Pharmaceuticals  have  always  been  a  huge  component of  India’s ever-growing  trade  expansion strategy,  especially  since the  country has already stated  its goal of diversification  of exports  both in terms of the  products  that  are being  exported and the  countries  to which they are exported.

India is a leading  exporter  of generic  drugs across the world and as demand  expands  across  the  globe,  Indian  pharmaceutical industry aspires to become  the world’s largest  supplier of drugs by 2030.

India aims to increase its Pharmaceutical industry revenue to $120 billion-$130 billion by 2030 from the current revenue of $38 billion at a compound annual growth rate (CAGR) of 11-12%.

The current  pandemic  has not only created  a havoc in the country as a  whole,  it  has  also  put  the  entire   Pharmaceutical  industry  in  a dilemma  and right now, it is difficult to decide  whether  it is boon or bane for the industry.

Impact of COVID-19 on Pharma Sector

However, such an unprecedented situation also brings certain genuine queries in the minds of the companies which we have tried to answer below:

Supply of Pharma Products

1. How will the current pandemic situation affect the continuity of supply of medicines from Pharmaceutical in Industry?

Answer: COVID-19 is a very dynamic situation.  We believe  there  would be indirect  effects  on the  continuity  of supply  of medicines  due  to lockouts, manpower  supply, raw materials supply  issue,  stoppage of transportation, etc.

The  Government,  however,  has  done  its  best  in  ensuring  that pharmaceutical manufacturers do not  face  any shortage of supply  of raw material  or labour or any other  directly or indirectly related  service. This is to ensure that all types of medicines are always available in the market.

The   Letter   bearing   No.   F.   No.   21(2856)/Div.   IV/2020/NPPA   dated26.03.2020 issued by  the   National  Pharmaceutical  Pricing  Authority (NPPA), a wing of the Government of India under the Department of Pharmaceuticals has also given instructions for unobstructed movement of pharmaceutical goods in light of the Ministry of Home Affairs order of even no. 40-3/2020-DM-I(A) dated 24.03.2020 and 25.03.2020. 

2. Whether the Pharmaceutical Industry has to revisit their Supply Chain Model?

Answer: Different areas around the country are facing different issues and subject to the terms & conditions of the transactions with the suppliers and the purchasers as well as the internal policies of the company, there can always be a possibility of legal consequences in the future.

Issues can crop up due to various hindrances and invite a wrath under Insolvency & Bankruptcy Code 2016, Indian Contract Act 1872, Specific Relief Act 1963, etc. where one party may create legal issues due to disruption of the supply chain and ultimate loss faced. These implications could lead to claims worth multi-million rupees both domestically as well as internationally.

Therefore, it is better to take an expert’s opinion to understand the legal implications that can arise.

Masks and Sanitizers

3. Under which notification masks and sanitizers have been included in the Essential Commodities Act, 1955?

Answer: The Ministry of Consumer Affairs, Food and Public Distribution vide notification no. F. No. 26(1)/2020-ECR&E, dated 13.03.2020 has included masks and sanitizers under the Essential Commodities Act, 1955 at Sr. no. 8 in the Schedule.

4. Whether there would be any new tax implications on pharmaceutical industries owing to the inclusion of Masks and Sanitizers as essential commodities under the Essential Commodities Act, 1955?

Answer: As of now there are no specific notifications from the Central Board of Indirect Taxes and Customs (CBIC) regarding the change in rates of tax or any other exemption or levy of tax on masks and sanitizers. It seems there would be no new tax implications but still it is advisable to take expert opinion to avoid unnecessary tax related litigations.

Import of Active Pharmaceutical Ingredients (APIs)

5. Whether there would be any impact on Indian Pharmaceutical Companies as far as the import of drugs and medicines is concerned since China is the world’s largest exporter of Active Pharmaceutical Ingredients (APIs) and intermediates and approximately 70 per cent of India’s total API requirement is met by imports from China?

Answer: In case the supply disruption continues over the next three to nine months, the pressures on credit buffers could intensify and rating transitions would be imminent, especially in case of the entities rated ‘INDIA’ and below, India Ratings and Research (Ind-Ra).

Till date there is no direct notification or circular which has been issued by the government regarding the import of APIs from China. 

Export of Active Pharmaceutical Ingredients (APIs) and Drugs

6. Whether there are any notifications concerning restrictions on export of Active Pharmaceutical Ingredients (APIs) and formulations by Government of India?

Answer: The Directorate General of Foreign Trade (DGFT) vide notification no. 02/2015-2020 dated 06.04.2020, has amended notification no. 50/2015-2020 dated 03.03.2020 and has made “free for export” certain API’s like antibiotics, hormones and vitamins, amongst others medicines.

Exception:

As per Policy Circular no. 33/2015-20 dated 20.03.2020, an exception has been created for the export of APIs and formulation made by these APIs to be allowed from SEZ Units.

Similarly vide Policy Circular no. 34/2015-20 dated 20.03.2020, exports of all formulations as mentioned in Notification no. 50/2015-20 dated 03.03.2020 shall be allowed under Advance Licenses issued on or before 03.03.2020. However, no enhancement of quantity is permitted for import or export in these Advance Licenses.

List of APIs allowed to be exported 

Sr. no.             ITC HS Code Description

146B               29332910                  Tinidazole

146C               29332920                  Metronidazole

146D               29335990                  Acyclovir

146E               29362210                  Vitamin B1

146F               29362500                  Vitamin B6

146G               29362610                  Vitamin B12

146H               29372300                  Progesterone

146I                29414000                  Chloramphenicol

146J                29415000                  Erythromycin Salts

146K               29419050                  Neomycin

146L               29419090                  Clindamycin Salts

146M              29420090                  Ornidazole

156A               30042050                  Formulations made of Chloramphenicol

156B               30042061                  Formulations made of Erythromycin Salts

156C               30042095                  Formulations made of Clindamycin Salts

156D               30043919                  Formulations made of Progesterone

156E               30045032                  Formulations made of Vitamin B1

156F               30045034                  Formulations made of Vitamin B12

156G               30045039                  Formulations made of Vitamin B6

156H               30049015                  Formulations made of Neomycin

156I                30049021                  Formulations made of Ornidazole

156J                30049022                  Formulations made of Metronidazole

156K               30049023                  Formulations made of Tinidazole

156L               30049099                  Formulations made of Acyclovir

Prohibition on Export of Hydroxychloroquine

7. Whether there is any notification issued by the Government of India to ban the export of key malaria drug amidst the COVID-19 outbreak? If yes, what will be the legal consequences of such notifications?

Answer: As per the notification no 54/2015-2020 dated 25.03.2020 issued by the Directorate General of Foreign Trade (DGFT) the export of key malaria drug Hydroxychloroquine was prohibited albeit with a few exceptions and conditions.

However, the DGFT vide Notification no. 01/2015-2020 dated 04.04.2020 has amended its earlier notification and has now completely prohibited the export of Hydroxycholorquine or its formulations, without any exceptions.

To understand the legal implications on different stakeholders, please get in touch with legal experts.

Medical Devices

8. Whether medical devices would be considered drugs?

Answer: Yes, the National Pharmaceutical Pricing Authority under the Ministry of Chemicals & Fertilizers vide its order dated 31.03.2020 has notified Medical Devices intended for use in human beings or animals with effect from 01st April, 2020.

All medical devices shall accordingly be governed under the provisions of the Drug (Price Control) Order, 2013.

Prohibition on Export of Surgical/Disposable Masks

9. What are the current notifications under COVID-19 in regard to export of masks and other drugs?

Answer: The Government of India, vide notification no. 52/2015-2020 dated 19.03.2020, has prohibited the export of all surgical/disposable masks and textile raw material used for making masks.

Force Majeure Clause in Contracts

10. Should Pharmaceutical Industries relook the Force Majeure clause in their supply contracts?

Answer: It is advisable to revisit all the on-going contracts especially with respect to the Force Majeure clause as any loophole may lead to litigation in the future concerning the supply or payment criteria.

The Force Majeure clause should be reviewed in terms of the following questions:

  • Who can invoke it?
  • When can it be invoked?
  • What are the exceptions to it?
  • What is the procedure to invoke it?
  • How can a party safeguard itself from the undesirable outcomes of Force Majeure?
  • What is the limitation period to invoke it?
  • Whether, under the light of the Office Memorandum of the Ministry of Finance, it is only applicable to public contracts or to private contracts as well?
  • What recourse does a party have if the contract does not contain any force majeure clause?
  • Whether a settlement agreement can be halted by taking the defence of Force Majeure?

It is important to answer all such questions before deciding to pave your way ahead in Force Majeure.

Miscellaneous Questions

11. Should Pharmaceutical Industries revisit their Disaster recovery planning in case of prolonged disruptions?

Answer: It is advisable for the Pharmaceutical Industries to revisit their Disaster recovery planning in light of their supply chain, APIs products, production of medicines, etc. and also to restructure the clause if required. An expert’s advise should be always suggested to anticipate these aspects and unforeseen situations.

12. Whether there are any regulations with regards to ceiling prices of pharmaceutical products and/or permissible increase in process of scheduled / non-scheduled formulations?

Answer: As per the Drug Price Control Order, 2013, specific provisions are mentioned towards compliance of ceiling of prices of pharmaceutical products. It restricts increase in price of products and also contains the provisions for sanctions against the perpetrator in case of violation of the provisions.

13. How to get regulatory approval to manufacture COVID-19 testing kit?

Answer: The Director General of the Indian Council of Medical Research, New Delhi had invited quotations for procurement of FDA / CE-IVD / ICMRNIV Pune approved Antibody Kit (Serological Test) for diagnosis of COVID – 19. Any Manufacturer with Indian based supplier could have submitted the quotations through email by 2:30 pm on 26.03.2020.

14. Whether there is any notification by Ministry of Home Affairs exempting Veterinary hospitals, Pharmacies and Research labs from lockdown?

Answer: The Government vide order no. 40-3/2020-D, dated 24.03.2020 issued by the Ministry of Home Affairs had excluded Veterinary hospitals, Pharmacies and Research labs from the lock down and also exempted it from the Disaster Management Act, 2005.

15. Whether pharmaceutical Industries can appoint any institute or dealers for the supply of masks and sanitizers or they would be required to take any mandatory licenses first?

Answer: Currently, there is no specific bar on the pharmaceutical industries for procuring masks and sanitizers. They can hire any entity which has been authorized and allowed by the Government for manufacture of masks and sanitizers even from the pre COVID-19 era. 

Author- AMLEGALS is a multi-specialised law firm. We would love to hear your views, queries, feedback and comments on covid19@amlegals.com or rohit.lalwani@amlegals.com.

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Qualification: LL.B / Advocate
Company: AMLEGALS
Location: AHMEDABAD, Gujarat, IN
Member Since: 14 Apr 2018 | Total Posts: 152
I am a litigation & arbitration advocate. I am founder of a leading full service law firm AMLEGALS. I handle litigation in indirect taxes, Insolvency & Bankruptcy Code, IPR, Arbitration, Contracts etc in High Courts, Tribunals-NCLT,CESTAT,NCLAT etc, Arbitral Tribunals and various Court of View Full Profile

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