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Part VI – Licensing

6.1 FERA Companies
The business operations of FERA companies would have to be in accord with national objectives and priorities. FERA companies would be eligible for entry mainly in those areas where the entry is desirable from the objectives of better health care. The list of bulk drugs open to all sectors has been revised accordingly. FERA companies would be eligible for licenses mainly in respect of these bulk drugs, subject to a phased manufacturing programme, and related formulations in order to encourage higher bulk drug production, the ratio between the value of production of bulk drugs to that of formulations (hereinafter referred to as ratio parameter) would be reduced from 1:5 to 1:4 for FERA companies. The definition of “drugs and pharmaceuticals” listed at Entry 14 of Appendix I of the Industrial Licensing Policy, would now read as in Annexure I.

6.2 Companies other than FERA Companies
These companies would continue to be eligible for industrial approvals in respect of all bulk drugs which are approved for use in the country and related formulations, subject to sectoral reservations for public and small scale sectors.

6.3 Role of Public Sector
Public Sector will continue to have an important role particularly in the production of basic bulk drugs which are central to the needs of the National Health Programme. However, the Government recognize the fact that the public sector units will have to function at optimum levels of efficiency, in production as well as marketing, in order to fulfill the role that has been assigned to them in the new policy, namely, that of making available essential bulk drugs at reasonable prices. Keeping in view the crucial role of the public sector in achieving the objectives of National Health Programme, indepth exercises have already been initiated to prepare an action plan of steps to improve performance of each of the public sector units.

Rehabilitation and restructuring plans for these public sector undertakings are expected to be finalized very shortly. These plans shall include changing management cultures and values, improvement of management system; improvement in product strategy; internal generation of cash; savings in fixed costs; reduction in line wastage and batch rejection; improvement in technology; reduction in expenses on utilities; reduction in inventory levels; better and more sensitive marketing strategy; higher capacity utilization; better utilization of R&D facilities etc.

It is decided to continue, to a substantial extent, the present policy of reservation for manufacture by the public sector of certain important bulk drugs. At present 17 bulk drugs including Pencillins and Polio Vaccines are exclusively reserved for production by the public sector units. Considering the projections of requirement of Penicillins, it is decided to expand the capacity of Penicillin in the existing public sector units along with induction of more advanced technology. However, it is felt that even with these measures the public sector units will by themselves not be in a position to meet the entire requirements of the country of these two basic and essential drugs. The 1989-90 demand of Penicillin is estimated to be as high as 2470 mmu as against the existing installed capacity of 637 mmu inclusive of 390 mmu in the public sector. Thus the present gap in the demand and production of this crucial drug would further widen by the end of 7th Plan period unless corrective steps are taken to narrow it. At present, in order to meet the requirements of this essential drug, imports are also resorted to which result in an outgo of foreign exchange to a substantial extent, this outgo being of the order of Rs. 24 crores in the year 1985-86. Similarly Polio vaccine which is an extremely important input in the immunization programme of the Government is yet to be produced in the country. A capacity of 10 million doses is being installed by M/s.Halfkine, a Maharashtra Government undertaking. However, the 1989-90 demand is estimated to be 80 million doses taking into account the requirement of the Expanded Immunization Programme. Keeping in view the large gap between the capacities created and the 1989-90 demand for Penicillin and Polio Vaccine, the need to reach self-sufficiency in these two vital products, it is decided to open these two products for production by all sectors. The demand for these essential drugs would continue to be met through imports also till such time as indigenous production has reached a level where imports become unnecessary. However 15 other bulk drugs which are presently reserved for the public sector would continue to be so reserved (Annexure – II).

6.4 DGTD Registration
DGTD registration would continue to be available to non-FERA and non-MRTP companies, in respect of proposals which satisfy the criteria for DGTD registration.

6.5 Delicensing
The scheme of de-licensing has already been extended to 94 bulk drugs including all anti-cancer drugs, all new bulk drugs developed through indigenous research, and related formulations as well as two drug intermediates. The scheme, would progressively be extended subject to the following criteria:

bulk drugs whose imports are allowed on OGL.
bulk drugs, whose production is limited to three producers or less in the organized sector.
bulk drugs whose formulations are of essential and mass consumption nature.
formulations and drug intermediates related to bulk drugs which are delicensed.
The scheme of delicensing would be available for non-FERA and non-MRTP companies only excepting for new drugs which would be cleared for use in the country and would not include bulk drugs reserved for public and small scale sector.

The capacities to be set up under the delicensing scheme will, however, conform to the economic scales of production.

6.6 Encouragement of new drugs
Introduction in the country of formulations based on new bulk drugs require the approval of the Drug Controller (India). In order to establish the safety and efficacy of the new drugs proposed to be introduced detailed information has to be furnished. This information amongst others, should include toxicity data on animals, pharmacological studies and results of clinical trials in Indian conditions, which may extend over several years. Once a firm obtains the approval other firms are not required to obtain approval in respect of that drug again. In order to encourage introduction of new drugs in the country, all new bulk drugs and related formulations would be brought under the scheme of delicensing. If approval for the introduction of the new drug is based on the clinical trials conducted by a MRTP or FERA company, such a company can also avail the scheme of delicensing in respect of such new bulk drug and related formulations. Exemption under Section 22A of the MRTP Act would also be available in such cases.

6.7 Phased Manufacturing Programme
To encourage cost-effective indigenisation and to ensure that bulk drug production does not remain confined to processing of later intermediates only, it has been decided to introduce system of a phased manufacturing programme (PMP). This will be applicable to all manufacturers and to all types of industrial approvals (licence, registration with the DGTD and registration under the Delicensing Scheme). Where the import content is 20%, or more of the value of production, import licenses for bulk drug manufacturers would be granted only in accordance with the approved PMP which would specify the indigenisation to be achieved annually as a percentage of the value of production. The viability of PMP would be examined in terms of the domestic resources cost of production; with a suitable shadow rate of foreign exchange. All companies manufacturing bulk drugs would be required to submit to the Department of Chemicals and Petro-chemicals their PMP proposals and the existing companies which import drug intermediates or other raw materials from their principals or their associated companies would be required to inform the Government of the details of such transactions within a month of such import.

6.8 Broadbanding
In order to provide greater manufacturing flexibility, broadbanding would be extended to the pharmaceutical industry, taking into account the technical factors like plant design, process and production facilities. To begin with 31 groups of bulk drugs (Annexure III) would be covered by broadbanding. Products, other than bulk drugs, would be broadbanded into the following categories:-

Formulations based on bulk drugs in Annexure III
Surgical ancillaries like sutures, catguts, bandages,
Seras and Vaccines.
Diagnostics of all types.
Transfusion solutions
The facility of broad banding would be available only in respect of products which are approved for use in the country by the Drug Controller (India). For domestic production, companies in the organized sector would be eligible for broad banding only in respect of items open to them.

The procedure to be followed for this is as laid down in the press note No.33 (1986 series) of the Department of Industrial Development dt.26.9.1986. The scheme of broad banding will also be subject to the conditions, laid therein.

6.9 Export Production
For export production, all companies would have total flexibility to produce any product with their existing facilities. They need only inform the government of the details of such production and export.

6.10 Revised Ratio Parameters
In order to encourage higher production of bulk drugs in the country, the ratio parameter between the ex-factory value of bulk drug production to that of formulation has been revised. The ratio parameter would be related to the size of a company, which in turn has a relationship with its ability to invest in and develop/procure technology for production of bulk drugs. For FERA companies ratio parameter would now be 1:4. For other companies the ratio parameters would be related to the ex-factory value of production of bulk drugs and formulations as follows:

Ex-factory value of production of bulk drugs and formulations Ratio parameter
1. Upto Rs.10 crores 1:10
2. For production in excess of Rs. 10 crores and upto Rs. 25 crores. 1:7
3. For production in excess of Rs. 25 crores. 1:5
The following activities would continue to be excluded in computing the ratio parameters:

Drug Intermediates.
Empty hard gelating capsules
Surgical ancillaries
Seras and Vaccines
Diagnostics of all types
Transfusion solutions
The companies in the organized sector are required to submit a production programme, including the production of new drugs, so that they can reach the new ratio parameters within a period of 3 years. As and when a company moved from one category to another, it would be allowed a period of 3 years to reach the new ratio parameter.

In order to encourage production of bulk drugs in the country the formulation turnover of all companies in the organized sector would continue to be based on a ratio of 2:1 between the value of consumption of indigenously produced bulk drugs and that of imported bulk drugs.

6.11 Supply of Bulk Drug to Non-Associated Formulators
FERA and MRTP companies would continue to supply 50% of the bulk drug production to non-associated formulators and other companies, including public sector, 30% of the bulk drug production to non-associated formulators.

6.12 R&D/Import of Know-how
R&D would gain an impetus from the various measures proposed in the policy such as the extension of delicensing to companies which conduct clinical trials and obtain the approval of the Drug Controller (India) for introduction of new drugs. However, wherever necessary, import of know-how would continue to be favourably considered on merits.

6.13 Regularization of production
A very large number of formulations are being produced ranging from one to two decades with industrial approvals which are being questioned. Majority of these drugs are claimed to be covered under registration certificates issued under Section 10 of the Industries (Development and Regulation) (IDR) Act. According to the practice then in vogue, these registration certificates did not mention individual items and capacities but merely permitted production of “drugs and pharmaceuticals”. Another major category comprises of items claimed to be covered under notification issued in the 1960s and 1970s, under Section 298 of the IDR Act, announcing exemption from industrial licensing, subject to some conditions. However, COB licences could not be issued in many cases because of non-fulfilment of one or more of the conditions subject to which regard to the fact that the exemptions were granted. Having that the products have infraction in most cases are technical and been accepted by the medical profession, Government have decided to regularise the production of all such formulations and surgical aids.

6.14 Re-endorsement of capacity
Government’s industrial policies in regard to re-endorsement of capacity, and recognition of additional capacities as a result of replacement/modernization/ renovation of equipment, as announced from time to time, would be applicable to the pharmaceutical industry.