No Responsibility of Quality Control for Multinationals

The Draft Pharmaceutical Policy - 2017

(Article-4)

The Department of Pharmaceuticals (DoP) under the Ministry of Chemicals & Fertilizers recently released the 18 page Draft Pharmaceutical Policy – 2017 which has been circulated among various stake-holders of the pharmaceutical industry and civil society. 

In an attempt to understand the draft, I have decided to present a series of articles portraying my own interpretations on this draft policy. The fourth article is here.

Abolishing Loan Licensing would free multinationals

from their responsibility of quality control

The Draft Pharmaceutical Policy – 2017 has mentioned: “Loan licensing was decided to be discontinued in phased manner in the drug policy 1986” since “it raises many quality maintenance and assurance issues.” [Para:5.8; Page:12 of the draft]. The paragraph concludes by saying: “(i) phasing out over 3 years (ii) loan licensing to be allowed only for WHO GMP approved facility (iii) loan licensing to be allowed upto only 10% of the total production of the Company.” Such statement appears to be bold and deserves applause. The draft, despite waging war against loan licensing, cleverly maintained silence on contract manufacturing.

According to “Drug Quality and Safety Issues in India” published by the Indian Council for Research on International Economic Relations in September, 2015: “In India, at present, manufacturing of drugs is done in three ways–own licence, loan licence and third-party agreements. In case of a loan licence, any company which does not have its own arrangements for manufacturing can use the facilities of another manufacturer. In this scenario, the applicant of a loan licence often provides the necessary raw material to the manufacturer and maintains strict oversight during the entire process. Third-party agreements, on the other hand, just entitle a manufacturer to undertake the manufacturing process on behalf of another entity that would only market the product, with greater autonomy of operation to the former. During our field research, we found an absence of clarity among respondents on the legal liability with regard to quality of products that enter the market through third-party manufacturing.” [Maulik Chokshi; Rahul Mongia and Vasudha Wattal].  

The loan license is defined under Rule 69-A and 75-A of the Drugs & Cosmetics Rules 1945, whereas, there is no third party manufacturing agreement provision in the Act and Rules. [Source: Drug manufacturing can be outsourced from a loan licensee; 04 March, 2015]. Third-party or contract manufacturing is actually out sourcing of products which provides easy solution for manufacturing one’s own brand names from other manufacturing unit. It is a very popular concept among marketing companies. In third-party manufacturing, name and address of the manufacturer must be mentioned on the label of the drug. Marketing company’s name should be mentioned separately. Ownership of brands will be the property of the marketing company but quality will be the responsibility of the manufacturing company. According to Pharma Franchise Help, “Multinational companies are also gotten manufactured their products at loan license or third party basis.” [Source: What is third party/contract manufacturing in Pharmaceuticals/Ayurvedic sector? Procedure, Requirements, Inventory]. In absence of loan license, multinationals would manufacture their products on third party basis only. Thereby, they would enjoy the brand equity but for quality assurance some small company from remote parts of the country would be held responsible!

The article, “List of Contract Manufacturing Pharma Companies in India” by Pharma Tips, published on 2 February, 2013 noted: “In spite of all the assurances, given by the multinational, a lot of scepticism has crept in to the views on contract manufacturing. Most of production personnel deputed in these plants have always commented that they have been unable to exercise the same controls as they could have in their own parent company.” The article further stated: “Today most of the companies including the minor contract manufacturers have moved to the remote areas of Himachal Pradesh, Sikkim to gain certain tax benefits. The question is—do these units have the required infrastructure, facilities, work force availability as is present in the major cities such as Delhi and Bombay. Many of the blue chip companies have even got their products manufactured on contract from these companies based in these remote areas.” [Source: Pharma Tips].

The draft pharmaceutical policy, incidentally, wants to abolish drug manufacturing under loan license which does have certain legal provisions to ensure the quality of medicines. But, it does not target third party manufacturing which is outside the purview of law and does not guarantee the quality of drugs. Therefore, the question is whether quality of medicine is the priority or under its pretext multinationals are freed from all responsibilities.

(To be continued.....)

@pradipsinterpretations