifications, laboratory equipment, storage, etc. The licences themselves carry numerous conditions in regard to maintaining staff, premises, equipment, testing, records, samples, inspection, compliance with the provisions of the DCA and DCR and such further requirements as may be specified, etc. Separate licenses and conditions are prescribed for different categories of drugs. Rule 84-A provides for an appeal against an order refusing to grant or renew a licence. Rule 85 empowers the authorities to cancel or suspend a licence, after providing an opportunity to the licensee to show cause, if in the authority's opinion, the licensee has failed to comply with any of the conditions of the licence or with any provisions of the DCA or DCR, and also provides for an appeal against a decision to cancel or suspend a licence.

Likewise, provisions pertaining to import and registration are contained in Part IV and provisions pertaining to sale of drugs other than Homeopathic medicines are contained in Part VI, which parts also stipulate extensive licensing provisions.

Part IX of the DCR contains detailed provisions on labelling and packing of drugs other than Homeopathic medicines and there is a prohibition on selling or distributing any drug unless it is labelled in accordance with the rules. A perusal of the labelling provisions shows that that they deal with the name of drug, weight, measure, volume, contents of the drug, name and address of manufacturer, a distinctive batch number (from which details of manufacture of a particular batch of the drug can become for inspection), manufacturing licence number, date of manufacture and date of expiry, caution or warning as prescribed for different categories of drugs [such as the famous Schedule H drugs (Schedule H being part of the DCR), which are required to be labelled with the symbol R^x and with the words "Not to be sold by retail without the prescription of a Registered Medical Practitioner" in the prescribed manner], Quick Response Code for Active Pharmaceutical Ingredients (API), etc. The labelling provisions are essential as they are in aid of the object of the DCA of promoting the use of good quality drugs, and ensuring that drugs that do not live up to quality do not find their way into the market.^[21] The Rules also prescribe the pack sizes for drugs.

In the context of the rules on labelling of drugs, the Supreme Court^[22] had occasion to deal with a contention that the consumer has the fundamental right to know whether the food products, cosmetics and drugs available for human consumption are of non-vegetarian or vegetarian origin, and the question whether under Article 226 of the Constitution of India the High Court has jurisdiction to direct the manufacturers of drugs and cosmetics to display a particular symbol in their packages to identify the ingredients of 'non-vegetarian' or 'vegetarian' origin. The Supreme Court inter alia held that the right to expression and receive information under Article 19(1)(a) of the Constitution can be limited by reasonable restrictions under the law made for the purpose mentioned in Article 19(2), that while it is imperative for the State to ensure the availability of the right to the citizens to receive information, such information can be given to the extent it is available and possible, without affecting the fundamental right of others, that when it is not possible to distinguish drugs as life-saving or not, it may not be desirable for the patient or his attendant to know the origin of the ingredients of the drug i.e. whether 'vegetarian' or 'non-vegetarian' and such option cannot be left to the patient or his attendant if required to save the life or eradicate a disease and that the High Court under Article 226 of the Constitution has no jurisdiction to direct the executive to exercise power by way of subordinate legislation pursuant to the power delegated by the legislature to enact a law in a particular manner.

Separate parts of the DCR containing elaborate provisions are devoted to manufacture for examination, test or analysis, to the manufacture and sale of homeopathic medicines, to different aspects pertaining to Ayurvedic, Siddha and Unani drugs, to biological and other products, to collection, storage, processing and distribution of whole human blood and its components by blood centres, manufacture of blood products, collection, processing, testing, storage, banking and release of umbilical cord blood stem cells, to approval of institutions for carrying out tests on drugs, cosmetics and raw materials used in their manufacture, etc., all of which are of equal importance.

The DCR contains a number of schedules (some of which, such as Schedule H, are well known). Some schedules are devoted to procedural aspects such as Forms, fees, etc. There are several schedules for the categorization of drugs (for example, Schedule C, C1, D G, H, X, etc.), Schedule F provides the requirements for the functioning and operation of a Blood Bank and/or for preparation of blood components, Schedule F1 is devoted to Vaccines, Schedule K provides for certain exemptions for certain classes of drugs, Schedule P pertains to life period of drugs, and so forth.

One of the important concepts which was introduced in the DCR was that of "new drug" (defined in Rule 122E) in Part XA thereof which, along with Schedule Y to the Rules, inter alia contains elaborate provisions for approval of "new drug" for manufacture for sale and for import thereof, as also provisions for approval of and conduct of clinical trials which are, as a general rule, mandatory before a new drug can be approved for manufacture for sale or for import. However, in 2019, separate rules called the New Drugs and Clinical Trials Rules, 2019 were made by virtue of which Part XA and Schedule Y are now not applicable in respect of new drugs and investigational new drugs for human use.

(c) New Drugs and Clinical Trials Rules, 2019:

The New Drugs and Clinical Trials Rules, 2019 (NDCTR) apply to all new drugs, investigational new drugs for human use, clinical trial, bioequivalence study, bioavailability study and Ethics Committee. These rules define a wide range of concepts such as "academic clinical trial", "bioavailability study", "bioequivalence study", "clinical trial", "investigational new drug", "new drug" and many more. Some of the key definitions are reproduced hereinbelow:

2(e) "bioavailability study" means a study to assess the rate and extent to which the drug is absorbed from a pharmaceutical formulation and becomes available in the systemic circulation or availability of the drug at the site of action;

2(f) "bioequivalence study" means a study to establish the absence of a statistically significant difference in the rate and extent of absorption of an active ingredient from a pharmaceutical formulation in comparison to the reference formulation having the same active ingredient when administered in the same molar dose under similar conditions;

2(j) "clinical trial" in relation to a new drug or investigational new drug means any systematic study of such new drug or investigational new drug in human subjects to generate data for discovering or verifying its,-

(i) clinical or;

(ii) pharmacological including pharmacodynamics, pharmacokinetics or;

(iii) adverse effects,

with the objective of determining the safety, efficacy or tolerance of such new drug or investigational new drug;

2(w) "new drug" means,-

(i) a drug, including active pharmaceutical ingredient or phytopharmaceutical drug, which has not been used in the country to any significant extent, except in accordance with the provisions of the Act and the rules made thereunder, as per conditions specified in the labelling thereof and has not been approved as safe and efficacious by the Central Licencing Authority with respect to its claims; or

(ii) a drug approved by the Central Licencing Authority for certain claims and proposed to be marketed with modified or new claims including indication, route of administration, dosage and dosage form; or

(iii) a fixed dose combination of two or more drugs, approved separately for certain claims and proposed to be combined for the first time in a fixed ratio, or where the ratio of ingredients in an approved combination is proposed to be changed with certain claims including indication, route of administration, dosage and dosage form; or

(iv) a modified or sustained release form of a drug or novel drug delivery system of any drug approved by the Central Licencing Authority; or

(v) a vaccine, recombinant Deoxyribonucleic Acid (r-DNA) derived product, living modified organism, monoclonal anti-body, stem cell derived product, gene therapeutic product or xenografts, intended to be used as drug;

Explanation.- The drugs, other than drugs referred to in sub-clauses (iv) and (v), shall continue to be new drugs for a period of four years from the date of their permission granted by the Central Licencing Authority and the drugs referred to in sub-clauses (iv) and (v) shall always be deemed to be new drugs;

Chapter V of the NDCTR deals with clinical trial, bioavailability and bioequivalence study of new drugs and investigational new drugs. It inter alia provides that for mandatory permission required to be obtained for conducting clinical trials of new drugs and investigational new drugs, conditions for grant of such permission by the Central Licensing Authority^[23], conditions, procedures, practices to be followed to conduct clinical trials and other related provisions. Likewise, it also contains provisions in relation to permission for bioavailability or bioequivalence of new drug or investigational new drug and principles and practices to be followed in this regard and other related provisions. Chapter VI deals with the issues in case of injury or death in clinical trial or bioavailability or bioequivalence study of new drug or investigational new drug, such as compensation, medical management. The Ethics Committee^[24] for clinical trials, established and registered in terms of Chapter III, has a significant role to play in regard to the conduct of clinical trials and of bioavailability or bioequivalence studies, such as approval of protocol, overseeing of the clinical trials or studies, reporting of serious adverse event, etc.

Chapter VIII pertains to the manufacture of new drugs or investigational new drugs for clinical trial, bioavailability or bioequivalence study or for examination, test and analysis. It inter alia provides that no person shall manufacture a new drug or an investigational new drug to conduct clinical trial or bioavailability or bioequivalence study or for examination, test and analysis without obtaining permission to manufacture such new drug or investigational new drug from the Central Licencing Authority and contains further provisions for conditions subject to which such permission can be granted and conditions and procedures to be followed by the manufacturer. Further the manufacturer is also required to obtain a licence in accordance with the provisions of the DCA and the DCR. The chapter also provides for the manner of labelling of new drug or investigational new drug manufactured, for the purpose of clinical trial or bioavailability or bioequivalence study. There are also provisions pertaining to permission to manufacture unapproved active pharmaceutical ingredient for development of pharmaceutical formulation for test or analysis or clinical trial or bioavailability and bioequivalence study. Chapter IX, which deals with import of new drugs and investigational new drugs for clinical trial or bioavailability or bioequivalence study or for examination, test and analysis, also stipulates a requirement of obtaining licence for the same from the Central Licensing Authority and contains provisions in regard to the same. Chapter XI deals with the import or manufacture of new drug for sale or for distribution, which also requires a permission from the Central Licensing Authority and conditions to be adhered to and other compliances.

The NDCTR also contains other chapters dealing with various other procedural provisions and several schedules which are vital importance in regard to the subject matter of the NDCTR, such as those prescribing general principles and practices for clinical trial, requirements and guidelines for permission to import or manufacture of new drug for sale or to undertake clinical trial, conduct of clinical trial, requirements and guidelines for conduct of bioavailability and bioequivalence study of new drugs or investigational new drugs, etc.

An immediate fallout of the notification of the NDCTR was that the inclusion "stem cell derived product" in the definition of "new drug" contained therein resulted in the discontinuance of treatment of several patients suffering from diseases which require treatments such as the Human Embryonic Stem Cell Therapy until licences could be duly obtained by the clinics providing the treatment. Several persons approached the Delhi High Court seeking a direction for continuance of treatment till such time licence is issued to the clinic providing the treatment or some other clinic. As an interim measure, the court directed that treatment be provided to the petitioners till such time the concerned clinic or at least some other clinic applies for a licence and the licence is processed, subject to the clinic in question submitting all the information as to the treatment being afforded to the petitioner to the Central Drugs Standard Control Organisation (CDSCO).^[25]

Prior to the introduction of these rules, when the law on clinical trials was governed by Part XA and Schedule Y of the DCR, the law, its lacunae and lax implementation had come under severe criticism on account of certain allegations of malpractices in conducting clinical trials.^[26] It remains to be seen whether these new rules are more effective in curbing the same while at the same time promoting research and development of new drugs.

(d) Medical Devices Rules, 2017:

These rules, made by the Central Government in exercise of powers under Sections 12, and 33 of the DCA, are applicable in respect of: (i) substances used for in vitro diagnosis and surgical dressings, surgical bandages, surgical staples, surgical sutures, ligatures, blood and blood component collection bag with or without anticoagulant covered under Section 3(b)(i) of the DCA, (ii) substances including mechanical contraceptives (condoms, intrauterine devices, tubal rings), disinfectants and insecticides notified under Section 3(b)(ii) of the DCA and (iii) devices notified from time to time under Section 3(b)(iv) of the DCA. The provisions of these rules have effect, notwithstanding anything inconsistent therewith contained in the DCR.

These rules define "medical device" as under:

"medical device" means,-

(A) substances used for in vitro diagnosis and surgical dressings, surgical bandages, surgical staples, surgical sutures, ligatures, blood and blood component collection bag with or without anticoagulant covered under sub-clause (i),

(B) substances including mechanical contraceptives (condoms, intrauterine devices, tubal rings), disinfectants and insecticides notified in the Official Gazette under sub-clause (ii),

(C) devices notified from time to time under sub-clause (iv),

of clause (b) of Section 3 of the Act;

Explanation: For the purpose of these rules, substances used for in vitro diagnosis shall be referred as in vitro diagnostic medical device.

The rules inter alia contain parameters for classification of medical devices into four classes – low risk (Class A), low moderate risk (Class B), moderate high risk (Class C) and high risk (Class C). Medical device manufacturers are required to obtain a licence to manufacture (from the State Licensing Authority in case of Class A or B medical devices and from the Central Licensing Authority in case of Class C or D medical devices) and have to follow the essential principles of safety and performance of medical devices as may be specified in the guidelines issued by the Ministry of Health and Family Welfare in the Central Government, from time to time keeping in view the contemporary scientific and technological knowledge and development. The rules stipulate the requirements and compliances for obtaining a licence, some common and some based on the class of medical device, as well as conditions for manufacturing medical devices. A licence to manufacture can be suspended or cancelled if the licensee contravenes any of the provisions of the DCA or the Medical Devices Rules, 2017, with a provision for appeal. Other provisions include those pertaining to import of medical devices (licensing and conditions), labelling of medical devices, provisions pertaining to clinical investigation of medical device and clinical performance evaluation of new in vitro diagnostic medical device, registration of certain medical devices, etc. and detailed schedules. Medical devices specified in the Eighth Schedule thereto are exempted from the provisions of the rules.

II. The Drugs (Prices Control) Order, 2013:

In exercise of the powers conferred by Section 3 of the Essential Commodities Act, 1955 (10 of 1955), the Central Government, from time to time, issues what is known as the Drugs (Prices Control) Order (DPCO), which primarily contains provisions pertaining to the regulation of pricing of drugs. Currently, it is the Drugs (Prices Control) Order, 2013 (DPCO, 2013)^[27] which is in force, which supersedes the earlier Drugs (Prices Control) Order, 1995 (DPCO, 1995)^[28].

It has been held that price fixation by the Central Government under the DPCO is in the nature of a legislative activity and the dominant object and purpose of such price fixation is the equitable distribution and availability of commodities at a fair price.^[29] Price fixation being a legislative activity, principles of natural justice are not attracted, unless of course provided for in the subordinate legislation itself.^[30] It is also held that the norms fixed by the Central Government are of general application, they are not intended to benefit or harm any particular manufacturer or formulator and indeed no manufacturer or formulator is required to be heard in the determination.^[31]

The DPCO, 2013 was issued in pursuant of and as per the National Pharmaceuticals Pricing Policy, 2012 (NPPP, 2012) ^[32]. One of the stated objectives of NPPP, 2102 is to put in place a regulatory framework for pricing of drugs so as to ensure availability of required medicines - essential medicines - at reasonable prices even while providing sufficient opportunity for innovation and competition to support the growth of industry thereby meeting the goals of employment and shared economic well-being for all. The NPPP, 2012 is materially different from the Drug Policy of 1994, which was implemented by way of the earlier DPCO, 1995, inter alia in that the thrust of the NPPP, 2012 is to regulate the prices of formulations as against the earlier principle of regulating the prices of specified bulk drugs (API) and their formulations adopted in the Drug Policy 1994.

In the context of the DPCO, which is a delegated legislation that follows a policy formulation, the Supreme Court^[33] has held that the Central Government which combines the dual role of policy-maker and the delegate of legislative power, cannot at its sweet will and pleasure give a go-by to the policy guidelines evolved by itself in the matter of selection of drugs for price control, and that the delegated legislation that follows the policy formulation should be broadly and substantially in conformity with that policy, otherwise it would be vulnerable to attack on the ground of arbitrariness resulting in violation of Article 14 of the Constitution. At the same time, it was also held that, the exclusion of some drugs from the purview of the DPCO, even if such exclusion is unjustified, cannot be a ground to claim exclusion of other drugs on the so-called principle of parity and could not be said to be an infraction of Article 14.

The Central Government is empowered to regulate prices under the DPCO. For long period of time, the Central Government was itself undertaking the task of price fixation. However, the task being cumbersome, complicated and time consuming, the Central Government, by a resolution dated 29.8.1997^[34], established an independent body of experts called the National Pharmaceutical Pricing Authority (NPPA)^[35] and entrusted it inter alia with the task of price fixation and revision and other related matters.

The DPCO, 2013 defines various terms relevant to it and some important definitions are reproduced below:

2(i) "formulation" means a medicine processed out of or containing one or more drugs with or without use of any pharmaceutical aids, for internal or external use for or in the diagnosis, treatment, mitigation or prevention of disease and, but shall not include –

(i) any medicine included in any bonafide Ayurvedic (including Sidha) or Unani (Tibb) systems of medicines;

(ii) any medicine included in the Homeopathic system of medicine; and

(iii) any substance to which the provisions of the Drugs and Cosmetics Act, 1940 (23 of 1940) do not apply;

2(u) "new drug" for the purposes of this Order shall mean a formulation launched by an existing manufacturer of a drug of specified dosages and strengths as listed in the National List of Essential Medicines by combining the drug with another drug either listed or not listed in the National List of Essential Medicines or a formulation launched by changing the strength or dosages or both of the same drug of specified dosages and strengths as listed in the National List of Essential Medicines.

2(v) "non-scheduled formulation" means a formulation, which is not included in Schedule-I;

(NOTE: This definition is as per the amendment w.e.f. 9.3.2015 to the DPCO, 2013)

2(zb) "scheduled formulation" means any formulation, included in the First Schedule whether referred to by generic versions or brand name;

The pricing regulation contained in the DPCO, 2013 applies only to scheduled formulations (formulations included in the first schedule to the same) and new drugs as defined therein. It may be noted that the definition of "new drug" under the DCR is not applicable to the DPCO, 2013, which contains its own definition of "new drug", except in the case of paragraph 32 of the DPCO, 2013 (which is reproduced hereinbelow). The DPCO, 2013 contains formulae for calculating the ceiling price of a scheduled formulation and provides for the methodology of retail pricing of a new drug, which once fixed by the Central Government, cannot be sold by manufacturers at a price higher than the ceiling price or retail price, as applicable, plus local taxes as applicable and if a manufacturer sells at a higher price, he would be liable to deposit the overcharged amount along with interest thereon from the date of such overcharging, in addition to penalty in case it is a new drug. While fixing a ceiling price of scheduled formulations and retail prices of new drugs, 16% of price to retailer as a margin to retailer is to be allowed. The DPCO, 2013 also contemplates revision of ceiling prices of scheduled formulations in terms of the provisions thereof.

The DPCO, 2013, however, in paragraph 19 thereof, also contemplates fixation of ceiling or retail price by the Central Government of any drug in case of extraordinary circumstances, if the Central Government considers it necessary in public interest.^[36] Moreover, paragraph 20 thereof empowers the Central Government to monitor the maximum retail price of all drugs, including non-scheduled formulations, and ensure that no manufacturer increases the same more than 10% of the maximum retail price during the preceding 12 months.

Under the DPCO 2013, the Central Government is also required to monitor the availability of scheduled formulations and API contained therein. Furthermore, the Central Government may, with a view to achieve adequate availability and to regulate the distribution of drugs in case of emergency or in circumstances of urgency or in case of non-commercial use in public interest, direct any manufacturer of any API or formulation to increase the production and to sell the API to other manufacturers of formulations and to direct the formulators to sell the formulations to institutions, hospitals or any agency as the case may be.

Paragraph 32 of the DPCO 2013 is noteworthy since it contains a list of cases to which the DPCO, 2013 does not apply. Paragraph 32, as amended by the Drugs (Prices Control) (Amendment) Order, 2019^[37], is reproduced hereinbelow:

32. Non-application of the provisions of this Order in certain cases.-

The provisions of this Order shall not apply to,-

(i) a manufacturer producing a new drug patented under the Indian Patents Act, 1970 (39 of 1970), for a period of five years from the date of commencement of its commercial marketing in the country.

(ii) a manufacturer producing a new drug in the country by a new process developed through indigenous Research and Development and patented under the Indian Patent Act, 1970 (39 of 1970) (process patent) for a period of five years from the date of the commencement of its commercial production in the country.

(iii) a manufacturer producing a new drug involving a new delivery system developed through indigenous Research and Development for a period of five years from the date of its market approval in India:

Provided that the provision of this paragraph shall apply only when a document showing approval of such new drugs from Drugs Controller General (India) is produced before the Government.

(iv) Drugs for treating orphan diseases as decided by the Ministry of Health and Family Welfare, Government of India

Explanation.- Notwithstanding anything contained in this Order, for the purpose of this paragraph 'new drug' shall have the same meaning as is assigned to under Rule 122-E of the Drugs and Cosmetics Rules, 1945.

The schedule to the DPCO, 2013, as originally issued, was based on the National List of Essential Medicines, 2011^[38] issued by the Ministry of Health and Family Welfare. In 2015, a fresh National List of Essential Medicines, 2015^[39] was issued. Thereafter, the Drugs (Price Control) Amendment Order, 2016 was issued on 10.3.2016, by which the Schedule to the DPCO, 2013 was substituted by a new Schedule, as per the National List of Essential Medicines, 2015. In this Amendment Order, an Explanation was introduced in the Schedule which reads as under:

Explanation.

(1) Any dosage form of a medicine, other than the dosage form included in this Schedule, but in same strength and route of administration, which does not have significant difference in terms of pharmacokinetics or pharmacodynamics or efficacy-safety profile over the dosage form mentioned in the list shall be considered as included. To elaborate, if a tablet is included, other dosage forms like conventional tablets and capsules are considered as included. However, such different dosage forms should be considered differently for purposes such as procurement policy, pricing, etc. This principle also applies to all other dosage forms e.g. oral liquid dosage forms, injectables, topical dosage forms, etc.

(2) Innovation in medicine must be encouraged. The formulations developed through incremental innovation or novel drug delivery systems like lipid/liposomal formulations, sustained release/controlled release etc. should be considered as included only if specified in the list against any medicine. Such different formulations should be considered differently for purposes such as procurement policy, pricing, etc.

(3) In cases, where vaccines or immunoglobulins or sera are listed in this Schedule, irrespective of variation in source, composition and strength, all the products of the same vaccines or immunoglobulins or sera as approved by the licensing authority are considered included.

(4) In general, medicines have been mentioned with respect to their active moieties, without mentioning the salts and, in cases where there is significant difference between the salts, the medicine finds mention as its specific salt.

(5) In cases where an active moiety is available as different isomers or analogues or derivatives, they are considered as separate entities, and inclusion of one does not imply inclusion of all isomers or analogues or derivatives.

(6) For injectable preparations, the pack size (single and multi-dose packs) has not been mentioned. It is suggested that the single and multi-dose pack sizes be considered as separate entities for purposes such as procurement/pricing etc.

Paragraph 32 and the aforesaid Explanation (2) added to the schedule evidence an intention to encourage research in medicine and innovations and not subject them to price regulation as a general rule. This intention is evident even from the NPPP, 2012. Drugs which fall within the scope of paragraph 32 are completely excluded from the purview of DPCO, 2013 and formulations which are novel drug delivery systems, sustained release/controlled release etc. should be considered as included only if specified in the list against any medicine. The Delhi High Court had occasion to deal with a case^[40] in respect of a controlled release drug and its observations in regard to paragraph 32 of the DPCO, 2013 and the aforementioned Explanation (2) are noteworthy.

The DPCO, 2013 also contains other provisions connected with price regulation and also provides, in paragraph 31, for a review by the Central Government, at the instance of any aggrieved person, of any notification or order issued under paragraph 4, 5 or 6 of the DPCO, 2013, within 30 days of the date of its publication or the receipt of the order by him. The review, which is in the nature of a post-decisional hearing, is thus limited to price fixation and does not extend, for example, to the inclusion of a drug in the schedule. The Supreme Court has, in the context of the DPCO, 1979^[41], described such a review as "a legislative review of legislation, or more precisely a review of subordinate legislation by a subordinate legislating body at the instance of an aggrieved person".^[42]

Violation of the provisions of the DPCO would amount to a punishable offence under the provisions of the Essential Commodities Act, 1955.

'How much price control is too much price control?' has been a question debated many times over. One of the raging debates on the fallout of too much price control which rose across the country in recent times was when, by way of the Drugs (Price Control) Third Amendment Order, 2016^[43] issued on 21.12.2016, coronary stents were inserted in the schedule to the DPCO, 2013, thereby making them subject to price regulation and thereafter, by way of various notifications, the ceiling prices of coronary stents were fixed and revised from time to time.

Conclusion:

The DCA and the rules made thereunder, thus, together constitute a crucial law regulating import, manufacture, distribution and sale of drugs and the DPCO takes care of regulating the pricing of drugs covered thereunder. There are however several other enactments in the context of medicine and public health, such as the Narcotic Drugs and Psychotropic Substances Act, 1985, the Pharmacy Act, 1948, the Drugs and Magic Remedies (Objectionable Advertisement) Act, 1954, Epidemic Diseases Act, 1897, the Indian Medical Council Act, 1956, Clinical Establishment (Registration and Regulation) Act, 2010, the Medical Termination of Pregnancy Act, 1971, the Medicinal and Toilet Preparations (Excise Duties) Act, 1955, the Poisons Act, 1919, the Transplantation of Human Organs Act, 1994, etc.