In this article, we have discussed rounding-off principles that manufacturers and importers of drugs and medical devices should follow while determining the maximum retail price (MRP) of their products.
What is rounding-off? Rounding-off refers to adjusting a fractional price of a drug or medical device to the nearest rupee, or the nearest paisa, depending on the context.
Why is rounding-off relevant for drugs and medical devices? The MRP of drugs and medical devices is regulated by a law called the Drugs (Prices Control) Order, 2013 (“DPCO”). If a manufacturer or importer decides to round-off the MRP of a drug or medical device for any reason, for example, pursuant to an increase or decrease in applicable taxes, and the rounding-off is not acceptable as per provisions of DPCO, then it may result in recovery of the overcharged amount from the manufacturer or importer.
What are the principles of rounding-off prescribed under DPCO? The DPCO itself is, as such, silent on the rounding-off of MRP. However, the authority responsible for enforcement of the DPCO, the National Pharmaceutical Pricing Authority (NPPA), has recognized the fact that rounding-off of MRP is an acceptable market practice [NPPA Minutes, 2016]. It is acceptable to NPPA that rounding-off of MRP is done as per ‘general mathematical practice’.
What is the general mathematical practice of rounding-off? The general mathematical practice is to round-off the second decimal place of the MRP, depending on the number present at the third decimal. If the number present at the third decimal place is 5 or bigger than 5, then the number present at the second decimal place may be increased by 1. If the number present at the third decimal is less than 5, then the number present at the second decimal place will not change. Some illustrations:
S No.
Actual Figure
Rounded-off Figure
1.
Rs. 123.45/-
Rs. 123.45/-
2.
Rs. 123.455/-
Rs. 123.46/-
3.
Rs. 123.456/-
Rs. 123.46/-
4.
Rs. 123.991/-
Rs. 123.99/-
5.
Rs. 123.999/-
Rs. 124.00/-
6.
Rs. 123.001/-
Rs. 123.00/-
7.
Rs. 123.111/-
Rs. 123.11/-
The above understanding was validated by the Delhi High Court in the case of Union of India v Bharat Serums.
Whether rounding-off is permitted for medical devices under Legal Metrology (Packaged Commodities) Rules, 2011? The MRP of medical devices is regulated by DPCO as well as Legal Metrology (Packaged Commodities) Rules, 2011 (“LMPC Rules”). Until 23.6.2017, the LMPC Rules had a provision to round off the fractional MRP to the nearest rupee. In other words, medical devices were permitted to round-off the fraction of less than fifty paise to the preceding rupees and a fraction of above 50 paise and up to 95 paise to the rounded off to fifty paise. However, the above provision was omitted from LMPC Rules with effect from 1.1.2018. Therefore, the MRP of medical devices today cannot be rounded off, except in the case of the second decimal place, as described earlier.
Can a manufacturer or importer of medical devices round-off MRP of medical devices to the nearest rupee or 50 paise? The simple answer is no, especially not after 2018. Before this, it was at least arguable that manufacturers and importers of medical devices could rely on the provisions of LMPC to take a position that they had the flexibility to round-off the MRP to the nearest rupee or 50 paise. The price regulator, NPPA, however, has not accepted this position. Post 2018, there is no basis for manufacturers and importers of medical devices to take such a position since the supporting LMPC provisions are now omitted. Please note that manufacturers and importers of drugs could never take benefit of the flexibility of rounding-off under LMPC Rules for fixing MRP because LMPC Rules do not apply to drugs.
Conclusion The flexibility to round-off MRP in the case of drugs and medical devices is available up to the second decimal place only, as per general mathematical practice. Any error in rounding-off for drugs and medical devices can result in significant recovery from manufacturers and importers under the provisions of the Drugs (Prices Control) Order, 2013.
The Division Bench of the High Court of Delhi, in the case of Union of India v Bharat Serums, has laid down how the overcharged amount should be calculated by India’s drug price control regulator, National Pharmaceutical Pricing Authority (“NPPA”). The judgement will have a significant impact on existing as well as future demands for overcharging which are raised on pharmaceutical and medical device companies in India.
Background
Under Para 20 of India’s drug price control law, the Drug (Prices Control) Order, 2013 [“DPCO”], all non-scheduled formulations are allowed to increase their price by 10% in 12 months. Non-scheduled formulations are non-essential drugs or medical devices that are not listed in the schedule of DPCO. Most pharmaceutical and medical device companies do not use the 10% price increase opportunity in the 12-month period and elect to increase the price after a number of years.
When the opportunity does arise to increase prices, the question that always arises is whether the company can increase the price by the ‘aggregate’ of permitted percentage increase, or by a maximum of 10% from its last published Maximum Retail Price (MRP). For instance, if the MRP of a drug or medical device was Rs. 100, and the company selling the product decides to increase the price of the drug or medical device after a period of 5 years, would it be entitled to increase the price of the product by Rs. 50 (10% increase allowed every 12 months period), or by Rs. 10 (10% increase from last MRP irrespective of the time gap).
The other question that arises is if a pharmaceutical or medical device company increases the MRP of its product by more than 10% in a 12-month period, then how should NPPA recover the overcharged amount? For instance, if the MRP of a drug or medical device was Rs. 100 earlier, and if the company revises the MRP of the product to Rs. 200 after 5 years, how should NPPA calculate the overcharged amount? Should NPPA assume that the company was only allowed to increase MRP by 10% and recover the remainder amount as an overcharged amount? In other words, should NPPA give a concession of Rs. 10 to the company and proceed to recover Rs. 90, or should NPPA ‘assume’ that the company would have increased its price by 10% each year, and proceed to recover only the balance amount, in this case Rs. 50 (or more accurately Rs. 39 since a 10% increase every year for 5 years would have resulted in MRP of Rs. 161).
The above questions were conclusively answered by the Delhi High Court and are discussed below.
Interpretation of 10% permissible price increase in 12-month period
The Delhi High Court has interpreted the 10% allowance to increase MRP as follows: the MRP of non-scheduled formulations can only be increased by 10% in a period of 12 months, at a time, but in case of overcharging, the NPPA will have to assume that the company would have taken the 10% MRP increase and will be permitted to recover the ‘net’ amount.
The above interpretation is explained using examples in the paragraphs below.
Examples
What is permissible MRP increase for a pharmaceutical or medical device company?
If the MRP of a non-scheduled drug or medical device was Rs. 100 in 2014, the permissible price increase on yearly basis would be as follows:
Years
01.01.2014
01.01.2015
01.01.2016
01.01.2017
01.01.2018
01.01.2019
01.01.2020
Actual MRP
100
110
121
133.1
146.41
161.05
177.15
If a pharmaceutical or medical device company wishes to take 10% increase after 5 years, how much can that be?
If the MRP of a non-scheduled drug or medical device was Rs. 100 in 2014, and the company decided to take a price increase in 2019, the maximum permissible price increase would be Rs. 110.
Years
01.01.2014
01.01.2015
01.01.2016
01.01.2017
01.01.2018
01.01.2019
01.01.2020
Actual MRP
100
100
100
100
100
110
121
How should the overcharged amount be calculated, in the event of default by a pharmaceutical or medical device company?
In a hypothetical scenario, where the MRP of a non-scheduled drug or medical device was Rs. 100 in 2014, and the company decided to increase it to Rs. 161.05 in 2015 and later to 177.15 in 2020, the overcharged amount will have to be calculated as follows:
Years
01.01.2014
01.01.2015
01.01.2016
01.01.2017
01.01.2018
01.01.2019
01.01.2020
Total ovecharged amount
Actual MRP
100/-
161.05
161.05
161.05
161.05
161.05
177.15
–
Permissible MRP (with 10% increase)
Not applicable
110
121
133.1
146.41
161.05
177.15
–
How NPPA calculated overcharging amount ? (Not legal)
Not applicable
51.05
51.05
51.05
51.05
0
0
204.2
Overcharged amount as per Delhi High Court
Not applicable
51.05
40.05
27.95
14.64
0
0
133.69
The above table is instructive because it illustrates the incorrect methodology applied by NPPA to calculate the overcharged amount that has been routinely demanded and recovered by NPPA so far from pharmaceutical and medical device companies.
Until the Delhi High Court judgement, the NPPA demanded an amount which was excessive and incorrectly calculated (Rs. 204.2). However, after the Delhi High Court judgement, irrespective of the amount that has been calculated by the NPPA, the actual payable amount will be significantly lower than the amount demanded by NPPA (Rs. 133.69).
Impact
This particular Delhi High Court judgement on permissible price increase of drugs and medical devices will have a far-reaching impact on existing overcharging demands which have been raised by NPPA, and the demands that NPPA will raise in the future. All existing demands for overcharging raised by NPPA, which have been calculated using incorrect methodology due to incorrect interpretation of overcharging provisions of DPCO by NPPA, should be rolled back by the NPPA. A pharmaceutical or medical device company that has currently received such a demand should strongly object to the NPPA’s demand on the strength of the Delhi High Court judgement.
Pharmaceutical and medical device companies should also be careful in taking price increases for non-scheduled formulations in the future, and should not assume that they will be able to take an ‘aggregate’ price increase after a certain number of years if they haven’t availed the option to increase the price every 12 months.
India’s medical device price regulator has issued a direction to importers and manufacturers of 24 categories of medical device to submit price-related information, including the price at which they sell medical devices to distributors and hospitals in India, by March 10, 2021.
Background
In India, medical devices are regulated not just for quality, but also for price. The Drug (Price Control) Order 2013 (“DPCO”) regulates prices of all medical devices that are marketed in India. Some medical devices such as coronary stents, drug eluting stents, condoms and intra-uterine devices that are listed in the schedule of DPCO have their ceiling price fixed by the National Pharmaceutical Pricing Authority (“NPPA”), while all other medical devices (i.e. the non-scheduled medical devices) have to abide by a restriction whereby their maximum retail price cannot increase by more than 10 per cent in any given 12-month period.
Direction
In order to ensure that medical device manufacturers and importers are complying with the requirements of DPCO, the NPPA has been given powers under DPCO to issue directions to manufacturers and importers to submit price related information. It is in furtherance of this power that NPPA has directed that the following information be submitted to it:
Medical device category as per risk classification published by DCGI
Product name or specifications
Brand name or description
Date of launch in India
Minimal unit of sale/retail pack size
Price per unit to distributor / stockist
Price per unit to hospital
Price per unit to retailer
Applicable GST percentage
Moving Annual Turnover
Maximum retail price for unit as on January 1 of the years 2018, 2019, 2020 and 2021 (for a few categories, only the MRP as on January 1, 2021 needs to be submitted)
A copy of the said direction is available at this link.
24 Categories of Medical Devices covered by the Direction
Disposable Hypodermic Syringes
Disposable Hypodermic Needles
Disposable Perfusion Sets
IVD devices of HIV, HBsAg and HCV
Catheters
Intra Ocular Lenses
I.V. Cannulae
Bone Cements
Heart Valves
Scalp Vein Set
Orthopedic Implants
Internal Prosthetic Replacements
Ablation Devices
Organ Preservative Solution
Blood Grouping Sera
Ligatures, Sutures and Staplers
Tubal Rings
Surgical Dressings
Umbilical tapes
Blood/Blood Component Bags
Nebulizer
Blood Pressure Monitoring Device
Digital Thermometer
Glucometer
Challenges with submitting price for retailer
There may be certain fields for which information has been requested by NPPA, but the information may not be available with the importers or manufacturers. For example, the details of price to retailer sought by NPPA may not be available since importers and manufactures typically sell to a distributor or hospital, and not directly to a retailer. In such cases where the information is not available due to the nature of the manufacturer’s or importer’s business model, the importer or manufacturer may simply submit to NPPA that the information is not available with them. The importer or manufacturer is not expected to retrieve this information from its supply chain and submit to NPPA. Being in possession of such information may in fact result in breach of anti-trust laws, as an attempt to undertake resale price maintenance.
Sale of imported medical devices marketed by marketer
Some importers import and sell directly to a marketer in India. In that case, it is the marketer who is supposed to provide this information as price related information is not available with the importer. However, the importer should ideally endorse and countersign the information submitted by marketer because the primary obligation to submit this information is with the importer. Alternatively, the importer may submit whatever information that it has and give a written undertaking along with the submission that the remainder of the information will be submitted by the marketer because the remaining information is unavailable with the importer.
Requirement of license
The direction also contains a note which states that manufacturers and importers must attach a copy of the licence obtained from the DCGI for each medical device. It may be difficult to furnish the manufacturing licence for Class A and Class B medical devices (such as Glucometer). The said licence is actually issued by State Licencing Authority of the state where the medical device is manufactured. In order to comply with the requirement of the direction, a copy of the licence issued by State Licencing Authority should be annexed in place of copy of license from DCGI.
Format for submission
All the above information has to be certified by a qualified chartered accountant or cost accountant in a physical format, and the same information is also required to be sent in form of an Excel Sheet to the NPPA at the following email ID medicaldevices-nppa@gov.in
What should manufacturers and importers of medical device take this direction very seriously?
Any non-compliance with the direction of NPPA to submit price information may result in criminal prosecution under provisions of Essential Commodities Act of 1955.
The information will also be used to ascertain whether any manufacturer, importer or marketer has fixed the MRP of the medical device in excess of ceiling price or has increased the MRP over the permissible 10 per cent limit in a 12-month period. In both these cases, the NPPA has the power to recover the excess price paid by the end-consumer from the importer or manufacturer, and to levy a penalty for overcharging in certain cases.
That apart, the information will most likely be used by NPPA to track or validate the market share of various medical devices and medical device manufacturers in terms of moving annual turnover (MAT) of said medical device under the submitted medical device category. If, at any time in future, a medical device is inserted in the schedule of DPCO on the grounds of essentiality to the Indian population, then the market share in terms of MAT will become an important consideration before NPPA in fixing the ceiling price that medical device.
Therefore, manufacturers and importers of the 24 categories of medical devices listed above must take this exercise seriously and submit the requisite data to the NPPA in prescribed form within timelines, both in physical and electronic format.
In February of this year, India’s Health Ministry had notified a new definition of medical devices with an intent to bring all medical devices under the purview of Medical Devices Rules, 2017 (MDR). Prior to such notification, only 37 categories of medical devices that it had notified were regulated by MDR. The new definition took effect from April 1, 2020, which means that MDR started applying to all medical devices from April 1, 2020. However, an exemption from applicability of MDR was added until August 11, 2022 for Class A (low risk) and Class B (low-medium risk) medical devices, and until August 11, 2023 for Class C (medium-high risk) and Class D (high risk) medical devices, in order give time to industry to acclimatize itself to the new regulatory framework of MDR and to obtain appropriate medical device quality certification such as ISO 13485 from designated certifying bodies.
After the development in February, since MDR regulates medical devices on the basis of their risk classification, there was always a question as to how will these yet-to-be regulated or (more appropriately) newly regulated medical devices will be classified. Unlike most countries, risk classification of medical devices is determined in India by the regulator, Drugs Controller General of India (DCGI), itself as per parameters of risk classification stipulated in First Schedule of MDR, and there is no room for dialogue or consultation with the regulator once the risk classification has been concluded.
The DCGI has now done its preliminary assessment and published a draft of medical device risk classification covering all medical devices for public comments. Medical devices have been split into 24 categories (Anethesiology, Pain Management, Cardiovascular, Dental, ENT, Gastroenterlogical, Urological, General Hospital, Operation Theatre, Respiratory, Neurological, Personnel Use, Obstetrical and Gynecological, Ophthalmic, Rehabilitation, Physical support, Interventional and Radiology, Rheumatology, Dermatology, Plastic Surgery, Pediatric and Neonatology Medical, Oncology, Radiotherapy, Nephrology and Renal care and Software). IVD devices have been split into 3 categories (IVD Analyzer, IVD Instrument and IVD Software).
There are some surprises in the risk classification. Sanitary pads, menstrual cups and tampons are sought to be regulated as medical devices. Fertility and conception software are sought to be regulated as medical devices. Birthing bath and new-born infant bed are also sought to be regulated as medical devices.
It is extremely important that the impacted companies review the draft risk classification and provide comments to DCGI before October 2, 2020 regarding either the inapplicability of law i.e. MDR to their products, or the inappropriateness of risk classification assigned by DCGI. Once the risk classification is finalized, it may not be revised for some time. Also, once MDR starts applying to a medical device, other laws such as Drugs (Prices Control) Order, 2013 will also start applying to such medical device.
On February 11, 2020, the Indian Government had gazetted a notification that brought all medical devices and medical equipment sold in India under existing quality and safety regulatory framework by declaring them as “drugs”. However, this notification has exposed all medical devices to India’s drug price control regulation that was put in place to make drugs affordable and accessible as well. So, from April 1, 2020 (i.e. the effective date of the notification), all manufacturers and importers of medical devices and medical equipment sold in India will have to be careful to not increase the maximum retail price of their products by more than 10% within 12 months. They will have to make periodic trade-related filings with the Government in which they will have to submit price information such as price to distributors, price to stockist, price to hospital and price to retailer. And, on top of all this, they will have to operate under constant risk of price fixation at the hands of the Government, like was done in the case of coronary stents and knee implant systems in 2017.
Background
The quality and safety of drugs sold in India is regulated by the Drugs and Cosmetics Act, 1940 (“DCA”). There is no equivalent legislation for medical devices. Therefore, the Indian Government notifies those medical devices whose quality and safety it intends to regulate as ‘drugs’ from time to time.
Prior to February 11, 2020, the Indian Government used to regulate the quality and safety of medical devices in a piecemeal manner. There were only 37 categories of medical devices and medical equipments that had been notified as drugs under DCA (see annexure for this list). However, on February 11, 2020, the Government declared all medical device and medical equipment to be drugs in order to bring them under the fold of quality and safety regulation under DCA, effective April 1, 2020. We have written extensively about it here.
There was a collateral impact of this decision of the Government on price and supply chain of medical devices and medical equipment. India regulates production, control and supply of all essential commodities through a law called the Essential Commodities Act, 1955 (“ECA”). ‘Drugs’ are regulated as an essential commodity under ECA. Therefore, the Government has power to regulate product control and supply of all drugs under ECA. In furtherance of the provision of ECA, the Government has notified a price control order for drugs called the Drugs (Prices Control) Order, 2013 (“DPCO”).
On February 11, 2020, when the Government decided to regulate all medical devices and medical equipment by notifying them as drugs, it automatically subjected them to the provision of DPCO. The authority responsible for the administration of DPCO, the National Pharmaceutical Pricing Authority (NPPA), has already brought out a clarificatory order stating that the provision of DPCO will squarely apply to all medical devices and medical equipment.
Impact on price and supply of medical devices after April 1, 2020
From April 1, 2020, all medical devices and medical equipment manufacturers and importers will have to comply with the provisions of DPCO. The obligations imposed by DPCO on all manufactures and importers of medical devices and medical equipment are as follows:
Retail sale price to be mentioned on all medical devices, including ones for institutional use: The DPCO requires that every SKU of medical device and medical equipment must be labelled with its maximum retail price (“MRP”) that is to be set by the importer/manufacturer/marketer. The said price must be prefixed by the words “Maximum Retail Price” and suffixed by the words “inclusive of all taxes”.
Before April 1, 2020, there was an exemption available for medical devices and medical equipment that weighed more than 25 kg or that were intended for institutional use, from declaration of MRP under the Legal Metrology (Packaged Commodity) Rules, 2011. However, from April 1, 2020, all medical devices and medical equipment, irrespective of their weight and intended use, will have to declare MRP on the label of each SKU in the manner specified above.
% cap on variation of retail sale price: The importers, manufactures and marketers of medical devices will have to be cognizant about variation of the MRP declared on the label of their medical devices. The MRP of the product should not be varied by more than 10% in any 12 month period, else the variation in excess of 10% will be recovered as ‘overcharging’ from the business concerned. For example, if an importer of medical device decides to reduce the MRP by 20%, but after a single quarter decides to return to the original retail price (i.e. increase by around 20%), then it won’t be permitted to do so. It can, at best, increase its MRP by 10% of the reduced price. If it starts selling the product at the original MRP, then the 10% excess will be recovered from the importer on MRP basis i.e. by multiplying the number of units sold with the 10% excess, along with intrest and penalty.
Risk of price fixation: The NPPA has the powers to fix ceiling prices of any drug under extra-ordinary circumstances and in public interest. Now, from April 1, 2020, this power will extend to all medical devices and medical equipment. Once a price is fixed, the importer, manufacturer and marketer of said medical device has to set its MRP either equal to or below the ceiling price. Most of the times, NPPA also fixes the margins that may be offered to the supply chain and makes the concerned importer/manufacturer/marketer liable for any breach of margin by the supply chain.
Risk of being subject to market based pricing: The Ministry of Health and Family welfare brings about a National List of Essential Medicines (“NLEM”) every few years. Medical devices are also included in the said list from time (e.g. coronary stent). The consequence of being included in NLEM from pricing perspective is that the medical device in question automatically becomes subject to a market price based price control i.e. the MRP of the said device must not exceed the average MRP of all importers, manufacturers and marketers who sell the same device and who have more than 1% market share in that particular device market. The said average MRP (referred to as “Ceiling Price”) is decided and set by NPPA. The Ceiling Price may go up or down every year, depending on the wholesale price index of the Government. The MRP of the medical device will have to be adjusted accordingly. A prior permission from NPPA is required to withdraw or to reduce production / import of medical device which are recognized as ‘essential’ by the Government.
Consequences of non-compliance
There are different consequences associated with different violations. Any violation of DPCO is serious because its parent legislation, the Essential Commodities Act, 1955, stipulates that any breach of DPCO may result in imprisonment and fine for the company and person(s) in-charge of the company for conduct of its business. However, undoubtedly, the most draconian provision of DPCO is the liability to deposit any amount ‘overcharged’ by the importer or manufacturer in breach of DPCO in addition to the interest and penalty.
Final comments
It is extremely important for medical devices and medical equipment companies doing business in India to be aware of the compliance requirements and obligation under India’s price control law (i.e. EC Act and DPCO). Since all medical devices and medical equipment are now regulated as drugs, and all drugs are treated as essential commodities, an inadvertent violation of India’s price control laws may have serious consequences for the business of these companies.
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.
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:
Name of the company or firm or
any other entity
Name and address of
manufacturing site (for devices manufactured in India only)
Specification and standards of
medical device (for imported devices only)
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)
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
Free sale certificate from
country of origin (for imported devices only)
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.
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)
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:
ENDS as a combination product
of drug and medical device
ENDS as a tobacco product
ENDS (nicotine) as food
ENDS (nicotine) as a poison
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.
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.
