Firms with cancelled drug licences may face heat as Centre tightens rules

DCC discusses stricter norms to bar firms with cancelled licences from reapplying and proposes public disclosure of inspection findings to strengthen pharma regulation

In a bid to tighten the regulatory regime, the Centre may consider debarring premises, firms and individuals whose licences were previously cancelled for non-compliance with good manufacturing practice (GMP) norms from making fresh applications.

 

At the 68th meeting on March 20, the Drug Consultatives Committee (DCC), a statutory body under the Central Drugs Standard Control Organisation (CDSCO), discussed the proposal to exclude premises and promoters of wholesale or manufacturing licenses from further licensing if they had been cancelled earlier.

 

The committee stated that several instances have been reported where a new licence has either been issued immediately or applied for by the same person after the initial licence was cancelled by the concerned authorities. The cancellation was due to various reasons, according to the minutes of the DCC meeting. The minutes accessed by Business Standard said this undermined the regulatory intent of the authorities.

 

While existing regulations provide a framework for suspending and cancelling licences, pharma analysts said the core limitation lies not in identifying violations but in the absence of continuing regulatory consequences.

 

Rishi Agrawal, chief executive officer (CEO) at compliance firm TeamLease RegTech said this creates a structural disconnect where even entities associated with serious offences, such as manufacturing counterfeit or substandard drugs, are not explicitly barred from re-entering the system. This is done through new legal entities, altered ownership structures or fresh licence applications.

 

“In effect, the regulatory framework imposes strong punitive action at the point of detection, but lacks entity-level continuity in enforcement, allowing regulatory arbitrage in high-risk scenarios,” he added.

 

Another analyst said the proposed debarment can introduce an element of regulatory memory into the system.

 

It can be done by bringing the pharmaceutical sector closer to regulatory practices such as director disqualification under Section 164 of the Companies Act, 2013 and market exclusion mechanisms used by financial regulators.

 

The DCC has further proposed displaying the brief details of firms under risk-based investigations, along with the recommendations of the inspection team publicly.

 

Currently, there is no statutory or administrative framework under the Drugs and Cosmetics Act, 1940 or the Drugs and Cosmetics Rules, 1945, that mandates public disclosure of inspections and findings arising from probes conducted by regulators, including the CDSCO, and state drug authorities.

 

“Inspection reports, including those assessing compliance with GMP under Schedule M, are treated as internal regulatory documents and public visibility is generally limited to consequential enforcement actions such as warning letters, show-cause notices, or licence suspension and cancellation orders,” Agrawal said.

 

However, he added that implementing this reform would require careful calibration to address legal risks, including mitigation of reputational harm in cases where findings are contested.

 

“This can be done potentially through standardised grading systems, post-adjudication disclosure mechanisms and protection of commercially and entity-specific sensitive information such as drug formulations,” Agrawal said.

 

While both proposals have been sent to a sub-committee for further review, the move comes at a time when India’s drug regulator bodies have been emphasising on compliance with GMP and the revised Schedule M.