Legal & Regulatory > India > Regulation, Pricing and Reimbursement Overview

All about regulation, pricing and reimbursement 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. What are the regulatory authorities with jurisdiction over drugs, biologicals, and medical devices in your country?

The following authorities are responsible for the regulation drugs, biologics and medical devices in India:

(i) Central Drugs Standard Control Organization (“CDSCO”), headed by Drugs Controller General of India (“DCGI”) under the Ministry of Health and Family Welfare

The CDSCO regulates import, manufacture, marketing and clinical trials of drugs, biologics and medical devices for the entire territory of India.

(ii) State-level licensing authority (“SLA”)

Each State, through SLAs (who are the state-level Food and Drug Administration), independently regulates manufacture and sale of drugs, biologics and medical devices within the territory of that State.

In certain cases, there is an overlap of function between DCGI and SLAs. In such cases, SLAs operate under the direction of DCGI.

(iii) National Pharmaceutical Pricing Authority (“NPPA”) under the Department of Pharmaceuticals

NPPA fixes prices of certain essential drugs, biologicals and medical devices for entire territory of India. It monitors price movements other drugs, biologicals and medical devices to ensure that the prices do not increase more than 10% year on year. NPPA also monitors the availability of drugs and takes remedial steps to prevent shortage.

(iv) Controller of Legal Metrology

Each State, through its Controller of Legal Metrology, regulates packaging and labelling of medical devices. The Controller of Legal Metrology does not have jurisdiction over drugs and biologicals.

(v) Review Committee on Genetic Manipulation (“RCGM”) under the Department of Biotechnology (“DBT”)

The RCGM, under the Ministry of Science and Technology to evaluate safety related aspects of on-going research involving Genetically Modified Organisms.

(vi) Genetic Engineering Approval Committee (“GEAC”)

The GEAC, under the Ministry of Environment, Forests and Climate Change regulates research, testing, safe use and handling of Genetically Modified Organisms and their products from an environment safety perspective.

2. What is the regulatory framework for the authorization, pricing and reimbursement of drugs, biologicals and medical devices?

AUTHORIZATION/LICENSING

The Drugs and Cosmetics Act, 1940 (“D&C Act”) along with the Drugs and Cosmetics Rules, 1945 (“D&C Rules”) and The Medical Device Rules, 2017 (“MDR”) governs the authorization, import, manufacture, distribution and sale of drugs, biologicals of medical devices.

The MDR regulates only certain categories of medical devices specifically notified for regulation by the Ministry of Health and Family Welfare. Medical devices are categorised into one of four classes under the MDR on the basis of increasing risk, from Class A to Class D.

At the time of enactment of the MDR, only 15 categories of medical devices were regulated under the rules. 14 additional medical devices were notified and included within the regulatory framework in 2018 and 2019 with effect from different points of time in 2019, 2020 and 2021.

Subsequently, on 11 February 2020, the Ministry of Health and Family Welfare published a notification (which came into force on 1 April 2020) effectively bringing all medical devices under the ambit of the MDR. The notification notified an expansive and catch-all definition of medical devices (rather than notifying an individual or category of medical devices), so that all medical devices were notified and consequently brought under the ambit of the MDR.

To provide a transition period for the medical device industry to undertake the compliance requirements under the MDR, the Ministry of Health and Family Welfare has also provided a temporary exemption from adhering to the compliance requirements for a period of 30 months for Class A and B devices and 42 months for Class C and D devices. The exemption commenced on February 11, 2020 and is conditional on the manufacturer/importer of the medical device registering their device on the Online System for Medical Devices established by the CDSCO for this purpose.

PRICING

The Drugs (Price Control) Order, 2013 (“DPCO”) under the Essential Commodities Act 1954 (“ECA”) regulates the pricing of drugs, biologicals and notified medical devices in India.

REIMBURSEMENT

India currently does not have a mechanism for reimbursement of drugs, biologics and medical devices. Out-of-pocket expenditure by patients is the primary means of financing of drugs, biologicals and medical devices. For more details on India’s healthcare system, please refer to Chapter 1 Question 7.

3. What are the steps to obtain authorization to develop, test, and market a product?

DEVELOPMENT

There is no authorization required to develop a product in India. However, once a product starts showing properties that qualify it to be called as drug, then a license is required to import or manufacture it.

A product in development becomes a drug when it starts satisfying the criteria for what is considered a drug for the purposes of the D&C Act, which includes:

1. “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;
2. 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;
3. all substances intended for use as components of a drug including empty gelatine capsules; and
4. 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”

TESTING

Any processing activity carried out on a drug, biological or medical devices requires a manufacturing license from the CDSCO or SLA, as the case may be. Testing of product amounts to processing. Therefore, a manufacturing license for the purpose of examination, test or analysis is required to be obtained from the SLA. If a product on which testing is to be carried out is to be imported, then a separate import license for the purposes of test and analysis is required from CDSCO. Please note that the import license is to be obtained in addition to the manufacturing license.

MARKETING

If the drug or biological qualifies as a “new drug” or if a notified medical device qualifies as an “investigational medical device” or “new In Vitro Diagnostic Device”, then a marketing permission from the CDSCO is required to be obtained in respect of such drug, biological or medical device before its manufacture or import, respectively.

The definition of investigational new drug is as follows:
“investigational new drug” means a new chemical or biological entity or substance that has not been approved for marketing as a drug in any country”

The definition of new drug is as follows:
“new drug” means, –

1. a drug, including active pharmaceutical ingredient or phytopharmaceutical drug, which has not been used in India to any significant extent, except in accordance with the provisions of the D&C Act and the rules, as per conditions specified in the labelling thereof and has not been approved as safe and efficacious by the CDSCO with respect to its claims; or
2. a drug approved by the CDSCO for certain claims and proposed to be marketed with modified or new claims including indication, route of administration, dosage and dosage form; or
3. 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
4. a modified or sustained release form of a drug or novel drug delivery system of any drug approved by the CDSCO; or
5. 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;

The drugs, other than drugs referred to in sub-clauses (iv) and (v), are considered to be new drugs for a period of four years from the date of the marketing authorization and the drugs referred to in sub-clauses (iv) and (v) shall always be deemed to be new drugs;

The definition of investigational medical device is a notified medical device:

1. “which does not have its predicate device as defined in clause (zm); or
2. which is licenced under sub-rule (4) or sub-rule (6) of rule 20, sub-rule (1) of rule 25, or sub-rule (1) of rule 36 and claims for new intended use or new population or new material or major design change;
   and is being assessed for safety or performance or effectiveness in a clinical investigation.”

Next, depending on whether the product will be importer or manufactured in India, appropriate license is required to be obtained from the CDSCO or SLA.

The said marketing permission is give only when the DCGI is satisfied about the safety and efficacy of the product. Where the safety and efficacy of the product cannot be established with available data, then a clinical trial (in case of drugs) or clinical investigation (in case of medical devices) is required to be conducted in India to generate safety and efficacy data of the product on Indian population. A permission is also required to undertake clinical trial/clinical investigation in India.

Thus, for a product which qualifies as a new drug or investigational medical device, the steps needed to be taken to start manufacturing or import of the product in India are:

1. Obtain permission to conduct clinical trial from DCGI
2. Obtain permission to market product from DCGI on the basis of safety and efficacy data generated from the clinical trial
3. Obtain import/manufacturing license to start import/manufacture of the product.

If the drug or biological does not qualify as a “new drug” or if the notified medical device does not qualify as an “investigational medical device”, then the product may be marketed in India after obtaining import/manufacturing license.

4. What are the approximate fees for each authorization?

The fees for each authorization are summarized in the table below:

5. For how long are marketing authorizations/registrations valid? How are marketing authorizations/registrations renewed?

Marketing authorizations for new drugs, investigational new drugs investigational medical devices and new IVDs are valid in perpetuity. Therefore, they do not need to be renewed.

6. How does the authorization process differ between brand-name products and generic products? Are there differences for local manufacturers versus foreign-owned manufacturers?

The drug and medical device regulatory framework does not make a distinction for authorizations between generic and brand name products or between local and foreign owned manufacturers.

In certain cases, there may be relaxations granted based on approvals/authorizations received from a foreign jurisdiction. For more information on the status of foreign marketing authorizations see Chapter 3 Question 6.

7. How are combination products (drug + drug, drug + biologic, drug + device, biologic + device, drug + biologic + device) regulated?

Combination products introduced into the Indian market for the first time are deemed to be ‘new drugs’, which means that a permission of the DCGI is required before they can be marketed in India. This deeming fiction continues for a period of four years, which means that any other importer or manufacturer of the combination product during the four-year period would also be required to obtain the permission of the DCGI for marketing of the said combination product.

After expiry of period of four years, combination products may be sold in India with appropriate manufacturing or import license from DCGI or SLA, without the requirement of obtaining a marketing permission from DCGI.

8. How is compliance with regulation monitored and evaluated? Is the regulatory regime comparable with the U.S. Food and Drug Administration or the European Medicines Agency expectations and requirements?

The CDSCO along with the SLAs is responsible for ensuring compliance with the requirements of the D&C Act. The CDSCO is primarily responsible for regulating and monitoring clinical trials and import of drugs, biologics and medical devices. The state drug licensing authorities primarily deal with licensing for manufacture, stocking and sale of drugs. The also carry out pre-licensing and post-licensing inspections and oversee the manufacturing process for drugs manufactured in their respective state units. The CDSCO and the state drug licensing authorities can inspect the premises of any manufacturing license holder without giving prior notice to ensure compliance with applicable laws. If non-compliance to any condition of the license or provision of the D&C Act is observed, the license can be suspended or cancelled, after providing an opportunity for the manufacturer to show cause as to why the license should not be cancelled or suspended.

With respect to clinical trials, the DCGI and Ethics Committee are the primary bodies exercising control over monitoring and enforcement. Any change in clinical trial protocol or serious adverse events occurring during the clinical trial must be notified to the Ethics Committee and the CDSCO.

Though the Indian regulatory framework is broadly comparable with U.S. Food and Drug Administration or the European Medicines Agency, India has its own unique and independent legislations governing the drug and medical device sector.

9. What is the potential range of penalties for noncompliance?

Penalties for non-compliances with the requirements of the D&C Act have been summarized in the tables below:

Import Related Contraventions

Manufacture/Sale Related Contraventions

10. Is there a national healthcare system? If so, how is it administered and funded?

India does not have a national healthcare system on the lines present in the United Kingdom and other developed countries. The government operates a fair number of primary, secondary and tertiary healthcare centres around the country. However, a majority of health care providers in India operate privately.

The government operates several schemes under which beneficiaries can avail care facilities from private healthcare providers. For example, the Central Government Health Scheme (“CGHS”) extends medical coverage to central government employees, pensioners and their dependents. The Employee State Insurance Scheme (“ESI Scheme”) makes it mandatory for employers who employ more than a certain number of employees in the organized sector, to participate in an insurance scheme for employees that covers the employees against the events of sickness, maternity, disablement and death due to employment injury and to provide medical care to the insured employees and their families.

Having said that, it is a fact that a major chunk of Indian population does not have a health insurance. To address the situation, A National Health Policy was introduced in 2017, with the objective of providing health insurance coverage to poor and backward population of India the tune of INR 500,000 per year. Any healthcare provider who wishes to participate and offer its services under the National Health Policy is required to register itself with the concerned department. As a precondition of registration, the service provider has to agree to a fixed set of charges for its services that are pre-determined by the government. In furtherance of the policy, the Government in the Union Budget of 2018 announced ‘Ayushman Bharat’, a National Health Protection Mission funded through Union Budget allocations. INR 12 billion (approximately USD 1.8 billion) was allocated to set up one hundred and fifty thousand Health and Wellness Centres as well as hospitalization cover for approximately 100 million poor and vulnerable families with INR 500,000 (approximately USD 7,700) per family, for secondary and tertiary care hospitalization.

11. How does the government (or public) healthcare system function with private sector healthcare?

For the most part, public healthcare and private healthcare systems function within their own spheres. The cost of care at Government hospitals is fixed by the Government while the market determines cost in the private sphere. However, it has been observed that an increase in quality of public hospitals is concomitant with a decrease in cost of care at private hospitals. Certain primary health and secondary centers run by the Government provide free treatment to patients who are otherwise unable to afford it.

12. Are prices of drugs and devices regulated and, if so, how?

The prices of all drugs and notified medical devices are regulated in India. All drugs and notified medical devices have been identified as “essential commodities” and their prices are regulated like prices of other essential commodities under a law called Essential Commodities Act, 1955 (“ECA”) and an order called Drugs (Prices Control) Order, 2013 (“DPCO”).

The ECA and DPCO segregate drugs and notified medical devices under two categories – scheduled formulations and non-scheduled formulations, depending on whether the drug or notified medical device appears in the schedule of the DPCO. The prices of scheduled formulations are fixed by an agency called National Pharmaceutical Pricing Authority (“NPPA”). The schedule to the DPCO is based on the National List of Essential Medicines, which is amended from time to time. The NPPA uses a formula to fix prices that essentially averages the prices of the same drug or medical device sold under various brands in the market. The government does not fix prices for non-scheduled formulations. However, government has mandated that the price of non-scheduled formulations should not increase by more than 10% between any 12-month period. The NPPA is tasked with the duty of monitoring prices of non-scheduled formulations.

13. How are drugs and devices used by patients paid for? What roles do public and private payers play?

There are three main modes of financing available to patients— out of pocket, beneficiary of government scheme or insurance. Out-of-pocket payment methods, however, remain the primary means of payment as India suffers from low insurance penetration. Reportedly, only 12.78% of Indians have some form of Government insurance, while only 2.47% of Indians have private insurance. There are also certain Non-Governmental Organizations that provide free medication to patients who are otherwise unable to afford them.

14. Who dispenses drugs and devices to patients and how are those dispensers compensated?

Licensed pharmacies and pharmacists are the only persons permitted to dispense drugs to patients in India. The pharmacists are usually compensated by way of salary for their services as part of employment. It is unethical for pharmacists to charge commission from pharmaceutical and medical device companies for sale of drugs and devices to patients.

15. What are the professional and legal responsibilities of those who dispense drugs and devices? What role do they play in providing patient care, information, and safety?

Pharmacists are governed by the Pharmacy Act, 1948 (“Pharmacy Act”) and Pharmacy Practice Regulations, 2015 (“PPR”) issued under the Pharmacy Act. The Pharmacy Act lays down minimum qualifications and mandatory registration requirements for any person intending to practice the profession of pharmacy in India. The role and responsibilities of pharmacists are laid down under the PPR. The PPR defines the practice of pharmacy to mean:

1. “Interpretation, evaluation and implementation of medical orders; dispensing of prescriptions, drug orders
2. Participation in drug and device selection, drug administration, drug regimen reviews and drug or drug
3. Provisions of patient counseling and the provision of those acts or services necessary to provide pharmaceutical care in all areas of patient care including primary care; and
4. Responsibility for Compounding and labeling of drugs and devices (except labeling by a manufacturer, redistributor of non-prescription drugs of drugs and devices and maintenance of proper records for them.”

The responsibilities of registered pharmacists include:

• Dispensing medication only on the basis of the prescription of a registered healthcare practitioner, and not substituting the prescription;
• Compounding, preparing, mixing, dispensing and/or supplying medication on the basis of the prescription of a registered medical practitioner.
• Counselling patients by personally initiating discussion on matters that will enhance or optimize drug therapy with each patient. The topics for the discussion may include special directions or precautions for administering the drug, common side effects of the drug and its proper storage.
• Reviewing patient record history and prescription for identifying drug-disease interactions, drug-drug interactions and drug-allergy interactions;
• Maintaining records of drugs dispensed and records of prescriptions for a minimum period of 5 years;
• Maintaining confidentiality of information received;