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India’s new Telemedicine Practice Guidelines – Analysis and Do’s and Don’ts for Doctors offering teleconsultation

Summary: The Indian Government has published Telemedicine Practice Guidelines (“Telemedicine Guidelines”) on March 25, 2020. These guidelines finally clarify India’s position on the legality of teleconsultation. It is now perfectly legal to provide teleconsultation by registered medical practitioners (M.B.B.S and above) in line with the requirements of the Telemedicine Guidelines. It has been clarified that the first consultation between doctor and patient need not be an in-person consultation, and doctors in India can provide the first consultation to patients located in any State remotely through teleconsultation. However, going forward, all doctors who provide teleconsultation will have to display their registration number in all communications exchanged with the patient – for example, in emails or WhatsApp messages, on prescriptions and on fee receipts. Doctors will also have to be careful while issuing a prescription during teleconsultation. As a thumb rule, prescribing medicines for chronic diseases (such as asthma, diabetes or hypertension) should be avoided during teleconsultation, unless it is an add-on or refill of an earlier prescription obtained during an in-person consultation less than six months ago. If a prescription for chronic diseases is to be issued, then the teleconsultation should be done strictly via video. A prescription can be sent through any electronic medium such as email, WhatsApp etc. as a photo/scan / digital copy of a signed prescription or an e-prescription.

What is the new development?

On March 25, 2020, the Board of Governors (“BoG”) entasked by the Health Ministry to regulate practice and practitioners of modern medicine, published an amendment to the Indian Medical Council (Professional Conduct, Etiquette and Ethics) Regulations, 2002 (“Code of Conduct”) that gave statutory support and basis for the practice of telemedicine in India.

The relevant part of the amendment is as follows:

3.8.1. Consultation through Telemedicine by the Registered Medical Practitioner under the Indian Medical Council Act, 1956 shall be permissible in accordance with the Telemedicine Practice Guidelines contained in Appendix 5 (of Code of Conduct).

A registered medical practitioner under Indian Medical Council Act, 1956 is a person who is enrolled in the State Medical Register or the Indian Medical Register under the Indian Medical Council Act, 1956 (or National Medical Commission Act, 2019 as and when it comes into full force and replaces the Indian Medical Council Act, 1956). Every practising doctor in India today is required by law to be enrolled in the State Medical Register or Indian Medical Register before the start of his or her medical practice. Therefore, the amendment does not add any new requirement of registration for doctors who want to practice telemedicine and provide teleconsultation to his or her patients.

Telemedicine is defined under the Telemedicine Guidelines as:

 “The delivery of health care services, where distance is a critical factor, by all health care professionals using information and communication technologies for the exchange of valid information for diagnosis, treatment and prevention of disease and injuries, research and evaluation, and for the continuing education of health care providers, all in the interests of advancing the health of individuals and their communities”

What does the amendment mean for Doctors?

Telemedicine consultation (or “teleconsultation”) has been offered by doctors in India since the year 2000. However, in the absence of statutory basis and support, it was not clear whether it was legal or not. In fact, there have been news reports that State Medical Councils had banned the practice of teleconsultation. For example, the Karnataka State Medical Council had reportedly warned doctors in the State of Karnataka against offering online consultations and threatened them with dire consequences if they did (including cancellation of registration). Despite such reports, the practice of telemedicine and teleconsultation flourished, and several major companies currently provide online teleconsultation services for a fee in India.

Now, doctors who are providing teleconsultation independently or through such companies can rest assured that such practice is lawful as long as it is done in compliance with Telemedicine Guidelines. Doctors can also provide teleconsultations to patients from any part of India.

In fact, the Telemedicine Guidelines specifically permit Doctors to provide teleconsultation for prescribing medicines, providing counselling (e.g. food restrictions, do’s and don’t’s for a patient on anticancer drugs, proper use of a hearing aid etc.) and imparting health education (e.g. advice on contagious infections, immunizations, exercises, hygiene practices, mosquito control etc.).

What does the amendment mean for patients?

India does not have a great doctor to patient ratio. This, coupled with the fact that India is a huge country and that the density of doctors is far higher in cities than in rural areas where the bulk of India’s population resides, is the reason why teleconsultation has great demand and potential in India.

Unfortunately, there were hardly any standards for doctors to follow and patients to expect during a teleconsultation. For example, Indian patients sometimes felt short-changed when a doctor was not clear or audible, or the doctor refused to issue a prescription or did not provide a report of the consultation after the consultation ended. Some patients feared whether the person on the other end was, in fact, a doctor or not. A few worried about their privacy, as electronic communications over mobile application or email, can leave a trail.

Indian patients now will be able to hold doctors accountable to provide teleconsultation as per the Telemedicine Guidelines, which provide a clear set of do’s and don’ts for doctors. A violation of the Telemedicine Guidelines will give patients avenue to complain against the doctor before appropriate State Medical Council for ‘misconduct’.

Telemedicine Guidelines – Salient features

Doctor can choose the medium of teleconsultation: A doctor may use any medium for patient consultation, e.g. telephone, mobile or landline phones, chat platforms like WhatsApp, Facebook Messenger etc., other mobile apps or internet-based digital platforms for telemedicine or data transmission systems like Skype/ email/ fax etc. However, before proceeding with the teleconsultation, the doctor should exercise professional judgement to decide whether the teleconsultation is, in fact, appropriate and in the interest of the patient. If the answer is yes, then the doctor should evaluate which medium would be preferred for the teleconsultation. For example, a complaint of appendicitis may require a physical examination and teleconsultation may not be preferred. On the other hand, some common complaints may not require physical examination or even consultation in real-time. For example, a complaint of headache or fever may not always require the doctor to examine the patient physically or audio-visually through a mobile or computer application. However, in certain cases, for example, on presentation of allergy or inflammation (e.g. Conjunctivitis), the doctor may choose to examine the patient in-person or through an audio-visual teleconsultation. Thus, the decision to examine the patient physically or remotely i.e. through teleconsultation, and the medium of teleconsultation, is to be taken by the doctor himself or herself on case to case basis.

Doctor has to maintain the same standard of care during teleconsultation as during in-person consultation: The Telemedicine Guidelines require doctors to maintain the same standard of care towards a patient during a teleconsultation as they would during an in-person consultation. In other words, the fact that the teleconsultation took place over a mobile app or email or telephone cannot be taken as a defence by a doctor against an allegation of medical negligence. Every doctor is expected to know the limitation of teleconsultation and advise or prescribe accordingly.

Patient is responsible for the accuracy of information: During the course of teleconsultation, if the doctor inquires for relevant information from the patient, then the patient is supposed to disclose the right information. The Telemedicine Guidelines have clarified that is the patient who will be responsible for accuracy for the information shared with the doctor, and not the doctor. However, since the standard of care is as high in the case of teleconsultation as in-person consultation, the doctor must make all efforts to gather sufficient medical information about the patient’s condition before deciding on a diagnosis or a treatment. If a patient provides any contradictory information, or if the doctor is not convinced with the information at hand to make a professional decision, he may ask patient to provide such documents or undertake such tests as he/she may feel proper in his/her professional judgement without fear of liability. 

Caregiver is deemed to be authorized on behalf of minor or incapacitated patients: If the age of the patient is 16 years or less, or if the patient is incapacitated (due to mental conditions like dementia or physical disability due to an accident), then the caregiver is deemed to be authorized to consult on behalf of the patient. The Telemedicine Guidelines clarify that in such cases, the teleconsultation can take place with the caregiver without the presence of the patient.

No fixed Format for issuing a prescription: There is no fixed format for issuing a prescription in a teleconsultation. The Telemedicine Guidelines has recommended a format, but following it is not mandatory. However, the doctor must provide photo/scan /digital copy of a signed prescription or e-Prescription to the patient via email or any messaging platform. Please note that a doctor can transfer the prescription to a pharmacy only if he/ she has the explicit consent of the patient.

Invoice for fees: Doctors can charge appropriate fees for teleconsultation. A receipt or invoice should be given to the patient against the fees.

Do’s and Don’t’s for Doctors

Patient identification is mandatory during first consultation: If the teleconsultation is, in fact, the first consultation of the patient with the doctor, then doctor should confirm the patient’s identity to his/her satisfaction by asking patient’s name or age or address or email I.D. or phone number or any other identification that may be reasonable.

Patient identity confirmation is not mandatory during follow-up consultation, but may be carried out on need basis: It is not mandatory to identify the patient during a follow-up teleconsultation with a known patient, especially if the doctor is communicating through the registered user id, email id or phone number. However, in case of doubt, the doctor should confirm patient identity as during the first consultation.

Caregiver identity and authorization should be checked: If the patient is not a minor or is not incapacitated, then a caregiver cannot consult on behalf of the patient unless he or she has a formal authorization such as a signed authority letter by the patient or his/her legal representatives (family members) or, where the caregiver is a family member himself or herself, if he or she has a document that verifies his or her relationship with the patient such as a government identity proof. The caregiver’s identity and authorization should be checked by the doctor before offering teleconsultation. In the case of minors, the identity of the caregiver should be confirmed.

Doctor should identify himself/herself to the patient before start of every teleconsultation: A doctor should begin any teleconsultation by informing the patient about his/her name and qualification. This may be uncomfortable to be done every time, especially to a known patient. However, this is the requirement of Telemedicine Guidelines at present.

Doctor should display his/her registration number at every touch-point with patient: A doctor who provides teleconsultation is required to display his/her registration number provided by respective State Medical Council on his/her prescription, website, electronic communications (WhatsApp/Message/Email etc.) and fee receipts given to his/her patients.

Doctor should not continue with teleconsultation if it not appropriate: the doctor is not satisfied with the information provided by the patient to provide specific treatment, i.e. prescription or health advice, then he/she should provide limited consultation as appropriate and refer the patient for an in-person consultation.

Doctor should maintain patient records of teleconsultation: For in-person O.P.D. consultations in India, the doctors, in general, do not maintain patient records. Appropriate patient history, observations and findings are recorded on the prescription and it is handed over to the patient. However, for teleconsultation, it is mandatory for doctors to prepare, maintain and preserve the patient’s records (e.g. case history, investigation reports, images, etc.), copy of prescription issued and proof of teleconsultation (e.g. phone call history, email records, chat/ text record, video interaction logs etc.). While no time period is prescribed for how long such records are required to be preserved, it is generally recommended to maintain these records for three years.

Patient’s personal data should not be disclosed or transferred without written consent of the patient: Since teleconsultation happens on an electronic medium, the Indian law that protects personal information, including medical and health-related information of patients, squarely applies to doctors who provide teleconsultation and receive such information from patients. This is in addition to the ethical obligation to protect patient privacy that is recognized in the Code of Conduct. The most important thing to note here is that Doctors who provide teleconsultation should not disclose or transfer any information that may identify the patient without the prior written consent of the patient.

Doctor should not deny emergency teleconsultation, but limit it for immediate assistance or first aid: Emergency teleconsultation should not be provided remotely except when it is the only way to provide timely care.Even then, such emergency teleconsultation should be limited to first aid, life-saving measures, counselling and advice on referral. Every emergency teleconsultation must end with an advise to the patient or his/her carer for in-person interaction with a Doctor at the earliest.

Limitation on prescribing medicines to patients: This is, perhaps, the most significant limitation imposed by Telemedicine Guidelines on the practice of telemedicine in India. Going forward, doctors will not be able to prescribe medicines over teleconsultation freely.

In order to prevent abuse, the Telemedicine Guidelines require every doctor to “prescribe medicines via telemedicine ONLY when (the doctor) is satisfied that he/ she has gathered adequate and relevant information about the patient’s medical condition and prescribed medicines are in the best interest of the patient.” Prescribing Medicines without an appropriate diagnosis/provisional diagnosis will amount to professional misconduct.

Before issuing a prescription through teleconsultation, every doctor is supposed to inquire about the age of the patient. If there is any doubt about the age of the patient, then the doctor should seek age proof. If the patient turns out to be a minor, then further teleconsultation should be done and prescription should be issued only in the presence of an adult, whose identity should also be ascertained by the doctor.

If the teleconsultation with the patient does not take place over video, then the concerned doctor cannot prescribe drugs to the patient other than common over-the-counter (“O.T.C.”) medications such as paracetamol, O.R.S. solutions, cough lozenges etc. Such patient also cannot be prescribed medication for which diagnosis is possible only by video consultation such as antifungal medications for Tinea Cruris, Ciprofloxacillin eye drops for Conjunctivitis etc. The doctor may, however, prescribe ‘add-on’ medication to such patient to optimize the existing treatment through drugs if such existing treatment was prescribed in an in-person consultation less than six months ago. Please note that there is no bar in prescribing emergency medications, even if they are not O.T.C. medicines, as and when notified by the government, through any form of teleconsultation, whether video or not.

A list of common O.T.C. medications that can be prescribed without video teleconsultation is described in List O, Appendix 5 of the Code of Conduct. A list of ‘add-on’ medications to optimize existing treatment is described in List B, Appendix 5 of the Code of Conduct. For the purpose of this list, emergency medications would be included in the list of O.T.C. medications, i.e. List O.

If the patient is examined through video, then the doctor may prescribe medications other than O.T.C. medicines described in List A of Appendix 5 of Code of Conduct. Some examples of such medicines are:

  • Ointments/Lotion for skin ailments: Ointments Clotrimazole, Mupirocin, Calamine Lotion, Benzyl Benzoate Lotion etc.
  • Local Ophthalmological drops such as: Ciprofloxacillin for Conjunctivitis, etc
  • Local Ear Drops such as: Clotrimazole ear drops, drops for ear wax etc.

The doctor may also prescribe a ‘refill’ of medication already prescribed during an in-person consultation for chronic illnesses (hypertension, diabetes, asthma etc.) or an ‘add-on’ medication to optimize the existing treatment (like in the case of non-video consultation).

Please note, however, that no doctor is permitted to prescribe habit forming drugs (i.e. drugs in Schedule X of Drugs and Cosmetics Rules, 1945) or narcotic or psychotropic drug (i.e. drugs regulated by Narcotic Drugs and Psychotropic Substances Act, 1985) through any medium of teleconsultation.

For details on restrictions on the ability of doctors to issue prescriptions during teleconsultation, please refer to the table below:

Type I (Non-video consultation)

Prior in-person consultation Scope and limitation of prescription List of drugs that may be prescribed
No prior in-person consultation + Can prescribe only O.T.C. medication e.g. Paracetamol, Oral Rehydration Solution (O.R.S.) packets, Antacids

– Cannot prescribed medications for which diagnosis is possible only by video consultation such as antifungal medications for Tinea Cruris, Ciprofloxacillin eye drops for Conjunctivitis etc.  

– Cannot prescribe ‘add-on’ medication which are used to optimize an existing condition

– Cannot prescribe ‘refill’ medications for chronic diseases such as Diabetes, Hypertension, Asthma etc.

– Cannot prescribe habit forming, narcotic or psychotropic drug 		As provided in List O, Appendix V of Code of Conduct
Prior in-person consultation for same health condition in last six months + Can prescribe O.T.C. medication e.g. Paracetamol, Oral Rehydration Solution (O.R.S.) packets, Antacids

+ Can prescribe ‘add-on’ medications which are used to optimize an existing condition – e.g. if the patient is already on Atenolol for hypertension and the blood pressure is not controlled, an A.C.E. inhibitor such as Enalapril may be prescribed as an add-on.

– Cannot prescribed medications for which diagnosis is possible only by video consultation such as antifungal medications for Tinea Cruris, Ciprofloxacillin eye drops for Conjunctivitis etc.

– Cannot prescribe ‘refill’ medications for chronic diseases such as Diabetes, Hypertension, Asthma etc

– Cannot prescribe habit forming, narcotic or psychotropic drug 		As provided in List O & List B of Appendix V of Code of Conduct

Type II (Video consultation)

Prior in-person consultation Scope and limitation of prescription List of drugs that may be prescribed
No prior in-person consultation + Can prescribe O.T.C. medication e.g. Paracetamol, Oral Rehydration Solution (O.R.S.) packets, Antacids

+ Can prescribed medications for which diagnosis is possible only by video consultation such as antifungal medications for Tinea Cruris, Ciprofloxacillin eye drops for Conjunctivitis etc.

– Cannot prescribe ‘add-on’ medication which are used to optimize an existing condition

– Cannot prescribe ‘refill’ medications for chronic diseases such as Diabetes, Hypertension, Asthma etc   – Cannot prescribe habit forming, narcotic or psychotropic drug 		As provided in List O & List A of Appendix V of Code of Conduct
Prior in-person consultation for same health condition in last six months + Can prescribe O.T.C. medication e.g. Paracetamol, Oral Rehydration Solution (O.R.S.) packets, Antacids

+ Can prescribe ‘add-on’ medications which are used to optimize an existing condition – e.g. if the patient is already on Atenolol for hypertension and the blood pressure is not controlled, an A.C.E. inhibitor such as Enalapril may be prescribed as an add-on.

+ Can prescribed medications for which diagnosis is possible only by video consultation such as antifungal medications for Tinea Cruris, Ciprofloxacillin eye drops for Conjunctivitis etc.

+ Can prescribe ‘refill’ medications for chronic diseases such as Diabetes, Hypertension, Asthma etc

– Cannot prescribe habit forming, narcotic or psychotropic drug   		As provided in List O, List A & List B of Appendix V of Code of Conduct

Mandatory training in telemedicine

At some point of time in future, the Board of Governors in supersession of Medical Council or National Medical Commission would introduce training programs in telemedicine. It will be mandatory to participate in those training programs for all doctors who intend to offer teleconsultations to patients. However, until those training programs are developed, there is no restriction in terms of prior training or qualification for registered doctors to engage in teleconsultation.

Do Telemedicine Practice Guidelines apply to doctors who are practising Indian medicine?

The Telemedicine Guidelines do not apply to practitioners of Ayurveda, Yoga, Homeopathy, Unani or Siddha.

What happens to the Telemedicine Guidelines when the National Medical Commission is set-up?

The Board of Governors in supersession of Medical Council of India will soon make way for the National Medical Commission. However, this transition will not impact the Telemedicine Guidelines and the practice of telemedicine in India.  The National Medical Commission Act, 2019 has a savings clause, which will allow the Code of Conduct and Telemedicine Guidelines to survive and remain enforceable until new regulations are made.

Impact of 2018 judgement of Deepa Sanjeev Pawaskar and Anr. v. State of Maharashtra on Telemedicine Practice Guidelines

In 2018, a judgement of High Court of Bombay caused panic amongst doctors who offered teleconsultation. In that case, two gynaecologists were denied anticipatory bail on the grounds that, prima facie, they were criminally negligent towards their patient who unfortunately died while under their care. The material facts of the case are that the deceased patient had presented herself with a complaint of fever and severe vomiting. She was admitted to the nursing home of the accused doctors by the hospital staff without examination, as the doctors were out of town. One of the doctors started treatment for the patient telephonically, by instructing the on duty nurse. Unfortunately, the patient died. The Court held that the patient died because, amongst other things, she was prescribed treatment over telephone without appropriate diagnosis, and found such practice to be an act of criminal negligence. The application of the doctors for bail in anticipation of arrest was rejected. However, the doctors were successful in receiving the bail in appeal and were not arrested.

This judgement was interpreted by some doctors as deeming the practice of telemedicine and teleconsultation itself illegal. However, such an interpretation is without basis and incorrect. The Court was only concerned failure of the doctor to diagnose the patient. The fact that the drugs for treatment of patient were communicated by the doctor through telephone is only incidental to the outcome of the judgement. It is not the basis of the judgement. In other words, had the doctor communicated the same drugs to the nurse orally while being physically present but without examining the patient, and then patient would have died, the Court would have come to the same conclusion. Thus, the judgement should not be extrapolated to state that the practice of telemedicine and teleconsultation itself is illegal.

Therefore, the above judgement of Bombay High Court does not interfere with the Telemedicine Guidelines at all. In fact, it supports it. The Telemedicine Guidelines require doctors who provide teleconsultation to start patient treatment only if the doctor is satisfied that he/ she has gathered adequate and relevant information about the patient’s medical condition and prescription of medicines which are in the best interest of the patient.  Else, the doctor should not prescribe medication to the patient. If the doctor prescribes patient in violation of the Telemedicine Guidelines, he/she risks losing his/her registration with respective State Medical Council i.e. the license to practice medicine on grounds of professional misconduct.

Enforcement of the Telemedicine Guidelines

The Telemedicine Guidelines have been published in form of an amendment to the Code of Conduct. Therefore, any violation of the Telemedicine Guidelines will be looked at as a ‘misconduct’ at hands of the concerned doctor under the Code of Conduct. A patient, who suffers due to misconduct, has the right to complain to the respective State Medical Council with whom the doctor is registered about the misconduct. If the doctor is found guilty of the misconduct, he or she may be reprimanded, or his/her registration may be suspended or cancelled. A suspension or cancellation of registration would effectively stop the doctor from carrying on his/her medical practice.

Conclusion

The notification of the Telemedicine Guidelines marks the dawn of a new era in the practice of modern medicine. The law has finally caught up with the reality and necessity of modern times.

The Telemedicine Guidelines enable doctors to confidently provide teleconsultation via any medium (such as email, phone call, message, fax, WhatsApp, other mobile and computer applications such as Skype, Google Hangouts etc.) to the patients.

At the same time, they protect patient interest by mandating doctors to identify themselves before consultations, disclose their registration number, offer the same standard of care to patients as during in-person consultation and limit medicines that can be prescribed through a teleconsultation.

Indians will now be able to enjoy access to quality healthcare remotely, and doctors will be able to extend their services to many more needy patients.

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All medical devices in India to be regulated as “drugs” – Medical Devices (Amendment) Rules, 2020

Summary:

The Indian law that regulates quality and safety of medical devices has been amended and it will now apply to all medical devices, effective April 1, 2020. Prior to the amendment, only 37 categories of medical devices were regulated or were notified to be regulated in near future in India.

The immediate consequence of the amendment in law is as follows:

  • Before October 1, 2021, all presently unregulated medical devices will have to be registered by respective importers or manufacturers with the Drugs Controller General of India. However,  those medical devices which are already regulated or have been notified to to be regulated are exempted from the requirement of registration (see list of 37 categories of medical devices at the end of this article which are exempt from registration).
  • Before October 1, 2022, importers, manufacturers, distributors, whole sellers and retailers of presently unregulated Class A (low-risk) and Class B (low-medium risk) medical devices sold in India will have to compulsorily obtain a license.
  • Before October 1, 2023, importers and manufacturers, distributors, whole sellers and retailers of presently unregulated Class C (medium-high risk) and Class D (high risk) medical devices sold in India will have to compulsorily obtain a license.

In order to obtain registration for medical devices, the importers and manufacturers of the medical devices have to be certified as compliant with ISO-13485 (Medical Devices – Quality Management Systems – Requirements for Regulatory Purposes).

What actually happened?

On February 11, 2020, the Government of India gazetted two notifications – a new definition of medical devices and The Medical Devices (Amendment) Rules, 2020. The cumulative effect of these two notifications is that all medical devices will be brought under the fold of quality and safety regulation from the effective date of both notifications – April 1, 2020.

India’s medical device quality regulation

The standards of quality and safety of medical devices are regulated in India by a law called The Drugs and Cosmetics Act, 1940 (“DCA”). The scope of DCA is restricted to only those medical devices which are notified by the Government from time to time as “drugs” (commonly referred to as “notified medical devices”).

The Medical Devices Rules, 2017 (“MDR”) have been framed under DCA. These rules lay down comprehensive quality requirements to be followed by marketers / importers / manufacturers / sellers of notified medical devices.

The way DCA and MDR ensure quality and safety of notified medical devices at all levels of the supply chain is by enforcing a mandatory license requirement. All importers / manufacturers / sellers of notified medical devices must obtain a license from the appropriate licensing authority before undertaking any commerce in notified medical devices. A license is issued only after quality checks. The license holder’s business premise is subject to periodic inspection. A license holder is also required to maintain detailed records of the sale-purchase undertaken in relation to notified medical devices and ensure traceability in the event of a quality or safety-related failure or complaint.

New Definition of Medical Devices

Until February 11, 2020, the Government had regulated or notified 37 categories of medical devices as drugs (see list of these 37 categories of medical devices at the end of the article). On February 11, 2020, the government exercised its powers to notify one or more categories of medical devices as “drug” to actually notify a new definition of medical devices.

As per the notification, effective April 1, 2020, the medical devices that fall under the following definition will be regulated as “drug” under the DCA and MDR:

All devices including an instrument, apparatus, appliance, implant, material or other article, whether used alone or in combination, including a software or an accessory, intended by its manufacturer to be used specially for human beings or animals which does not achieve the primary intended action in or on human body or animals by any pharmacological or immunological or metabolic means, but which may assist in its intended function by such means for one or more of the specific purposes of ― (i) diagnosis, prevention, monitoring, treatment or alleviation of any disease or disorder; (ii) diagnosis, monitoring, treatment, alleviation or assistance for, any injury or disability; (iii) investigation, replacement or modification or support of the anatomy or of a physiological process; (iv) supporting or sustaining life; (v) disinfection of medical devices; and (vi) control of conception.

The above new definition is intended to cover all medical devices, as per technical discussions that preceded the notification of the above definition. Thus, by virtue of this definition, all medical devices sold in India will come to be regulated by DCA and MDR from April 1, 2020, when the definition takes effect.

For the purpose of this article, all medical devices which were not notified until February 11, 2020 (i.e. other than the list of 37 categories of medical devices listed at the end of this article), and will now be covered by the new definition of medical devices will be referred to as “Newly Notified Medical Devices”.

The Medical Device (Amendment) Rules, 2020

On February 11, 2020, the government also notified The Medical Device (Amendment) Rules, 2020 (“MDR Amendment”). The MDR Amendment introduces two changes to MDR. The first is introduction of a new chapter for registration of Newly Notified Medical Devices by their respective manufacturers and importers. The second is an exemption for the 37 categories of already regulated or notified medical devices from the requirement of registration introduced by the new chapter.

Requirement of registration

The manufacturers or importers of Newly Notified Medical Devices will be required to compulsorily register their medical devices with the Drugs Controller General of India (“DCGI”) before October 1, 2021. The DCGI will start accepting applications for registration through a dedicated online portal called “Online System for Medical Devices” from April 1, 2020 (or from such later date by when the online portal to ready to accept applications). There is no time-frame prescribed as of now for processing of the application for registration by DCGI. It appears that the registration will be done instantly after submission of all information and documents on the online portal i.e. without any examination of the information and documents submitted by the applicant at the hands of DCGI.

The registration process is relatively simpler and should not be equated to a full-fledged marketing registration or authorization. Any importer or manufacturer of Newly Notified Medical Device will be able to obtain registration on the submission of the following information:

  1. Name of the company or firm or any other entity
  2. Name and address of manufacturing site (for devices manufactured in India only)
  3. Specification and standards of medical device (for imported devices only)
  4. Details of medical devices (Generic Name, Model No., Intended Use, Class of Medical Device, Material of Construction, Dimensions (if applicable), Shelf Life, Sterile or Non-sterile status, Brand name only if registered under India’s trade mark law)
  5. Certificate of compliance with respect to ISO 13485 standard accredited by National Accreditation Board for Certification Bodies or International Accreditation Forum in respect of such medical device
  6. Free sale certificate from country of origin (for imported devices only)
  7. A duly signed undertaking stating that the information furnished by the applicant is true and authentic

The registration will be complete only upon generation of a registration number.

If an importer or manufacturer is unable to obtain registration for its Newly Notified Medical Device  before October 1, 2021, then it will not be able to market and sell its medical device in India until a registration is obtained.

The importer or manufacturer of a medical device which belongs to one of the 37 categories of medical device regulated or notified prior to February 11, 2020 (see list at the end of this article) are exempt from the requirement to obtain registration for its medical device and therefore can continue to carry on their business on the strength of the license issued by appropriate licensing authority.

Label declaration of registration number

Every importer and importer who obtains a registration number for its medical device will have to display the registration number on its label. The requirement to declare registration number is not tied to the deadline for registration (October 1, 2021). Rather it is an immediate requirement and will trigger from the time the registration number is issued, unless otherwise mandated by DCGI.

Consequence of obtaining registration

A certificate of compliance with ISO-13485 (Medical Devices – Quality Management Systems – Requirements for Regulatory Purposes) is mandatory for registration of Newly Notified Medical Device. Therefore, an importer or manufacturer of a registered medical device will have to ensure that the requirements of ISO 13485 are met at all times. Broadly speaking, ISO 13485 requires creation, documentation and implementation of a quality management system which is to be supplemented by an independent audit from time to time.

Once an importer or manufacturer registers its medical devices, it will have to strictly conform to its documented quality management system.

If any gap is found in the implementation of quality management system by DCGI, it will have the right to suspend or cancel the registration of the medical device.  An order of suspension or cancellation of registration for medical device will prevent the importer or manufacturer of said medical device to further import or manufacture said medical device.

Consequences of registration on supply chain

There is no consequence of registration of medical device  on its supply chain. The supply chain will not be required to obtain registration or license to sell registered medical devices.

Requirement to obtain a license

In addition to registration, importers and manufacturers of Newly Notified Medical Devices will have to obtain a license under MDR before the prescribed deadline (see table for deadlines).

In the table below, we have listed the name of the authority who will issue the license to importers and manufacturers along with prescribed deadlines.

Class of medical device Licensing Authority Stipulated timeline for processing application Deadline for obtaining license
Class A and B (import) DCGI Up to 9 months from the date of application September 30, 2022
Class C and D (import) DCGI Up to 9 months from the date of application September 30, 2023
Class A (manufacture) State-level Licensing Authority Up to 45 days from the date of application   September 30, 2022
Class B (manufacture) State-level Licensing Authority Up to 140 days from the date of application September 30, 2022
Class C and D (manufacture) DCGI 120 – 180 days (estimated) September 30, 2023

It is important to note that it is not mandatory to have a registration number in order to obtain a license. Therefore, the application for license can be made anytime after April 1, 2020 (or such other date that DCGI may specify in future).

If a license is obtained much in advance before the deadline gets over, it will not obligate the manufacturer or importer to comply with the requirements of MDR only on the grounds that a license has been obtained. For example, if a Class C or Class D medical device importer or manufacturer obtains a license before the deadline of September 30, 2023, the said importer or manufacturer will not have to declare the import license number on the label. The supply chain of the said device also will not require a license just because the medical device importer or manufacturer has applied for and received a license. However, after the deadline gets over, all the compliances stipulated under MDR including the requirement to obtain license by the entire supply chain will have to be met. The routine inspections of warehouses or manufacturing premises should also begin only after the prescribed deadline gets over.

The risk-classification of all medical devices (Class A, B, C, D) will be done by the DCGI. It is expected that the DCGI will come out with a list of classification of medical devices on or before April 1, 2020. However, in the meanwhile, anybody interested in knowing the potential classification of medical device can refer either refer to parameters of classification of medical devices described in the first schedule to MDR or to its classification in a GHTF country (EU, Australia, Canada, Japan, USA etc.) because India largely follows GHTF principles of classification of medical devices.

Therefore, it may not hurt importers and manufactures of Newly Notified Medical Devices to make an application to obtain a license sufficiently in advance of the expiry of deadline.

Supply chain to obtain license

The supply chain of Newly Notified Medical Devices (including marketers) will also have to obtain appropriate license for distribution (i.e.Wholesale ) or retail sale before the deadline for obtaining a license for respective class of devices expires. See table below for the name of the authority who will issue the license and for prescribed deadlines.

Class of medical device Licensing Authority Stipulated timeline for processing application Deadline for obtaining license
Class A and B (imported or manufactured) State-level Licensing Authority Up to 3 months (estimated) September 30, 2022
Class C and D (imported or manufactured) State-level Licensing Authority Up to 3 months (estimated) September 30, 2023

Relaxation to obtain registration and license

The government has given time to the medical device industry to transition into the regulatory framework and to obtain ISO 13485 certification, if not already obtained.

The government has relaxed the requirement to obtain registration and license for Newly Notified Medical Devices for the following period:

  • April 1, 2020 to September 30, 2021 – No registration or license will be required to manufacture, import, distribute or sell Newly Notified Medical Devices;
  • October 1, 2021 to September 30, 2022 – Registration will be required to import or manufacture such medical devices, but no license will be required;
  • October 1, 2022 to September 30, 2023 –  License will be required to manufacture, import, distribute or sell Class A or Class B medical devices, but no license will be required to manufacture, import, distribute or sell Class C or Class D medical devices; and
  • After October 1, 2023 – License will be required to manufacture, import, distribute or sell Class C and Class D medical devices as well.

Exemption for devices regulated or proposed to be regulated but notified before February 11, 2020

As indicated earlier, the 37 categories of medical devices regulated or notified before the date of MDR Amendment i.e. February 11, 2020, will not be affected by the MDR Amendment and therefore will not be required to obtain registration. The list of 37 categories of medical devices is reproduced at the end of this article.

However, being exempted from application of the MDR Amendment does not mean that they are exempted from MDR itself. These devices and their importers, manufactures and the entire supply chain will have to obtain a license and observe other compliances stipulated under MDR at all times.

Consequences of non-registration or of not obtaining license before deadline

If an importer or manufacturer of a Newly Notified Medical Device fails to obtain a registration until October 1, 2021, then it will have to cease import or manufacture of said medical device until such time the registration is obtained. It will be easy for the DCGI or State-level Licensing Authority to know whether a medical device is manufactured or imported without registration. Under the Legal Metrology (Packaged Commodity) Rules, 2011, every importer and manufacturer of any medical device (whether regulated or unregulated) is required to declare the date of import of medical device or date of manufacture of medical device on its label. Therefore, if a declaration exists on the label of a medical device that the medical device has been imported  or manufactured on or after October 1, 2021, but the label does not show a DCGI registration number, then it will be confiscated by DCGI or appropriate State-level Licensing Authorities and action will be taken against the importer or manufacturer.

Any violation of MDR including failure to obtain registration or license before stipulated deadline may result in criminal prosecution resulting in imprisonment and fine. Any stock of medical device that is sold without registration or license could also be confiscated.

Final comments

The expansion of definition of medical device and the requirement to obtain registration for medical devices should not come as a surprise because the Government had published a draft of these notifications in October last year. It was covered extensively at the time, including by us.

In our view, the notification of the new (and comprehensive) definition of medical device has brought finality to the issue of regulation of all medical devices that has haunted the government and Indian consumers for a long time. The Government has now given sufficient time for the industry to adopt ISO 13485 and obtain registration for hitherto unregulated medical devices. Now, the onus is on the industry to do its part and reinforce the belief of the Indian consumer and the international community in the quality and safety of medical devices sold in India.

List of 37 categories of medical devices regulated or proposed to be regulated but notified before February 11, 2020, and therefore not affected by the amendment

1. Disposable Hypodermic Syringes; 2. Disposable Hypodermic Needles; 3. Disposable Perfusion Sets; 4. Substances used for in vitro diagnosis including Blood Grouping Sera;
5. Cardiac Stents; 6. Drug Eluting Stents; 7. Catheters; 8. Intra Ocular Lenses;
9. I.V. Cannulae; 10. Bone Cements; 11. Heart Valves; 12. Scalp Vein Set;
13. Orthopedic Implants; 14. Internal Prosthetic Replacements; 15. Ablation Devices; 16. Ligatures, Sutures and Staplers;
17. Intra Uterine Devices (Cu-T) 18. Condoms; 19. Tubal Rings; 20. Surgical Dressings;
21. Umbilical tapes; 22. Blood/Blood Component Bags; 23. Organ Preservative Solution; 24. Nebulizer (effective from 1 Jan.2021);
25. Blood Pressure Monitoring Device (effective from 1 Jan.2021); 26. Glucometer (effective from 1 Jan.2021); 27. Digital Thermometer (effective from 1 Jan.2021); 28. All implantable medical devices Equipment (effective from 1, April,2021);
29. CT Scan Equipment (effective from 1, April,2021); 30. MRI Equipment (effective from 1, April,2021); 31. Defibrillators (effective from 1, April,2021); 32. PET Equipment(effective from 1, April,2021);
33. X-Ray Machine (effective from 1, April,2021); 34. Dialysis Machine (effective from 1, April,2021); 35. Bone marrow cell separator (effective from 1, April,2021); 36. Disinfectants and insecticide specified in Medical Devices Rules, 2017;
37. Ultrasound equipment (effective from 1, November, 2020)      
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All medical devices to be regulated: Draft rules notified in India

The Ministry of Health and Family Welfare in India has notified the Draft Medical Devices (… Amendment) Rules, 2019 (Draft Rules) for public comments on October 18, 2019. By notifying these rules, the Indian Government has made its intention clear to regulate all medical devices in a phased manner. As of date, only twenty-three categories of medical devices are regulated by the Indian Government. Thirteen categories of medical devices will be regulated from the year 2020.

Highlights

Amendment to Medical Devices Rules, 2017: The Draft Rules will be incorporated within the existing Medical Devices Rules, 2017 (MDR). This is an important fact considering some news reports had indicated that the Union Government was planning to completely overhaul the medical device regulatory framework which would have affected the medical devices that are currently regulated, as well. Thus, medical devices which are presently regulated should not be impacted upon formalization of the Draft Rules.

New registration requirement: All medical device manufacturers and importers will have to register themselves and their medical devices with the Central Licensing Authority (i.e. the Drugs Controller General of India).

Key requirements for registration in case of manufacturers: In order to register, a manufacturer will have to submit a) name and address of the manufacturer and the manufacturing site, b) details of medical devices, including shelf life and c) certificate of compliance with ISO 13485.

Key requirements for registration in case of importers: In order to register, an importer will have to submit a) name and address of the importer, b) specification and standards of the medical device, c) details of medical devices, including shelf life, c) certificate of compliance with ISO 13485 and e) free sale certificate from country of origin.

Grace period for registration:  It will be voluntary for manufacturers and importers to register themselves until the expiry of eighteen months from the date of notification of the final rules (“Grace Period”).

Registration to be mandatory: After expiry of Grace Period, it will be unlawful for manufacturers and importers to market the medical device in India without a registration issued by the Central Licensing Authority.

License requirement: Manufacturers and importers of Class A (low risk) and Class B (low medium risk) medical devices will have to obtain a license under MDR from the appropriate authority within 12 months of the expiry of the Grace Period. Manufacturers and importers of Class C (medium-high risk) and Class D (high risk) medical devices will have to obtain a license under MDR from the appropriate authority within 24 months of the expiry of the Grace Period.

Labelling requirement: Once registered, both manufacturers and importers will have to mention their registration number on the label of the medical device.

Dedicated portal for registration: There will be a dedicated portal called ‘Online System for Medical Devices’ that will be set-up for registration of medical devices.

Open for comments: The Draft Rules are open for comments for thirty days from the date of notification, i.e. until November 17, 2019.

Background

India is one of the few countries which currently does not regulate all medical devices, including some of the ones that are put on or inside the human body. The objective of the Draft Rules is to bring all medical devices within the purview of the regulatory framework. The ultimate objective, of course, is to set a scientific benchmark for safety, quality and performance of all medical devices and ensure that every medical device sold in India conforms to this benchmark. On a separate note, it was important for the Indian Government to take strong steps to ensure safety and quality of all medical devices manufactured in India to give a boost to its flagship Make in India programme, especially since the reduction of import dependence on medical devices is high up on the Government’s agenda.

Issues

The current language of the Draft Rules is not without shortcomings. Some of the key shortcomings that we have identified are:

The lack of clear definition of medical device: The Draft Rules will be effective only when the Ministry of Health and Family Welfare notifies that all medical devices will be regulated as drugs under Section 3(b)(iv) of The Drugs and Cosmetics Act, 1940. Currently, only thirty-six categories of medical devices have been notified as drugs, as discussed in the introductory part of this article. It is expected that such a notification will soon follow the notification of the Draft Rules once they are finalized. However, the current definition of medical devices under MDR is a very limited definition. It does not lay down a uniform set of criteria to determine when any substance or article can be called a medical device for the purposes of MDR. It is expected that the Ministry of Health and Family welfare will notify another amendment to MDR and amend the definition of medical devices to lay down certain objective criteria for classification as a medical device. Without a uniform set of criteria, it will be very difficult for manufacturers and importers to assess whether their product falls under the category of medical device or not.

Discretion to choose class of medical devices for registration: In most countries around the world, it is up to the manufacturer or importer of medical devices to select a risk categorization for its medical device and justify it to the national regulatory agency. However, in India, as per Rule 4(3) of MDR, the Central Licensing Authority itself determines the risk classification of the medical devices. There is no formal avenue to justify or review the risk classification of medical devices once it is determined by the Central Licensing Authority. Interestingly, for the purpose of registration, the Central Licensing Authority has allowed importers and manufacturers to declare a risk classification as they deem fit. The current text of the Rules does not empower the Central Licensing Authority to review the risk classification before the grant of registration. This may result in a situation where two manufacturers of the same generic medical device may declare different risk classifications. The proper determination of risk classification is especially relevant since it may have an impact on quality management system adopted by the manufacturers (and importers, as the case may be).

Time-frame to adopt ISO 13485: The ISO 13485 is essentially a quality management system for medical devices. In order to obtain a certificate of compliance with ISO 13485, a manufacturer/importer has to not just show that the required documentation and processes that assure quality are in place, but also demonstrate that the quality management system is functional. There are many manufacturers / importers / marketers in India who have a portfolio of numerous medical devices. It could be an onerous task for them to put in place a functional quality management system for all medical devices in their portfolio and obtain a registration from the Central Licensing Authority within 18 months (i.e. within the Grace Period). As per some industry estimates, it may easily take up to a year or more for mid-size businesses to put in place a functional quality management system that complies with the requirements of ISO 13485.

Adverse consequences of ‘voluntary’ registration: If a manufacturer or importer already has a certificate of compliance with ISO 13485, it does not make commercial sense for it to obtain registration from Central Licensing Authority until shortly before expiry of the Grace Period (i.e. eighteen months from the date of notification). This is because immediately upon receipt of registration, it will have to start declaring the registration number on the label. Typically, any change to packaging, including to the label, requires months of advanced planning from a product continuity perspective. Further, once registered, the manufacturer or importer would be liable to be investigated by the Central Licensing Authority for quality and safety. This rationale is also applicable to manufacturers and importers of medical devices who do not have certificate of compliance with ISO 13485 yet, but can obtain it in short time. Instead, it would have been pragmatic for Central Licensing Authority to take some time and set-up a system for registration that is exhaustive and fool-proof, so that it could gather greater quantity and quality of information from registrations.

Potential supply chain disruption: Though the Draft Rules put in place a registration requirement, please note that a license requirement will also be applicable for such medical devices in due course, as highlighted earlier. It is quite likely that the supply chain (i.e. super stockists, distributors, third-party logistics providers) of most of the currently unregulated medical devices does not have a license to sell a medical device. When the license requirement becomes applicable for medical device manufacturers and importers, it will also become applicable for the entire supply chain (i.e. they will have to obtain a license to sell a medical device by wholesale or retail from appropriate licensing authority). If the entire supply chain does not obtain a license by then, it could result in supply chain disruption.

Price control: Once medical devices come within the regulatory framework of MDR, they will automatically come within the price control framework of Drugs (Prices Control) Order, 2013 (DPCO). In fact, unregulated medical devices will come within the price control framework from the date of notification of the final rules. This is because DPCO applies to all drugs, and the definition of drugs is the same as that under Drugs and Cosmetics Act, 1940 (DCA). Since MDR has been framed under DCA by creating a deeming fiction that medical devices are drugs, the currently unregulated devices will also come under the ambit of DPCO. The immediate consequence of application of DPCO would be that the marketers of the medical device will not be able to increase its MRP by more than 10% in any continuous 12 month period. Under certain circumstances, their prices may also be fixed by the Government.

Comment

The regulation of all medical devices is a welcome change that is expected to level the playing field. More importantly, it is expected to give assurance of quality and safety to the common man who gets exposed to one or the other medical device at some stage of his/her life. It is hoped that the Central Drugs Standards Control Organization would consider some of the issues highlighted herein and address them before notifying the final rules. In the meanwhile, the medical device industry should prepare itself for the reality of impending future regulation.

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New Compliances for Health Research on Drugs, Medical Devices and Cosmetics in India

Woman sitting in laboratory

From September 16, 2019, all research conducted in India which focuses on human diseases or conditions in the context of a drug, medical device or cosmetics will have to be reviewed and overseen by a non-governmental body known as Ethics Committee.

More specifically, from that date, the Drugs and Cosmetics Act, 1940 (DCA) will begin to apply to “biomedical and health research”, which is defined as “research including studies on basic, applied and operational research or clinical research, designed primarily to increase scientific knowledge about diseases and conditions (physical or socio-behavioral); their detection and cause; and evolving strategies for health promotion, prevention, or amelioration of disease and rehabilitation”. The New Drugs and Clinical Trials Rules, 2019 (NDCTR), notified under the DCA, will make it mandatory for any person, company or institution involved in biomedical and health research regulated by NDCTR to ensure that a registered Ethics Committee reviews and oversees the conduct of the research.

Background

Prior to notification of NDCTR on March 19, 2019, there was no law as such that regulated biomedical and health research carried out on human participants other than such clinical research which involved a ‘new drug’. The Indian Council of Medical Research, India’s apex medical research and scientific body, had published The National Ethical Guidelines for Biomedical and Health Research on Human Subjects but there was no law that could enforce these guidelines on sponsors, professionals and institutions involved in the research. This lacuna in the law has been addressed by NDCTR.  The provisions in NDCTR that relate to biomedical and health research were to take effect after 180 days from March 19, 2019 (i.e. the date of its notification). This time was sought, perhaps, to put the administrative machinery in place, such as the National Ethics Committee Registry for Biomedical and Health Research.

Who will be impacted

Any legal person, whether an individual or company, undertaking any biomedical or health research regulated by NDCTR for academic or business purposes, will have to approach a registered Ethics Committee for approval of the research proposal.

A laundry list of those who may be impacted the most is described below for convenience –

Pharma Companies – Pharma companies usually undertake non-interventional research to evaluate patient behaviour, adoption and outcomes. Pharma companies also undertake non-mandatory post-marketing surveillance of pharmaceutical drugs. To the extent that such research concerns the health of the patient, it would have to be approved and overseen by a registered Ethics Committee.

Medical Device Companies – Like pharma companies, medical device companies undertake non-interventional research to evaluate patient behaviour, adoption and outcomes. Medical device companies also commission research to analyse secondary health data in patient registries. Such research would have to be approved and overseen by a registered ethics committee.

Cosmetics Companies – Cosmetics companies commission health-related studies from time to time. For example, cosmetic companies pay market research companies to assess the impact of the product from a psychological perspective (e.g. increase in confidence, reduction in stigma related to pimples or scars etc.). Such studies would henceforth be required to be approved and overseen by a registered Ethics Committee.

Diagnostic Companies – Diagnostic companies, especially those operating in the field of precision diagnostics, commission studies on existence and determination of various biological markers that aid in the diagnosis of diseases and conditions prevalent in the Indian market. Such studies would henceforth be required to be overseen by a registered Ethics Committee.

Technology Companies – Some technology companies, such as IBM, offer products and services that help clinicians in making better decisions with respect to the choice of medicines by analyzing a database of patient records (e.g. IBM Watson). Such technology companies, before deploying their products and services that analyze patient data with reference to pharmaceutical drugs, notified medical devices or cosmetics, would require the approval of a registered Ethics Committee.

Contract Research Organizations – There are numerous contract research organizations that undertake comparative Bio-availability and Bio-equivalence studies in India for pharmaceutical drugs that have been in the market for some time (i.e. drugs other than new drugs). Such comparative studies would henceforth be required to be approved and overseen by a registered Ethics Committee.

Market Research Organizations – Many market research organizations collect health data or undertake health-related primary research (e.g. patient interviews) and secondary research (e.g. prescription analysis) to reach certain conclusions for its clients (e.g. distinctive health-related product claims).  Such marketing research organization would also have to submit their research to a registered Ethics Committee for review and approval.

Who will not be impacted

Companies undertaking health research on traditional medicinal products (Ayurvedic, homoeopathic medicines etc.) – The NDCTR have been framed under powers that the Central Government has with respect to pharmaceutical drugs, notified medical devices and cosmetics. Therefore, logically, it does not apply to all other categories of drugs such as ayurvedic medicines and homoeopathic medicines. Since the obligations with respect to biomedical and health research are provided under the NDCTR, these logically cannot apply such other category of drugs due to the inherent limitations of NDCTR.

Companies undertaking health research on non-notified medical devices – The DCA applies to a very small number of notified medical devices at present. Any bio-medical and health research that concerns non-notified medical devices should not be covered by NDCTR.

Food & Beverage companies – The DCA does not apply to food or beverages. A separate legislation, called Food Safety and Standards Act, 2006 (FSSA), regulates the quality of food and beverages sold in India. There is no requirement to obtain an Ethics Committee permission to undertake biomedical and health research related to food products under FSSA.

Educational institutions – Students, academicians and professionals in numerous educational institutions undertake epidemiological research i.e. biomedical and health research that is related to diseases and conditions in general and not related to any particular medicine, notified medical device or cosmetics. Such research should not fall in the scope of NDCTR.

Challenges

Shortage of registered ethics committees – Almost all major research institutions in India have a registered ethics committee that they have formed themselves. Some research institutions who don’t have a registered ‘institutional’ ethics committee of their own seek services of a registered ‘independent’ ethics committee. These ethics committees are registered to review clinical trials on new drugs and investigational notified medical devices. The challenge, however, is that a separate registration is required for ethics committees which will review biomedical and health research proposals. In fact, the authority which will grant such registration to ethics committees was designated only a few days ago by the government (i.e. on September 12, 2019). Therefore, at the time of commissioning biomedical and health research, the sponsor of such must carefully evaluate the ‘registered’ status of the ethics committee who has offered its services.

Lack of clarity in definition – The definition of “biomedical and health research” is very broad, so much that it could arguably extend to research on how a medicine “tastes” or a medical device “feels”. Further, the definition by itself does not restrict the application of NDCTR to research that involves medicines, notified medical device and cosmetics only. It is broad enough to cover “basic research” as well, which is not connected any medicine, medical device or cosmetic but instead concerns research on human body and its constituents. Such expansive interpretation of the scope of the definition is not correct, because the parent law to NDCTR, that is the DCA, is applicable only to drugs, notified medical devices and cosmetics. Therefore, rules made under it, cannot go beyond the scope of DCA.  

Conclusion

In light of the application of NDCTR to biomedical and health research, sponsors of any research that concerns human participants and involves a pharmaceutical drug, notified medical device or cosmetic must be careful to not inadvertently violate NDCTR. A good practice would be to refer all such studies for approval of a duly registered Ethics Committee who may, after review of the study design, itself come to a conclusion that it is within the scope of NDCTR or not. Needless to say, all eligible biomedical and health research should under undertaken after review, and under supervision, of a duly registered Ethics Committee only.

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Highlights – Consumer Protection Act, 2019

The Consumer Protection Act, 2019 (“New Act”)  heralds the beginning of a new era of consumer rights in India that are in sync with new-age consumer expectations. It carries forward the rich legacy of The Consumer Protection Act, 1986 (“Act”) that was considered path-breaking at the time of its enactment, but which was unable to meet the challenges of a rapidly growing, sophisticated and inter-dependent market for goods and services.

Key Highlights of the New Act-

Establishment of Central Consumer Protection Authority: The New Act will establish a new regulatory authority known as the Central Consumer Protection Authority (“Central Authority”), which will have wide powers of investigation including the power of search and seizure. The CCPA will have an investigation wing, headed by a Director-General, which may conduct inquiry or investigation into violation of consumer rights or unfair trade practices (much like the MRTP Commission under erstwhile Monopolies and Restrictive Trade Practices Act, 1969 that had powers to investigate monopolistic or restrictive trade practice).

The Central Authority has been granted wide powers to take suo-moto actions, recall products, order reimbursement of the price of goods/services and file class-action suits if a consumer complaint affects more than 1 (one) individual.

Product Liability: The New Act has formally introduced the concept of product liability and brought within its fold not just the product manufacturer and product service provider but the product seller as well. A ‘product seller’ is such a person who is involved in placing the product in the market for a commercial purpose (e.g. brand owner). A product liability action for compensation can now be formally made on grounds of defectiveness of good or deficiency of services that has caused harm to a person or his/her property on grounds. The scope of defect and deficiency has been expanded to include non-conformance to express warranty or specifications, design defect, failure to provide adequate instructions or warnings to prevent any harm etc. Certain exceptions have been provided under the New Act from product liability actions, such as, that the product seller will not be liable where the product has been misused, altered or modified.

Unfair Contracts: Following international jurisprudence, the New Act introduces a unique provision that safeguards consumers against unfair contracts by declaring them to be illegal. An unfair contract covers contracts between manufacturer/ trader and a consumer that causes significant changes in the rights of the consumer that the New Act explicitly recognizes, such as by way of – imposing unreasonable obligation or condition on the consumer which puts consumer to disadvantage; reserving right to unilateral termination (without reasonable cause) or assignment without consent (which is to the detriment of the consumer) in the contract; imposing a penalty for breach which is disproportionate to loss caused etc. 

Unfair Trade Practices: The New Act introduces a broader definition of Unfair Trade Practices, which also includes sharing of personal information given by the consumer in confidence, unless such disclosure is made in accordance with the provisions of any other law. The New Act empowers the Central Authority and Consumer Commission (i.e. the judicial fora) to order the perpetrator of such practice to discontinue it.

Penalties for Misleading Advertisement: The New Act introduces, for the first time, a definition of misleading advertisement. It covers false description and guarantee of a product or services. It also covers information that was deliberately concealed from the consumer. If a misleading advertisement is found to be prejudicial to the interest of consumers, then the Central Authority may impose a penalty of up to INR 1,000,000 (Indian Rupees One Million) on a manufacturer. Separately, the New Act has made it a criminal offence to publish false or misleading advertisement for manufacturers and services providers. If found guilty, they could be sentenced to imprisonment for up to 2 (two) years.

Celebrity Endorsement: The New Act fixes liability on endorsers considering that there have been numerous instances in the recent past where consumers have fallen prey to unfair trade practices under the influence of celebrities acting as brand ambassadors. In such cases, it becomes important for the endorser to take the onus and exercise due diligence to verify the veracity of the claims made in the advertisement to refute liability claims. If a misleading advertisement is found to be prejudicial to the interest of consumers, then the Central Authority may impose a penalty of up to INR 1,000,000 (Indian Rupees One Million) on the endorser as well. The Central Authority can also prohibit the endorser of a misleading advertisement from endorsing that particular product or service for a period of up to 1 (one) year. For every subsequent offence, the period of prohibition may extend to 3 (three) years.  

E-Commerce Transactions Covered: The New Act has widened the definition of ‘consumer’. The definition now includes any person who buys any goods, whether through offline or online transactions, electronic means, teleshopping, direct selling or multi-level marketing. The earlier Act did not specifically include e-commerce transactions.

Enhancement of Pecuniary Jurisdiction: Like the previous Act, there are three fora for consumer grievance redressal: The District Commission, State Commissioner and National Commission. Each for a has been given a pecuniary limit to entertain consumer complaints. These limits are far higher than the limits set by the previous Act. The District Commission (earlier referred to as District Forum) can now entertain consumer complaints where the value of goods or services paid does not exceed INR 10,000,000 (Indian Rupees Ten Million). The State Commission can entertain disputes where such value exceeds INR 10,000,000 (Indian Rupees Ten Million) but does not exceed INR 100,000,000 (Indian Rupees One Hundred Million), and the National Commission can exercise jurisdiction where such value exceeds INR 100,000,000 (INR One Hundred Million). 

E-Filing of Complaints: The New Act provides flexibility to the consumer to file complaints with the jurisdictional consumer forum located at the place of residence or work of the consumer. This is not an option under the previous Act, which mandated filing of the complaint at the place of work or business of the opposite party. The New Act also contains enabling provisions for consumers to file complaints electronically and for hearing and/or examining parties through video-conferencing. This should reduce inconvenience for the consumers, especially the ones who are physically challenged due to ill-health or old age.

Provision for Alternate Dispute Resolution: The New Act provides for mediation as an alternate dispute resolution mechanism, making the process of dispute adjudication simpler and quicker. This will help speedier resolution of disputes and reduce pressure on consumer courts.

Date of enforcement: The New Act has been notified on August 9 2019. It will replace the Consumer Protection Act, 1986 when enforced. The date of the enforcement of New Act 2019 has yet not been announced, but is expected soon.

With the New Act becoming law of the land, gone are the days of  ‘Buyers beware’. The consumer is now the king, not just in business but also in law. Hence, it is important for FMCG, E-retailers and Celebrity Endorsers to be cognizant of the provisions of the New Act. All businesses must pull up their socks and amend their business practices and contracts to meet the expectations of the New Act, so that they do not find themselves caught on the wrong side of the law when then New Act is enforced.

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Crackdown on Corruption in FDA in India – Key takeaways from recent developments

Two separate incidents, one relating to India’s central drug law enforcement body- the Central Drugs Standards Control Authority (CDSCO), and another relating to a State drugs law enforcement body- the Himachal Pradesh Drugs Control Administration (HPDCA), have received widespread attention. On August 16 2019, a very senior officer of the CDSCO was arrested while accepting a bribe.  On August 23 2019, the residential and office premises of a very senior officer of HPDCA was raided by the vigilance department on bribery allegations. These high profile investigations closely follow the arrest of a Drug Inspector of CDSCO and the Managing Director of a Pharmaceutical Company on grounds of hatching an alleged conspiracy to ‘manage’ adverse results of a government lab test. All these individuals have been charged for commission of offences under India’s anti-bribery law i.e. The Prevention of Corruption Act, 1988.

The official communication from the Central Government with respect to the arrest of its officer reads: “All stakeholders, public and officers shall take cognizance of the fact that CDSCO has the policy of zero tolerance towards corruption and is committed to act stringently against any act of corruption.”

The official communication is very interesting, especially in the background of the reported facts that prompted the arrests.

The complaint against the senior officer of the HPDCA was that he was allegedly receiving “undue favours” such as free air tickets and hotel accommodation from pharmaceutical companies.

The complaint against the Drug Inspector of CDSCO was that he had allegedly demanded a bribe to ignore the deficiency in samples of dobutamine injection. The drug is used to treat acute heart failure

It is not unusual in India for individuals from different verticals of pharmaceutical / medical device business – quality, regulatory, government affairs and senior management, to actually be in direct and repeated contact with officers of the drugs law enforcement bodies for genuine business reasons.

It may not be right to say that such constant interaction is a bad thing. However, it does increase the possibility of corruption. Therefore, it is important to sensitize those in direct contact with government officers that-

  1. It is a criminal offence not just to demand or take a bribe, but also to offer or give a bribe in India.
  2. A bribe does not necessarily have to be in cash. It may be in kind as well such as by way of flight tickets, hotel stays or expensive liquor bottles.
  3. MNCs doing business in India are at higher risk of corruption because, as subsidiaries of US or UK holding companies, they expose the holding companies to the risk of violation of stringent foreign anti-bribery laws such as US Foreign Corrupt Practice Act and UK Bribery Act.

Some important take-aways from the recent crack-down on corruption in the drug enforcement bodies –

  1. The degree of vigilance by CDSCO and other state-level enforcement bodies i.e. State FDAs against corruption has increased. According to reports, a “zero tolerance” policy against corruption has been put in place.
  2. The Managing Director of a pharmaceutical company was arrested along with the Inspector of CDSCO for paying the bribe even though he was not physically present when the bribe was accepted. Therefore, the senior management of a company is especially exposed to an anti-bribery prosecution since they are in charge of day to day operations of the company.
  3. Doing a favour to a government officer, like booking flight ticket or hotel accommodation or providing free medicines/medical devices, may be looked at as an instance of bribe both under Indian and foreign laws.
  4. It is reported that the complaint against HPDCA officer was done by a pharmaceutical company. While it is up to the Courts to establish the veracity of the complaint, it does show that there is scope for refusing a demand of a bribe and for lodging an effective complaint.

Last but not the least, these developments underscore the importance to put in place appropriate systems and processes that act as a risk mitigation tool against the possibility of corruption. At the very minimum, every pharmaceutical and medical device company should have a written policy on corrupt practices that is both comprehensive and practical to suit the reality of India. This must be complemented by regular training sessions to communicate the policy to everyone in the company in a language that they will understand. Some companies have already put in place a whistle-blower policy. The policy must be fine-tuned to escalate potential acts of corruption as well.

Better safe than sorry!

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E-Cigarette and ENDS ban in India: Analysis of laws, consequences and challenges

Last updated: June, 2019

May 31 is observed every year as the World Anti-Tobacco Day. On May 31 of 2019, The Indian Council of Medical Research (ICMR), the apex bio-medical research body of the Indian government, issued a  formal recommendation to ban the sale of e-cigarettes and electronic nicotine delivery systems (ENDS) through-out India. The ICMR recommendation has come at an opportune time since, very recently, the Delhi High Court has stayed the operation of a Central Government circular imploring various Indian States to ban ENDS. 

In this post, we have analyzed the current regulatory framework for the regulation of e-cigarettes and ENDS (hereinafter referred collectively as ENDS for convenience) to evaluate its scope and limitations, as well as decode the method of current regulation of ENDS under Indian law. We have also highlighted the consequences of violation of the ban, if any.

Legal and regulatory framework

Under Indian law, there are five distinct regulatory buckets in which ENDS may fall:

  1. ENDS as a combination product of drug and medical device
  2. ENDS as a tobacco product
  3. ENDS (nicotine) as food
  4. ENDS (nicotine) as a poison
  5. ENDS (nicotine) as an insecticide

We will deal with each regulatory bucket in the paragraphs below.

Combination of Drug and Medical Device

Preparations of nicotine are regulated as a drug in India. In fact, the sale of gums and lozenges containing more than 2 mg of nicotine requires a retail drug license.

As per a survey carried by the author, most States in India have regulated ENDS as a drug (since substances and devices are deemed to be drugs in India). Under the Drugs and Cosmetics Act, 1940 and its rules (“Drug Laws“), a license is required to import, manufacture and sell drugs. Wherever State Governments have banned ENDS, they have done so by refusing to issue a license to undertake any commercial activity related to ENDS on the grounds that ENDS is not approved for sale as a drug. This position has been endorsed by the Central Government as well, who had released in advisory for all States in India to that effect in August 2018.

Import, manufacture or sale of ENDS in violation of Drug Laws could result in confiscation, fine and imprisonment for the company involved as well as the person in charge of the operations of the company. 

However, two separate Delhi High Court orders have raised serious questions over the legal basis of the ban on ENDS. In Piush Ahulawalia v. Union of India, the Delhi High Court clarified that the Central Government’s advisory was not binding, and therefore the State Governments were free to chart their own course in terms of banning (or not banning) ENDS. In Focus Brand Trading India Pvt. Ltd. and Anr  v. DGHS and Ors., the Delhi High Court went a step ahead and questioned whether ENDS could be regulated as the drug in the first place. The March 2019 order passed in this matter effectively brings into question any ban enforced on ENDS on the assumption that ENDS is a drug.  A Customs notification released in November 2018 had made it mandatory that import consignments of ENDS would require prior approval of Additional Drugs Controller, Customs. The said notification has also been stayed by the March 2019 order. 

In the author’s own considered opinion, however, the government is well within its powers to regulate ENDS as a drug. It is a fact that nicotine is a drug. As per the current construct of Drug Laws, a drug when consumed for non-medicinal purpose would remain a drug and be regulated as one. Therefore, what is actually left to be established whether the system i.e. ENDS is drug or not. As most readers are aware, ENDS is just a system that delivers nicotine. Therefore, it is not a chemical but a device. Drug Laws do not regulate all devices. They regulate notified devices only and ENDS is not a notified device. Therefore, ENDS sans nicotine cannot be said to be regulated under the Drug Laws. But a combination of ENDS with nicotine (i.e. refill) should certainly qualify as a drug. There are enough instances where such combination products have been regulated as drugs in India in the past. For instance, a Glucometer by itself is not a drug (at least not until January 1, 2020). But a Glucometer when sold along with glucose strips is regulated as a drug, because glucose strips are regulated as drugs. This analogy squarely applies to ENDS sold with nicotine refills.

Having said that, what is important to remember that the Drugs Laws do not ban ENDS with nicotine refills. Therefore, it is possible to structure business operations in a manner that it would be lawful to carry out the business of ENDS with nicotine refills under a drug license in India. 

ENDS as a Tobacco product

Most jurisdictions around the world, including the US and Europe, regulate ENDS as a tobacco product. In India, tobacco products are regulated by law, but in a limited manner. The Cigarette and Other Tobacco Products Act, 2003 and its rules (“Tobacco Laws”) regulate advertisement, sale to minors and labelling of cigarettes and tobacco products, but stop short of giving power to the government to ban a tobacco product in India. In other words, the Tobacco Laws in India impose compliance requirements for cigarettes and tobacco products, but the government cannot use it to ban import, manufacture or sale of tobacco product in India so long as the tobacco products are compliant to the requirements stipulated by law. Interestingly, the definition of ‘tobacco product’ under Tobacco Laws is exhaustive, and it means any product that is listed in the Schedule to the main Act. ENDS is not listed in that Schedule yet. Therefore, it is strongly arguable that Tobacco Laws in India do not apply to ENDS at all. 

Suffice it is to say that the Tobacco Laws, as they exist today, do not (read cannot) ban the sale of ENDS with nicotine refills.

ENDS as food

Food in India is regulated by the Food Safety and Standards Act, 2006 and the rules and regulations made under it (“Food Laws”). The definition of “food” under India’s Food Laws extends to substances in the form of liquid, gas or vapour. Therefore, nicotine, when consumed in form of gas or vapour, may qualify as food. The consumption of nicotine as a food ingredient has been specifically banned under Food Laws. States such as Tamil Nadu and Union Territories like New Delhi have also issued notifications (1, 2) banning “all food products chewable or otherwise… containing tobacco and/or nicotine as ingredients” in public interest for successive periods of one year.

This makes it unequivocally clear that any food containing nicotine cannot be sold in India. It is but natural to conclude that the language of the ban would engulf ENDS with nicotine refills as well. A violation of Food Laws could result in confiscation, fine and imprisonment for the company involved as well as the person in charge of the operations of the company. 

However, the ban on products containing nicotine imposed through food laws is not without controversy. Over the last few years, different High Courts have given contrary decisions on whether tobacco products should be regulated exclusively under Tobacco Laws or both Tobacco and Food Laws. A February 2019 Madras High Court judgement has highlighted this contrarian position as well. Therefore, until the Supreme Court of India decides on this issue, it is possible to argue today that ENDS with nicotine refills should not be regulated as food, but rather as a tobacco product and be governed exclusively by the Tobacco Laws (which incidentally does not give power to the government to ban ENDS). This means that the ban on nicotine as food or food ingredient may have no bearing on ENDS with nicotine refills. 

ENDS as a poison

India regulates import and sale of poisons, in the same manner as drugs. A license is required to import or sell poisons. The difference between drug regulation and poison regulation is that every state has the power to notify any chemical as a poison and regulate it (this legal position has been upheld by Supreme Court as well). Thus, given the ambiguity surrounding the application of drug regulation to ENDS, some states in India have decided to notify nicotine as a poison under the Poisons Act, 1919 and thus regulate ENDS. For instance, Punjab has regulated nicotine as a poison since 2014.

A violation of the Poisons Act, 1919 could result in confiscation, fine and imprisonment.

Again, like drug regulations, the Poisons Act, 1919 does not ban the sale of ENDS with nicotine refills. Therefore, it is possible to structure business operations in a manner that it would be lawful to carry out the business of ENDS with nicotine refills under a poisons license in India.

ENDS (nicotine) as an insecticide

The chemical, Nicotine Sulphate, and preparations made out of it, have been identified as insecticide under the Insecticides Act, 1968. Any person desiring to import or manufacture or sell an insecticide requires regulatory clearance from the government.

However, Insecticides Act, 1968 itself exempts “Any substance specified or included in the schedule or any preparation containing any one or more such substances, if such substance or preparation is intended for purposes other than preventing, destroying, repelling or mitigating any insects, rodents, fungi, weeds and other forms of plant or animal life not useful to human beings“. Due to the said exemption, the fact that nicotine sulphate and its preparations are insecticides has no bearing for ENDS with nicotine refills, because it not intended to be used as an insecticide.

Takeaways

On the strength of the above analysis, it is difficult to say that trade in ENDS has been conclusively or comprehensively banned in India. It is true that some states such as Punjab, Tamil Nadu and Karnataka have banned the trade of ENDS within their territory, but such a ban does not appear to have a very strong backing of a statute. This becomes more evident as one peruses the actual text of the administrative orders through which the ban has been imposed, because there is hardly, if any, statutory provision cited in those orders to support the ban and the government appears to be relying solely on “public interest” to support its stance. Numerous media reports (1, 2) have also indicated that the government is struggling to find a way to ban ENDS. Therefore, it appears that the stage is set for the courts, especially the Supreme Court, to clarify the position on the so-called ban on ENDS in India. Until then, it cannot be said that it is not possible to do the business of ENDS in India.

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India exempts patented drugs from price control for a limited time, but patented medical devices continue to remain under price control

As of January 2019, the Indian Government has allowed importers and manufacturers of patented new drugs to price their product freely for a period of five years. The said five year window will begin from the date of the product’s commercial marketing in India.

Prior to this development, patented new drugs which were not developed in India were subject to certain price restrictions depending on whether the drugs were part of National Essential Medicine List (NLEM) or not. Where the drugs were part of NLEM, the government prescribed a price ceiling above which the drugs could not be sold. Where the drugs were not part of NLEM, the importers/manufacturers of the product were not permitted to increase their price by more than 10% in any 12 month period. These restrictions will not be applicable to patented new drugs any longer until expiry of the said five year window.

The Indian government has also carved out an exemption from price control for orphan drugs. Going forward, any drug that, in the opinion of Ministry of Health, is used for treating orphan diseases will also receive exemption from price control. Such a drug need not be a new drug, or have a patent, or both to be able to be eligible for the price exemption as long as it is used in treatment of an orphan disease. Interestingly, certain medical devices such as coronary stents and knee implants are regulated as drugs in India and therefore are part of price control applicable to drugs. These medical devices will not be able to take benefit of this exemption as medical devices do not fall within the definition of ‘new drug’ under the law.

Foreign Manufacturers, Importers, Indian distributors and Indian manufacturers should take note of this development immediately and evaluate whether they are eligible and interested in taking benefit of the exemption. If the drug is already in market, then the availability of the five year window period for the drug should be evaluated.

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Ethical marketing and promotion of medicines

Time and again, the pharmaceutical industry has been accused of indulging in unethical practices concerning the marketing of medicines around the world.  These unethical marketing practices are, in fact, a major area of concern for the Government as well as patient groups. Amongst all unethical practices, the one that attracts the highest amount of scrutiny is the (questionable) interaction between pharmaceutical companies and healthcare practitioners (HCPs).

India is no exception. The Draft Pharmaceutical Policy, 2017 published by the Government itself makes a note that unethical practices employed by pharma companies are an area of major concern and that Doctors are lured to recommend a particular brand through all expenses paid trips often disguised as ‘educational conventions’. Unfortunately, the cost of such trips and other incentives gets added to the overhead cost of marketing of the medicine and is ultimately passed on to the patients.

There is no law at present that regulates the promotion and marketing of drugs (including medical devices) by companies before HCPs. Interactions between pharma companies and HCPs are regulated, at best, by way of restrictions cast on HCPs through their respective professional and ethical guidelines. For example, the Indian Medical Council (Professional Conduct, Etiquette and Ethics) Regulations, 2002 regulate the professional and ethical conduct of doctors practising modern medicine and prohibits doctors from accepting any kind of freebies (including travel and accommodation) from pharma and allied healthcare industry. Unfortunately, the principal legislation that regulates the pharma industry i.e. The Drugs and Cosmetics Act, 1940 does not say what pharma companies can and cannot say, or give or cannot give, to HCPs.

It is true that there are consumer protection legislations in India such as the Consumer Protection Act, 1986 (now the Consumer Protection Act, 2019) and the Drugs and Magic Remedies (Objectionable Advertisement) Act, 1954 and Rules, 1955 but these legislations regulate misleading advertisements, not unethical industry-HCP interaction.

It is, perhaps, not right to say that the government has turned a blind eye to this problem. In fact, in light of the increasing number of complaints of unethical practices adopted by pharma companies, the Department of Pharmaceuticals had introduced the Uniform Code of Pharmaceutical Marketing Practices (UCPMP) back in 2011 (later revised in 2014). The intent behind UCPMP code was to guide the pharma industry in its interaction with HCPs. However, the voluntary nature of UCPMP has relegated its own status to that of a “non-binding guideline”.

However, not all is lost. There is no dearth of pharma companies who are proudly ethical in their dealings with HCPs. In fact, most pharma MNCs have put in place exhaustive internal guidelines and robust internal systems which guide interactions of their medical representatives/marketing personnel with HCPs.  Interestingly, HCPs also seem to value such ethical behaviour. It is obvious that, at the end of the day, a HCP will prescribe medicines from only those pharma companies whose quality he or she trusts.

It is quite likely that the Indian government may decide to give legal teeth to UCPMP and make it binding. After all, the UCPMP is the nearest Indian equivalent to the US Physicians Payment Sunshine Act that we have. Interestingly, the enforcement of the Sunshine Act by US Authorities have resulted in hundreds of millions of dollars in fines for some pharma companies.

There is no doubt that making UCPMP into a law would certainly help to curb the rampant quid-pro-quo arrangements that exist today between pharma companies and HCPs. More so, those companies which currently engage in unethical practices will be forced to re-evaluate their sales and marketing strategies and become compliant, or else they will have to face legal consequences.  

In the meanwhile, at least those companies who have achieved leadership positions in India’s pharma industry may lead by example and assume voluntary responsibility to follow UCPMP in text and spirit. The pharma industry associations would also do much good if they could adopt the UCPMP and direct their members to ensure compliance with the provisions of UCPMP at all costs. Such proactiveness will go a long way in instilling a sense of confidence amongst the Government and patients groups. And if that happens, needless to say,  the heavily regulated industry that is pharma industry will have one less regulation to worry about.

The views are personal.

Anil Upadhyay

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Confidentiality and Non-Disclosure Agreements – Key Things to Keep in Mind before Disclosing Confidential Information

All health-focused businesses, whether of pharmaceuticals, medical devices, food & beverages, cosmetics or healthcare, hold a large amount of information that is confidential or proprietary to the business. While soliciting investments from investors, or in the course of finding the right business partners, it becomes vital to disclose or share such information for validation. At that time, there is some hesitation to disclose confidential or proprietary information – what if the data fell in a competitor’s hand? What if the information is used against the owner?

Contrary to general perception, it is possible to retain full control over the use of confidential or proprietary information even after it has been disclosed in the course of business. It is also possible to force the receiving party to permanently delete the information from its systems, so that there is no scope of its misuse. The legal instrument that allows a business to have control over the use and disclosure of its confidential and proprietary information is called a Non-Disclosure Agreement (commonly referred to as NDA).

It is easy to source an NDA template because they are very readily available on the internet. Most businesses that have been around for some time usually have an NDA template of their own. However, before actually signing an NDA, health-focused businesses should ensure that their NDA template checks the following essential boxes:

Wide definition of confidential information: Ideally, any information that is shared by disclosing party to receiving party should be treated as confidential under an NDA. This leaves no scope for ambiguity between the disclosing party and receiving party with regards to the information shared by the dislosing party. It may also be a good idea to add language which clarifies the scope of confidential information, for instance, that confidential information covers customer list, regulatory information, pricing information etc. as it serves as a reminder to the receiving party that use and disclosure of such information is to be taken very seriously.

Clear identification of purpose: The real objective behind signing an NDA is to control the use and disclosure of confidential or proprietary information. The use of such information can be regulated only if the NDA clearly identifies the purpose behind sharing of the information. If the purpose is clearly defined, it is easy to establish whether the information that was disclosed was used or misused. Any use of the information beyond the purpose of its disclosure would amount to misuse of the information, which will be prohibited (see section on Non-Disclosure below). Therefore, it is very critical for the effectiveness of an NDA that the purpose of the disclosure is clearly identified within the NDA.

Existence of a non-disclosure clause: The language that imposes restriction on use and further disclosure of the confidential and proprietary information is, perhaps, the most critical part of an NDA. It is very important to properly define the limitations for use and disclosure of the information. Ideally, the information disclosed should not be used (a) for purposes other than the defined purposes; (b) by parties other than the receiving party; (c) by persons other than those for whom it is absolutely necessary to know about the information and who are in direct employment of the receiving party  and (d) beyond a stipulated time-period for any purpose whatsoever (usually the term of the NDA).

Protection against competition from receiving party: These days, it is fairly common to have non-compete provisions built into an NDA. A non-compete clause is a negative covenant by which the receiving party agrees not to enter into a business that competes with the business of the disclosing party. Such a provision  becomes necessary to include in the NDA when the receiving party is in same or similar business, and can capitalize on the disclosed information to compete with the disclosing party in a short span of time. While it is fairly simple to contractually impose such an obligation on the receiving party, it is not easy to enforce non-compete obligation before the Indian courts. The Indian courts have held that non-compete provisions will be binding during the currency of the contract, but its enforceability after expiry or termination of the contract is a moot point which will be decided on a case to case basis. Therefore, many times, the term of the NDA is deliberately stretched (up to 10 years!) in order to improve chances of enforcement of the non-compete. If the term of the NDA cannot be stretched, then in order to improve the chances of enforcement of a non-compete obligation, the disclosing party should record in the NDA that the receiving party has given assurance to it that it would not compete with the disclosing party and only on the basis of such assurance the disclosing party has agreed to disclose the information.

Additional protection from non-circumvention: Sometimes, a receiving party is tempted to bypass the disclosing party and explore business opportunities within the business network of the disclosing party without involving the disclosing party. This may not, strictly speaking, amount to ‘using’ the confidential information. Therefore, it is important to address the possibility of such a ‘circumvention’ in the NDA. This form of ‘circumvention’ is particularly common in business relationships where the disclosing party is not the actual manufacturer/supplier of goods and services, but is instead a facilitator. To address any risk of such circumvention, the NDA should compel the receiving party to refrain from circumvention, avoidance or by-passing of the disclosing party in order to avoid signing of a contract (for investment, fee, commission etc.).

Stipulation of remedies: Monetary compensation may not always be an adequate remedy in case of breach of the NDA. Ideally, the receiving party should be stopped from using any information that is confidential or proprietary to the disclosing party. However, until the disclosing party is able to prove that the monetary compensation is not going to be adequate remedy for breach of NDA, Indian courts will not issue an order that stops the receiving party from doing so. Therefore, in the NDA, it is important to record that the remedy of specific performance and injunctive relief will be available to receiving party in addition to monetary compensation, because monetary compensation alone may not be adequate remedy to disclosing party in case of breach of the NDA.

Governing law and jurisdiction: An NDA between two domestic parties is always regulated by domestic law. However, that may not be the case when one of the parties is a foreign party. When there is no clear stipulation of governing law in an ‘international’ NDA, then in the unfortunate event of a dispute, the receiving party may take up the defence of non-application of domestic law (or foreign law, depending on where the action is instituted!) in an enforcement action before a Court. This could delay the remedy for disclosing party that is otherwise stipulated and agreed to in the NDA. Therefore, it is important to clearly stipulate the governing law of the agreement in the NDA. Separately, as a disclosing party, it is natural to prefer domestic law as governing law of the NDA. However, this may actually be counter-productive if the receiving party is a foreign party because a large number of countries do not directly recognize the orders of Indian courts. In case of perceived or actual breach of NDA, time is of essence, and therefore the quickest option to secure relief is to go to the courts which have jurisdiction over the foreign receiving party and ask for urgent relief. Now, in order to be able to do so, it is preferred that the governing law of the contract is actually the domestic law of the foreign party and not the domestic law of the disclosing party. On the same note, it is equally important to identify which court will have jurisdiction over any breach or dispute arising out of the NDA, so that the opposite party does not institute a counter-action in another court and objects to the jurisdiction of the court that has been approached by the disclosing party for relief.

Sometimes, in order to avoid ‘forum shopping’, the parties agree to resolve any dispute by way of an arbitration seated in a neutral country whose orders would be directly enforced by courts in the country of the disclosing party as well as the receiving party.

Survival clause: Last but not the least, it is important to verify whether the NDA has a survival clause or not. If the NDA does not have a survival clause, then its effect will cease after expiry of the term of the NDA, or early termination of the NDA by either party. The disclosing party should ensure that certain obligations such as that of confidentiality and dispute resolution (disputes can happen even after expiry of the NDA because the disclosing party may not become aware of the breach for a long time) survive the expiration or termination of the NDA.

Happy signing!