One of the main reasons for the abysmal quality of drugs in India is the multiplicity of regulators. The nation of India, which is a common market, has 36 different drug regulators – 1 each of each state and union territory and the Central regulator, the Drugs Controller General of India, DCGI. One of the two PILs that I have filed attempts to change this situation by challenging the Drugs & Cosmetics Rules of 1945 (D&C Rules).
The split of powers between the state and centre
The division of powers, under the Drugs & Cosmetic Act, 1940, between the central and state regulators is complex, confusing, overlapping and thoroughly unsuitable from the regulatory perspective of ensuring uniformity & consistency in standards of drugs quality across the country. While the DCGI, (the central regulator) can issue marketing approvals for ‘new drugs’, certify and regulate imports, it is only the state licensing authorities (the state regulators, SLA) which can issue manufacturing licences and regulate Good Manufacturing Practices (GMP) incorporated in Schedule M to the D&C Rules. Enforcement powers such as prosecution for the manufacture of sub-standard drugs are given to both the state and central regulators.
Off all the statutory powers listed above, licensing of manufacturing units is the most critical regulatory activity with the direct impact on the quality of drugs. By virtue of Rule 71(2) of the D&C Rules, a manufacturing licence can be issued to only those manufacturers complying with the GMP which are under the purview of Schedule M to the D&C Rules. A facility found to be in violation of GMPs will therefore be in violation of the terms of its manufacturing licence and can either have its licence suspended or cancelled by the SLA who issued it. Under the D&C Rules, any appeal against this decision by a SLA can be made to the respective State Government. In the regulatory world, the power to cancel or suspend a manufacturing licence is significant because it can result in the shut-down of a pharmaceutical company.
The main problem with having multiple SLAs is the lack of consistency and uniformity in enforcement activities because each SLA follows its own interpretation of the law. One of the key challenges with 35 different SLAs is the sheer logistics of co-ordination among them – the Drugs Consultative Committee (DCC) is a statutory body that is meant to serve as the forum for this objective. Unfortunately, DCC meets once a year, therefore it is not able to address real situations on a concurrent basis. To complicate efforts, each state has their individual organisational setup and different recruitment rules to the SLAs, which makes consistency in enforcement completely impractical.
For example, a pharmaceutical company found to be making sub-standard (Not of Standard Quality, NSQ) medicine is liable to get its manufacturing licence suspended for a fixed duration of time under Rule 85-I. Currently, each SLA enforces this regulation for different durations. While states like Himachal Pradesh claim to suspend licences for a duration ranging from 1 month to 6 months, Gujarat suspends licences for a just day or more. Furthermore, when a state like Tamil Nadu detects a NSQ drug manufactured in HP, it can initiate criminal prosecution against the manufacturer – a process which can take several years at best and result in only a slap on the wrist for this violation; in the meantime, the SLA in Tamil Nadu can do nothing to stop the manufacturer from continuing to flood the state with sub-standard product because the licence is issued by the SLA of Himachal Pradesh. In the best case, the SLA in Tamil Nadu can refer the case to the SLA of Himachal Pradesh, which is then at liberty to do what it wants with the manufacturing facility. Since each SLA operates directly under the state government, political interference is guaranteed in most cases. While this is happening, the rest of the country has absolutely no way of keeping the offending manufacturer in Himachal Pradesh out of their respective markets because India has a common market and there are no barriers in inter-state commerce for drugs, i.e., once a company procures a manufacturing licence from one state, it can sell its drugs across the country without additional permission from each state. Thus, although a pharmaceutical company licensed by one particular state can unleash its sub-standard medicine on all states of the country, it is accountable to only the SLA in its home state. In a manner of speaking, such regulation results in a ‘democracy deficit’ whereby the people of one state are forced to bear the consequence of poor governance in different state which is governed by representatives elected by people in that state.
Over the last decade, the Government of India has tried not once but twice to centralize some aspects of licensing of drug manufacturing through the Drugs & Cosmetics (Amendment) Bill, 2007 and the Drugs & Cosmetics (Amendment) Bill, 2013. Both bill were meant to realise the recommendation of the Mashelkar committee to centralise licensing activities. Neither Bill was enacted into law.
The legal challenge I raised in the PIL
To understand the legal challenge, it is first necessary to understand the history of the Drugs & Cosmetics Act from 1940 to 1960 and the policy debates which led to a critical amendment in 1955.
The Drugs Act, 1940
The Drugs & Cosmetics Act was originally enacted in 1940 as the Drugs Act by the Indian Legislature before independence from British rule.
Although enacted as a Central Legislation, the Drugs Act, 1940 split regulatory powers between the Centre & Provinces. The Act delegated substantial powers to both the Central and the Provincial Governments to draft rules for the setting of standards for their respective areas of regulation i.e., import and domestic manufacture/sale, respectively. Section 33 as it existed in 1940 specifically delegated to the Provincial Governments the power to issue licences for the manufacture of drugs and also the power to nominate the authority empowered to issue such licences. The language of Section 33 as it existed in 1940 is reproduced as follows:
Section 33 (1) The Provincial Government may, after consultation with the Board and after previous publication by notification in the official Gazette, make rules for the purpose of giving effect to the provisions of this Chapter.
(2) Without prejudice to the generality of the foregoing power, such rules may-
(e) prescribe the forms of licences for the manufacture for sale, for the sale and for the distribution of drugs or any specified drug or class of drugs, the form of application for such licences, the conditions subject to which such licences may be issued, the authority empowered to issue the same and the fees payable therefor;
The Drugs Act, 1955
After independence from the British in 1947, the government constituted the Pharmaceutical Enquiry Committee to study and recommend policy reform for the country’s fledgling pharmaceutical industry. In its final report, submitted to the Government in 1954, the Committee made strong recommendations to centralise regulation. Commenting on the poor manufacturing standards in the factories inspected by the committee members, the report commented:
“The products of these factories were a menace not only to the particular State, in which they were located, but also to the neighbouring States, to whose market they found their way. The people of the neighbouring States were in no way benefitted in spite of the fact that the Act was being administered there in a better manner. When these points were brought to the notice of the State Drugs Controllers, they appeared to be helpless in the matter, either because they were afraid that by closing down such factories, it might lead to employment, labour unrest etc., or they had their own misgivings of the powers delegated to them under the Drugs Act to take such steps. It is, therefore necessary to centralise the administration of the Drugs Act to bring about a uniform implementation of the Drugs Act throughout the country for proper co-ordination with the working of the Industries (Development & Regulation) Act to be possible.”
In the same year, the Government of India moved the Drugs (Amendment) Bill, 1954 in Parliament. The ‘Statement of Object & Reasons’ appended to the Bill explained the intention behind the Bill by saying “It has further been found necessary that with a view to maintaining uniformity throughout the States the power to make rules under Chapter IV with respect to the manufacture, sale and distribution of drugs, which is at present vested in the State Governments should be entrusted to the Central Government.”
The specific amendment proposed by the Bill was to transfer all the power to regulate domestic manufacturing under Section 33 from the state governments to the central government. As a result the phrase “provincial government” in Section 33 was replaced with the phrase “central government”. The Bill was enacted into law in 1955.
Since Section 33 effectively delegated the power to regulate the drug industry to the Central Government, the actual nuts and bolts of the regulatory framework were to be notified through rules. In 1960, when the Central Government finally amended the Drug Rules, 1940, it surprisingly sub-delegated to state governments, the power that was delegated to it by Parliament. Rules 69 specifically sub-delegated to the State Government the power to appoint licensing authorities to regulated manufacturing in their states. This was contrary to the intent of Section 33.
In other words, the Rules were amended in a manner which went completely against the letter and spirit of the Drugs (Amendment) Act, 1955.
The legal argument
Our PIL challenged the constitutional validity of Rule 69 and other associated rules on the grounds that the Central Government did not have the power to further sub-delegate the power to appoint licensing authorities to the State Governments. One of the principle of statutory interpretation, relevant to this case, is delegatus non podest delegare which means that an authority to whom power has been delegated by a statute cannot further sub-delegate that said power to another authority unless the language of the authority expressly allows for such a delegation of powers. The logic behind this maxim is simple: a delgatee of power cannot act beyond the scope of power delegated to it. This rule against the sub-delegation of power, unless it has expressly been allowed for in the text of the statute, has been reiterated time and again by the Hon’ble Supreme Court of India in several cases.
Put simply, Parliament delegated the power to appoint licensing authorities to the Central Government and it is only the Central Government which can appoint the licensing authorities.
I was hoping that my counsel would present this argument before the court; unfortunately, we were denied this opportunity. This is not an academic argument, it impacts the health of over a billion people in India.