Localization
Nishith Desai & Associates / India
The key facts about the localization in Indian Pharma. Prepared in association with Nishith Desai & Associates, a leading law firm in India, this is an extract from The Pharma Legal Handbook: India, available to purchase here for GBP 75.
1. Are there any rules or regulations requiring and/or encouraging localization in your country? What is the legal framework defining these localization rules and policies?
There are no specific legislations or regulations requiring and/or encouraging localization in India. The relevant localization policies have been elaborated upon in the answers provided below.
2. Have there been any recent significant changes involving localization rules?
Yes, there have been significant changes involving localization rules.
3. If yes, when did they take place and what did they involve?
Exemption from Drug Price Control
The Department of Pharmaceuticals by way of an order (“Order”) extended a price control exemption that was earlier granted only to manufacturers of new drugs and medical devices protected through a product patent (“Patented New Drugs”) developed through indigenous research and development to all Patented New Drugs regardless of the country in which such drugs are developed (“New Drug Exemption”). The New Drug Exemption was effective from January 03, 2019.
Prior to the Order, the scope of price control exemption was limited to only those manufacturers who were producing Patented New Drugs that were (i) developed through indigenous (i.e. local) research and development and (ii) not produced elsewhere. However, the New Drug Exemption removes all localization requirements. Therefore, even manufacturers, importers and marketers of Patented New Drugs developed and manufactured outside India are now eligible for price control exemption for a period of five years from the start of its commercial marketing. Conversely, domestic manufacturers who marketed Patented New Drugs in India and outside India have also become eligible for price control exemption, which was not the case earlier.
Prices of all drugs and medical devices in India are controlled under the Drugs (Prices Control) Order, 2013 (“DPCO”). The National Pharmaceutical Pricing Authority (“NPPA”) set up under the DPCO is empowered to fix ceiling prices of drugs and medical devices that are listed in the schedule appended to the DPCO (“Scheduled Formulations”). The drugs that are not part of the schedule to the DPCO (“Non-Scheduled Formulations”) are under strict price surveillance. The prices of Non-Scheduled Formulations cannot be increased by more than 10% in any 12 month period.
Exemption from Conducting Local Clinical Trials
The New Drugs and Clinical Trial Rules, 2019 (“New Drugs & CT Rules”) empowers the Central Drugs Standard Control Organisation (“CDSCO”)- India’s apex drug controller- to exempt a drug approved in foreign jurisdiction specified by the CDSCO from undergoing local clinical trials to obtain marketing authorization in India. The New Drugs & CT Rules came into force on March 19, 2019. For more information, please see Question 6.
4. Is the process of obtaining a marketing authorization impacted by localization policies in your country?
Yes, the process of obtaining marketing authorization is impacted by localization policies in India.
5. If yes, how so (what are the incentives received or the requirements)?
Drugs
As a matter of rule, new drugs are required to undergo local clinical trials before being granted marketing authorization in India to determine whether such drug is safe and efficacious for the Indian population. A new drug includes the following:
- A drug, including a bulk drug substance, which has not been used in India to a significant extent and whose safety, efficacy and therapeutic value has not been established in India;
- A drug which is already approved which is now proposed to be marketed with modified or new claims such as indication, dosage, dosage forms or route of administration;
- A Fixed Dose Combination (“FDC”) of two drugs individually approved earlier but which are now proposed to be changed for the first time or if the ratio of drugs in an FDC is sought to be changed;
- A modified or sustained release form of a drug or novel drug delivery system of any drug approved by the CDSCO; and
- All vaccines and Recombinant DNA (r-DNA) derived drugs, unless certified otherwise.
However, a local clinical trial may not be required at all if the new drug is approved and marketed in countries specified by the CDSCO and if:
- No major adverse events have been reported;
- There is no probability or evidence of difference in (a) the enzymes or gene involved in the metabolism of the new drug and, (b) safety and efficacy of the new drug between the Indian population and the population the drug was tested on; and
- The applicant has undertaken to conduct comprehensive post-marketing surveillance to establish and effectiveness of the new drug as per a study design that has been approved by the CDSCO.
Medical Devices
Generally, medical devices that have not been approved by the CDSCO (“Investigational Medical Devices”) are required to undergo clinical investigations before they can be manufactured or imported for sale or distribution in the country. Submission of such clinical investigation data is a pre-requisite to obtaining a manufacturing or import license in respect of such medical device.
However, when a free sale certificate has been issued in respect of any medical device by the national regulatory authority of Australia, Canada, Japan, European Union countries or the United States of America, an import or manufacturing license can be granted without carrying out a clinical investigation.
6. Is the pricing process for pharmaceutical products impacted by localization policies in your country?
Yes, the pricing process of pharmaceutical products is impacted by localization policies.
7. If yes, how so (what are the incentives received or the requirements)?
For more information, please see Question 3.
8. Is the reimbursement of pharmaceutical products impacted by localization policies in your country?
The reimbursement of pharmaceutical products is not impacted by localization policies in India as India does not have a reimbursement policy for pharmaceutical products.
9. If yes, how so (what are the incentives received or the requirements)?
Not applicable.
10. Is the access to public or public tenders of pharmaceutical products impacted by localization policies in your country?
Yes, access to public tenders of pharmaceutical products is impacted by localization policies.
11. If yes, how so (what are the incentives received or the requirements)?
As part of the ‘Make in India’ policy, the Indian Government gives preference to ‘local supplier’ of pharmaceutical products and medical devices for public procurement purposes by all government procuring entities. The Public Procurement Policy of India stipulates the eligibility criteria to obtain preferential status in case of tenders.
To qualify as a local supplier of pharmaceutical products, the minimum local content shall be 75% for all products manufactured in India and 10% for all products manufactured outside of India. The local content requirements are slated to increase every financial year until they reach 90% and 30% respectively for fiscal year 2023-25.
For medical devices, the minimum local content is as follows:
| Category of Medical Devices | % of Local Content |
|---|---|
| Medical disposables and consumables | 50% |
| Medical electronics, hospital equipment, surgical instruments | 25% |
| Implants | 40% |
| Diagnostic Reagents/IVDs | 25% |
Separately, the Indian Government has also amended the General Financial Rules, 2017 (“GFR”) – a compilation of rules and orders to be followed by Government Departments when dealing with matters involving public finances – restricting bids for public tenders from bidders based in countries which share a land border with India (“Bordering Countries”). The amendment requires bidders from Bordering Countries to register with the Department for Promotion of Industry and Internal Trade (“DPIIT”) to be eligible to bid for public procurement of goods, services or works carried out by government bodies (including public sector banks and enterprises).
12. Are import tariffs, importation and/or exportation permits, trade and/or taxation of pharmaceutical products impacted by localization policies in your country?
Yes, import tariffs, importation and/or exportation permits, trade and/or taxation of pharmaceutical products is not impacted by localization policies in India.
13. If yes, how so?
Import tariff exemption is granted for some pharmaceutical products by the Finance Ministry of India. However, after the introduction of the Make in India policy, the Central Government has withdrawn tariff exemptions granted to over 70 drugs including life-saving drugs used for HIV with a view to boost production of pharmaceutical products in India.
14. Are there any other incentives or advantages offered by the current local localization rules in your country?
Yes.
15. If yes, what are they?
India offers tax incentives in the form of tax deductions for in-house R&D expenditures.
16. Are there discussions about the possibility of implementing localization policies in your country?
None.
17. If yes, what are the proposed reforms and when should they come into place?
None.
