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Authored by Ammu Brigit

One of the licences that is issued under the Drugs and Cosmetics Act 1940 (DCA) for manufacturing of drugs is given to a licence applicant who does not have a manufacturing facility and intends to get the drug manufactured through a person with such facility and a manufacturing licence. Under the DCA such licences are referred to as loan licences, and commonly known as contract manufacturing.

Prior to March 2021, the responsibility of maintaining the quality of drugs lied solely with the contract manufacturer and only the name and address of the contract manufacturer of the drug was required to be printed on the label or container of the drug.

In M/s Glaxo Smithkline Pharmaceuticals Limited vs. State of Bihar & Anr 2011, the writ petitioner, Glaxo Smithkline Pharmaceuticals (GSK) through a third-party manufacturing agreement engaged Emcure Pharmaceuticals Ltd (Emcure) to manufacture certain drugs. The Inspector of Drugs found certain drugs in the premises of the agents with names of GSK also printed along with the name of the manufacturer, Emcure. According to Rule 96 and 97 of the Drugs and Cosmetics Rules 1945 (“DCR”), the name of the wholesaler is not required to be labelled on the drugs. A complaint was filed, and the Chief Judicial Magistrate had passed an order against GSK as GSK’s action was violative of DCA. Pursuant to which, the petitioner filed a writ petition before Hon’ble Patna High Court to quash the order of the Judicial Magistrate. GSK clarified that names were printed as per the third-party agreement it had with Emcure and took the aegis under Section 19(3) of DCA which states that a person not being a manufacturer of the drugs shall not be liable for the quality of drugs if he acquired such drugs from a duly licensed manufacturer and also stated that such labelling was according to agreement between Emcure and GSK. The Court held that it cannot entertain the plea under Section 19(3) of DCA while hearing the writ petition against the order of cognizance and pointed out that the intention of the GSK by printing its name on the label bolder than the name of the original manufacturer is to mislead customers into believing that the product is of GSK’s. Further, the court commented that the manufacturing of drugs through third-party manufacturing agreements is a way out from being liable of the regulatory provisions under DCA & DCR including but not limited to the onus of quality of products. The court further observed that it is evident that, GSK was getting benefitted out of printing its name on the label of the drug while not having any legal obligations or responsibilities as a wholesaler of the drug under the law.

The draft pharmaceutical policy 2017 by Department of Pharmaceuticals signalled the quality concerns in drug manufacturing. The policy stated that loan licensing and contract licensing undermines drug manufacturing and pricing of drugs. The draft policy document also pointed out that the manufacturing of the same drug product under different brand names by one manufacturer for distribution by different marketers needs to be discontinued and the principle of one brand name, one manufacturer, one salt and one price needs to be introduced. However, this draft policy document has not taken its final shape yet and the DCA has also not been amended to reflect the suggested changes.

In the year 2019, the Ministry of Health and Family Welfare (MoHFW) in consultation with the Drugs Technical Advisory Board, released a draft amendment rules of DCR which suggested that quality of the drug is the responsibility of the marketer also. Later, with the intent to make the marketer of the drugs also accountable for the quality of drugs, the MoHFW notified Drugs and Cosmetics (Amendment) Rules, 2020 (‘Amendment’) amending the Drugs and Cosmetics Rules 1945 (DCR), which have come into effect from 1st March 2020. The highlights of the Amendment are as below:

a. Definition of Marketer: Introducing the term ‘marketer’ to DCR, the amendment defines the marketer as any person who as an agent or in any other capacity has adopted a drug manufactured by another manufacturer through an agreement for marketing such drug by labelling or affixing his name on the label for its sale and distribution.

b. Agreement for Marketing: Inserting Rule 84C in DCR, the Amendment makes it mandatory for any marketer to enter into an agreement with the manufacturer from whom he adopts for distribution or sale of such drug by labelling or affixing his name on the label of the drug.

c. Responsibility of the Marketer: According to the Amendment, any marketer who sells or distributes a drug shall be responsible for the quality and other regulatory compliances with respect to such drug along with the manufacturer under DCA.

d. Labelling of Drugs by Marketer: The name and address of the marketer of the drug shall be printed in a conspicuous manner on the label of the container of any drug which is marketed by a marketer. If the drug is contained in an ampoule or a small container, mentioning the name of the marketer would be sufficient.

Effective from 1st March 2020, the Amendment holds the marketer and the manufacturer equally responsible for the quality and other regulatory compliance in relation to the drug. The marketers may have to now assign a team to independently validate the quality of the drugs before taking the delivery of the drugs from the manufacturers, to be compliant with the DCA. However, a marketer has a safe harbour under Section 19(3) of DCA which makes a  person not being a manufacturer of a drug not liable for the quality of the drugs if he proves that: (i) he acquired the drug from a duly licensed manufacturer, distributor or a dealer; (ii) he did not know and could not ascertain with reasonable diligence that the drug was not of standard quality prescribed by DCA; (iii) that the drug while in his possession was properly stored and remained in the same as he acquired it. Thus, a marketer can still demonstrate that he is not liable for the regulatory compliance with respect to quality of drugs under Section 19(3) of DCA.

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