Author: Nishith Desai & Associates
2019 so far has witnessed a lot of activity in the pharma space, so much so that the e-pharmacy saga – a pressing development towards the close of 2018 – has taken a temporary backseat this year. Instead, the new stars of 2019 so far have been price regulation and regulation of electronic nicotine delivery systems. 2019 also saw a significant piece of legislation introduced – the New Drugs and Clinical Trial Rules, 2019 – which has already begun making waves in the industry.
Some of the major developments that have taken place so far are captured below:
Indian Government Notifies New Clinical Trial Regime
The Ministry of Health and Family Welfare (“Health Ministry”) has notified the New Drugs and Clinical Trials Rules, 2019 (“New Drugs & CT Rules”) to replace the existing regulatory framework governing clinical trials in India under the Drugs and Cosmetics Rules, 1945 (“D&C Rules”). The New Drugs & CT Rules are more comprehensive and broader in scope than existing regulation under Schedule Y of the D&C Rules (“Old CT Rules”). The New Drugs & CT Rules retain certain existing provisions from the earlier regime, such as for the establishment of an ethics committee to oversee clinical trials and the requirement to conduct a clinical trial in four stages.
Some significant additions in the New Drugs & CT Rules include provisions for bioavailability and bioequivalence studies as well as the requirement for including clinical trial participants from pediatric and geriatric populations in the study if the drug is intended to treat conditions that specifically affects such populations.
Another significant addition to the New Drugs & CT Rules is the relaxation of the requirement for conducting local clinical trials of all drugs. Under the old CT Rules drugs approved in foreign jurisdictions were required to undergo clinical trials locally in India before they could be marketed in the country. Under the New Drugs & CT Rules, however, local clinical trials are not required to be considered for drugs marketed in foreign jurisdictions that recognized by the Health Ministry or in respect of orphan drugs.
The New Drugs & CT Rules also introduce the concept of ‘investigational new drug’ as a substance that has not been approved for marketing as a drug in any country and ‘orphan drug’ as a drug that is intended to treat a condition which affects less than half a million persons in India. The New Drugs & CT Rules also provide regulators with the option of waiving the requirement to conduct clinical trials in certain cases, such as for drugs which have already been approved in specified developed countries.
The New Drugs & CT Rules have been welcomed by the industry as they are expected to clarify, streamline and shorten the timelines for conducting clinical trials in India.
Government is in Process of Revising and Updating the National List of Essential Medicines
The Health Ministry has reportedly conducted the first stakeholders meeting with the Standing National Committee on Medicine (“SNCM”) to revise the National List of Essential Medicines (“NLEM”). The NLEM is a list of medicines that satisfy the priority healthcare needs of a population. The SNCM has been constituted by the Health Ministry to revise the NLEM every few years.
The Health Ministry first took up the mantle of revising the NLEM in February earlier this year and has concluded a meeting with stakeholders in the last week of July. A medicine is added in the NLEM if it is:
- Essential for the treatment of a disease or illness prevalent in the population;
- Safe and efficacious for the treatment of such disease;
- Cost-effective for the treatment; and
- Feasibility in context of advantage and cost-effectiveness i.e. an essential medicine should be available in a form in which adequate quality throughout its shelf-life under recommended storage conditions is ensured.;
Unlike previous years, the terms of reference of the SNCM include not only medicines and medical devices but also ‘other products used for the health and hygiene of the public’. In pursuance of this mandate, the SNCM has reportedly shortlisted hygiene products such as soap, adult diapers, sanitary napkins, hospital hand gloves, floor disinfectant and operation theater gum boots to add to the NLEM. Generally, products in the NLEM are subject to price control under the Drugs (Prices Control) Order, 2013(“DPCO”)- India’s drug price control legislation. However, the Government has expressed the intention to de-link the NLEM from automatic price control. As a result, items listed in the NLEM will be brought under price control only upon the recommendation of a second committee.
The NLEM was first drawn up in 1996 and has been revised every few years since. The NLEM was last revised in 2015. Earlier, the medicines listed in the NLEM were subject to price control under the DPCO. The prices of formulations in the NLEM were fixed by the National Pharmaceutical Pricing Authority (“NPPA”)- the apex authority for drug price control in India. It remains to be seen the role the NPPA will play in regulating the prices of items under the NLEM after the new NLEM is finalized.
Indian Government Caps Prices of Anti-Cancer drugs
The NPPA has reduced the prices of nine cancer drugs by way of an office memorandum (“OM”). The OM is the latest addition in a growing list of cancer drugs that the NPPA has brought under the price control by capping trade margins on such drugs at 30%. The NPPA first capped the trade margin of 32 cancer drugs through an order dated February 27, 2019 (“Order”). Since then, over 450 drugs have been added to Order. According to the government, the price cut is expected to benefit 2.2 million cancer patients in India and result in annual savings of INR 8 billion.
The trade margins of the cancer drugs were capped under Paragraph 19 of the DPCO– the order passed under the Essential Commodities Act, 1955 (“EC Act”) which empowers the NPPA to regulate the prices of drugs and certain medical devices. The DPCO lists out certain drugs under its schedule (referred to as Scheduled Formulations), which are based on the National List of Essential Medicines. The NPPA fixes the ceiling prices of all Scheduled Formulations based on a prescribed formula under the DPCO. Drugs that are not covered under the Schedule to the DPCO – non-scheduled formulations – are restricted from having a price increase by more than 10% over the previous year.
The cancer drugs for which trade margins were capped are non-scheduled formulations, and technically not subject to a price ceiling that is prescribed by the NPPA. However, the trade margins were capped under Paragraph 19 of the DPCO – which gives the NPPA the power to fix the price of any drug (regardless of whether they are Scheduled or non-Scheduled Formulations) in any manner as it deems fit, in case of extra-ordinary circumstances and in the public interest.
India Proposes to Make Marketers of Drugs Responsible for Quality of Drugs and Regulatory Compliances
The Health Ministry published a notification on June 24, 2019 proposing to amend D&C Rules–framed under India’s primary drug control legislation, the Drugs & Cosmetics Act, 1940 (“D&C Act”), such that entities marketing a drug are responsible for the quality of the drug as well as for carrying out regulatory compliances (“Proposed Amendment”).
In India, a common business model is for companies to outsource the manufacturing activity for their drug to a third-party manufacturer, such that for the purposes of regulation, the third party is considered the manufacturer while the outsourcing party is considered the marketer of the drug. Currently, the D&C Rules hold only the manufacturer of the drug liable for any defects in the drug or for gaps in compliance, and not the marketing company. The Proposed Amendment aims to ensure that pharmaceutical companies that contract out the manufacturing activity are also responsible for compliance with the quality standards and compliances under the D&C Rules.
India Introduces A Proposal to Regulate Electronic Nicotine Delivery Systems as Drugs
The Ministry of Law and Justice (“Law Ministry”) issued an ordinance on September 18, 2019 banning the production, manufacture, import, export, transport, sale, distribution, storage and advertisement of e-cigarettes (“Ordinance”). The Ordinance also requires persons who are in possession of e-cigarettes to deposit such e-cigarettes with a police officer.
Currently, the Ordinance has been challenged before the Calcutta High Court by an importer of e-cigarettes (“Petitioners”). The Petitioners before the Calcutta High Court have contended that e-cigarettes should be treated as any other Nicotine Replacement Therapy and are currently being unfairly and arbitrarily singled out. The Petitioners are also expected to place evidence before the Calcutta High Court to demonstrate that e-cigarettes pose fewer health risks as compared to combustible cigarettes and cigars.
The Health Ministry has been in the process of regulating ENDs for almost a year now. In August 2018, the Health Ministry issued an advisory to all Indian States and Union Territories to ensure that ENDs were not sold in their territory (through brick-and-mortar stores or online), except in accordance with the provisions of the D&C Act (“Advisory”)  as well as sending an internal communication to all state drug controllers requiring them to ensure that ENDs are sold in accordance with the D&C Act (“Communication”). Since then, the Central Board of Indirect Taxes and Customs has also issued a circular to India’s customs authorities asking such authorities to ensure the Advisory is implemented (“Circular”). However, the validity of the Circular and Communication were challenged in the Delhi High Court, where it has been stayed. The Delhi High Court, while ruling on the interim stay, held that ENDs do not appear to be drugs on the face of it. The Bombay High Court, in another matter relating to the Advisory, placed reliance upon the decision of the Delhi High Court and passed an interim order directing the Maharashtra Food & Drug Authority to not take any action against the petitioner who is a manufacturer of e-cigarettes. The cases before the Delhi High Court and the Bombay High Court are currently pending. However, since the Ordinance has come into force any order made by these courts regarding the constitutionality of the Communication and Circular be infructuous unless the Ordinance is also declared unconstitutional.
Currently, some nicotine products such as nicotine gums and nicotine transdermal therapeutic patches are regulated as drugs under the D&C Act. Such products will continue to be sold as only ENDs have been banned and not nicotine altogether.
Government Notifies Date for Labeling Norms to Come into Force
The Health Ministry by way of notification dated March 20, 2019 (“Enforcement Notification”) stated that labeling norms first notified on April 26, 2018 (“Original Notification”) would come into force on April 01, 2019 (“Enforcement Date”). Before the Enforcement Notification, compliance with the Original Notification was on voluntary basis. However, from the Enforcement Date, compliance with the Original Notification became mandatory.
The Original Notification seeks to amend the labeling requirements of drugs as stipulated in the D&C Rules. The Original Notification amends the labeling declarations that are required to made in respect of drugs specified in Schedules G, H, X and H1.
The CDSCO has been taking labeling violations more seriously than before. Earlier this year, the cosmetics division of the CDSCO canceled the import license of a cosmetics importer for labeling violations.
Health Ministry proposes to implement track and trace mechanisms for bulk drugs
The Health Ministry published a notification on August 08, 2019 proposing to amend the D&C Rules such that all bulk drugs manufactured in India or imported into India have a quick response (“QR”) code on their label at each level of packaging (“Proposed Amendment”). As per the Proposed Amendment, data stored on the QR code should contain the product identification code, name and details of the bulk drug, details of the manufacturer or importer and any special requirements for storing or transporting the drug.
The Proposed Amendment is based on a recommendation made by the Drugs Technical Advisory Board (“DTAB”) – India’s apex advisory board on technical matters relating to drugs in April 2019. In May 2018, the DTAB also proposed the introduction of a track and trace system to be implemented by 300 major pharmaceutical brands on a voluntary basis. Efforts to implement serialization in respect of pharmaceutical products were first made in 2015 when the Health Ministry put forth a proposal to require all manufacturers of drug formulations to print barcodes on all primary, secondary and tertiary packaging of drugs. However, this proposal was never brought into force.
Serialization/track and trace requirements is also set be applicable to drugs exported out of India starting from April 01, 2020. However, this requirement will be enforced by the Ministry of Commerce and Industry, as opposed to the Health Ministry that is otherwise in charge of regulating drugs.
We hope to achieve more clarity with respect to some of the above-mentioned such as the status of the e-cigarettes, e-pharmacies and the requirements of QR codes on drug packaging by the end of the year. The Indian pharma industry is poised to grow exponentially in the coming few years. We are seeing an increase in government support and encouragement towards pharma companies, especially with respect to start-ups. We are excited to see what the rest of 2019 has in store for us!
Stay informed with The Pharma Legal Handbook: India
 Notification dated March 19, 2019 by Ministry of Health and Family Welfare, available at: https://cdsco.gov.in/opencms/opencms/system/modules/CDSCO.WEB/elements/download_file_division.jsp?num_id=NDU0Mg== (Last Accessed August 15, 2019).
 News article on ‘Health ministry to conduct first stakeholders meet for revision of NLEM 2015 on July 25’, dated July 24, 2019 available at: http://pharmabiz.com/NewsDetails.aspx?aid=117114&sid=1 (Last Accessed August 15, 2019).
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 News article on ‘Government shortlists hygiene products to be brought under price control’, dated August 25, 2019 available at: https://www.livemint.com/science/health/government-shortlists-hygiene-products-to-be-brought-under-price-control-1566710834857.html (Last Accessed August 15, 2019).
 News article on ‘Adding hygiene products to NLEM won’t lead to their price control: Govt’, dated August 26, 2019 available at: https://www.thehindubusinessline.com/economy/adding-hygiene-products-to-nlem-wont-lead-to-their-price-control-govt/article29261897.ece (Last Accessed August 15, 2019).
 Office Memorandum by National Pharmaceutical Pricing Authority dated May 15, 2019, available at: http://www.nppaindia.nic.in/wp-content/uploads/2019/05/Scan0114.pdf (Last Accessed August 15, 2019).
 Order by National Pharmaceutical Pricing Authority dated February 27, 2019, available at: http://egazette.nic.in/WriteReadData/2019/198807.pdf (Last Accessed August 15, 2019).
 Revised MRP of non-scheduled cancer medicines by National Pharmaceutical Pricing Authority dated March 08, 2019, available at: http://www.nppaindia.nic.in/wp-content/uploads/2019/03/Brands-List-for-OM.pdf (Last Accessed August 15, 2019).
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 Advisory dated August 28, 2018 by Ministry of Health and Welfare, available at: https://mohfw.gov.in/newshighlights/advisory-electronic-nicotine-delivery-systems-ends-including-e-cigarettes-heat-not (Last Accessed August 15, 2019).
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 Notification dated March 20, 2019 by Ministry of Health and Family Welfare, available at: http://egazette.nic.in/WriteReadData/2019/200553.pdf (Last Accessed August 15, 2019).
 Notification dated April 26, 2018 by Ministry of Health and Family Welfare, available at: http://egazette.nic.in/WriteReadData/2018/185026.pdf (Last Accessed August 15, 2019).
 Order by the Cosmetics Division of the Central Drugs Control Organization dated June 17, 2019, available at: https://cdsco.gov.in/opencms/opencms/system/modules/CDSCO.WEB/elements/download_file_division.jsp?num_id=NDUwNw== (Last Accessed August 15, 2019).
 Minutes of Meetings of the 82nd Drugs Technical Advisory Board held on April 02, 2019, available at: https://cdsco.gov.in/opencms/opencms/system/modules/CDSCO.WEB/elements/common_download.jsp?num_id_pk=ODc5 (Last Accessed August 15, 2019).
 Minutes of Meetings of the 79th Drugs Technical Advisory Board held on May 16, 2018, available at: https://cdsco.gov.in/opencms/opencms/system/modules/CDSCO.WEB/elements/common_download.jsp?num_id_pk=NTY4 (Last Accessed August 15, 2019).
 Notification dated June 03, 2015 by Ministry of Health and Family Welfare, available at: http://egazette.nic.in/WriteReadData/2015/164394.pdf (Last Accessed August 15, 2019).
 Public Notice 16/2015-20 by Directorate General of Foreign Trade dated July 04, 2019, available at: https://dgft.gov.in/sites/default/files/PN%2016%20dt.%204.07.2019%20Eng_3.pdf (Last Accessed August 15, 2019).