New laws for our pharma sector must focus on reforms

Source: This post is based on the article “New laws for our pharma sector must focus on reforms” published in Livemint on 13th October 2021.

Syllabus: GS3 – Government Policies and Interventions for Development in various sectors

Relevance: Reforms needed in pharma-sector

Synopsis: With govt agreeing to take a look at the pharma sector laws, our legislative framework for drugs, cosmetics and medical devices may be in for a complete reset.

Introduction

The government has considered to take a fresh look at the decades-old law governing the pharmaceutical sector and issued an order to constitute a committee.

The committee will examine the Drugs and Cosmetics Act (DCA) and previously framed drugs and cosmetics bills, and then submit draft documents for a de-novo Drugs, Cosmetics and Medical Devices Bill by 30 November 2021.

What is the current scenario of India’s pharma-sector?

India has been a prime source for the manufacture and supply of affordable and efficacious generic medicines across the world and there has been a steady flow of foreign direct investment in this sector, with India’s pharmaceutical industry being the third-largest globally by volume.

According to the Economic Survey of 2020-21, the Indian pharmaceuticals sector is expected to expand multi-fold and become a $ 130 billion industry by 2030.

Also, medicine spending is projected to grow rapidly leading India to become one of the top 10 countries in terms of such expenditure.

How pharma-sector is governed in India?

Legislative framework: Currently, the Drugs and Cosmetics Act (DCA) of 1940, read together with the Drugs and Cosmetics Rules of 1945, are the primary legislations governing the import, manufacture, distribution and sale of drugs and cosmetics in India.

Rules made by the Centre: there are other industry-specific rules and regulations around medical devices, prices of essential notified drugs, narcotic and psychotropic drugs and substances, development of new drugs and undertaking clinical trials.

What are some of the key aspects the committee should consider for the country’s proposed new legislation?

Digital health: New-age technologies and internet-based business models such as e-pharmacies are major drivers of growth. But specific regulations for such business models are necessary to provide a clear and predictable regulatory framework that would aid further investment in this segment.

Medical devices: The Medical Devices Rules of 2017 govern medical devices but there is still dependence on the DCA and the Central Drugs Standard Control Organization (CDSCO). There have been efforts in the past to enact a separate legislation governing medical devices and the newly set-up committee could consider adopting a similar approach in the proposed legislation.

Ambiguity in licensing issues: One of the conditions under various licences issued under the DCA is a requirement for fresh licences if there is a change in the constitution of the firm operating under earlier issuances.

However, what constitutes a change in constitution is not explained which leads to contradictory interpretations by regulators in different states. Such ambiguity impacts merger and acquisition modalities and timelines in this sector.

Sandbox regime: Regulators across the globe are considering novel ways in which the start-up ecosystem can be encouraged. Regulators in this sector could also adopt the approach of providing a ‘sandbox’ for innovation that’s backed by a suitable regulatory regime around it.

Foreign direct investment: India’s regulatory regime for FDI in this sector limits overseas investment in brownfield pharmaceutical ventures to 74% of equity under the automatic route. Moreover, there are sector-specific conditions such as no ‘non-compete’ restrictions that are likely to have a knock-on impact on FDI inflows.

While FDI-norm reforms may not directly fall within the purview of the proposed bill but the committee may consider with a view to pushing for further relaxations in this area to boost investment.