The pharmaceutical and life sciences sector in India is one of the country's major domestic industries and contributes about 2% to the total GDP. In the last nine years, it has grown steadily by a compound annual growth rate of 9.43%. The Indian pharmaceutical industry is dominated by manufacturers of generic medicines and vaccines, and exporters. Other major sectors include biologics and biosimilars, bulk drugs, contract research and manufacturing, and over-the-counter (OTC) drugs. The pharmaceutical and life sciences sector predominantly consists of larger companies including domestic and foreign players. In recent years, pharmaceutical and health care start-ups in digital health, vertical e-pharmacies, telemedicine, and remote diagnostics have begun to emerge.

The M&A trends include acquisitions of sub-brands and therapeutic divisions, licensing of patented products, and collaborations between foreign and Indian pharma companies for research and development.

Notable recent transactions include:

In addition, during the COVID-19 pandemic, there was increased M&A activity and collaborations with global players (for example, Pfizer, Moderna, Astra Zeneca, J&J, BioNTech, Elli Lilly, and Gilead), collaborating with Indian pharmaceutical companies (for example, Serum Institute, Dr Reddy's Laboratories, Zydus Cadila, Biocon, Cipla, and Sun Pharma), to manufacture vaccines and drugs.

The Indian pharmaceutical industry is a contract manufacturing and research hub and attracts multiple global players. The influx of foreign investment in this sector is high. Under the Indian foreign direct investment (FDI) laws:

Therefore, given that global pharmaceutical companies commonly enter the Indian market for contract manufacturing or collaborative arrangements with domestic companies, the FDI laws are likely to be a barrier and a major concern.

Health care services in India (including the provision of insurance) are provided by the government and private companies. As health care is regulated by the states under the Indian Constitution, only the state governments (and not the federal government) can legislate on public health matters. Health care policies and initiatives still exist at both the federal and state level.

The National Health Policy 2017 outlines the government's goals on health care delivery in India, one of which is to progressively move towards universal health coverage. To this end, the government set up a National Health Protection Mission that is funded through union budget allocations. In the union budget of 2018, INR12 billion was allocated to set up 150,000 health and wellness centres as well as hospitalisation cover for about 100 million poor and vulnerable families, with INR500,000 per family for secondary and tertiary care hospitalisation. The government is also increasingly adopting digital health technologies as part of its health care delivery system. To this end, government has launched the National Digital Health Mission, which aims to provide a unique health ID to every Indian citizen.

India also has a system of employees' state insurance (ESI), where certain classes of employees are provided with insurance by the Employees' State Insurance Corporation (ESIC), to which both the employer and the employee make contributions. The ESI provides medical benefits to covered employees, pensioners, and their dependants at hospitals and dispensaries set up by the ESIC.

The government has also set up a Central Government Health Scheme (CGHS), providing medical facilities to central government employees, pensioners, and their dependants.

At the state level, state governments have set up health and welfare schemes. In Karnataka, for example, the government set up the Yeshasvini Scheme covering rural farmers in Karnataka, who pay a nominal amount and are covered for certain surgical procedures at network hospitals.

The national health care system in India operates at two levels, central and state. While there is no federal law on public health, there are several health care policies and schemes that have been introduced to support the public health system. Although there is no direct engagement of pharmaceutical companies in the national health care system, from time to time, the central and state government invite bids for procurement of medicines and medical devices from pharmaceutical companies. During the COVID-19 pandemic, there were more collaborations between the government and pharmaceutical companies for the procurement of vaccines.

Drugs as defined under the Drugs and Cosmetics Act, 1940 (Drugs and Cosmetics Act) (which covers some medical devices and diagnostics) are essential commodities under the Essential Commodities Act, 1955 (ECA). The government can regulate the prices of any essential commodity through orders passed under the ECA. The Drug (Prices Control) Order 2013 (DPCO), passed under the ECA, regulates the prices of medicinal products in India. The National Pharmaceutical Pricing Authority can fix the ceiling price of any formulation that is part of the Schedule to the DPCO. The Schedule is based on the current National List of Essential Medicines. Separately, formulations that are not covered under the Schedule are prohibited from increasing their price by more than 10% in 12 months.

The DPCO was amended in January 2019 to exempt orphan drugs and manufacturers of patented new drugs from price control. Manufacturers of patented new drugs are exempt from price control for five years from the date of commencement of commercial marketing. Orphan drugs are exempt from price control indefinitely but only if the Ministry of Health and Family Welfare decides to make them exempt. Orphan drugs have been defined for the first time in the New Drugs and Clinical Trial Rules 2019 as "a drug intended to treat a condition which affects not more than 500,000 persons in India."

As a part of mandatory compliance requirements under the DPCO, all pharmaceutical companies are required to submit pricing and sales data. The ceiling price of formulations covered in the Essential List of Medicines/DPCO Schedule are determined based on the pricing data submitted by the companies. The annual increase in prices of all formulations are also monitored based on the pricing data submitted by the companies. Risk-sharing agreements, commercial discounts, and access arrangements are not used.

Health technology assessments are not used in pricing decisions.

India does not have a universal system that provides funding or reimbursement for medicinal products. However, various schemes initiated by both the central and state governments provide free or subsidised medicinal products or financial assistance for medical procedures, largely targeted at the population living below the poverty line and in rural areas.

The DPCO permits a 16% margin to the retailer (which includes a pharmacist) for scheduled formulations (that is, price-controlled drugs). For non-scheduled formulations, there are no trade margins set out for retailers. However, the government has residuary powers to notify trade margins for drugs in the interest of the public. Therefore, trade margins, including retail trade margins, may be set by the government under exceptional circumstances.

The sale of medicinal products (either retail or wholesale) requires a licence under the Drugs and Cosmetics Act from the relevant state drug licensing authority under whose jurisdiction the proposed activity is intended to be carried out. Prescription drugs (Schedules H, H(1), and X drugs) can be dispensed according to a prescription issued by a registered medical practitioner (that is, a healthcare professional registered to practice medicine in India under National Medical Commissions Act, 2019). Prescription drugs can only be dispensed by a registered pharmacist. Pharmacists are registered in accordance with the Pharmacy Act, 1948.

Certain medicinal products, for example, aspirin and paracetamol tablets, can be sold without a licence, subject to conditions. The class of drugs, and the extent and conditions for the exemption, is covered under Schedule K to the Drugs and Cosmetics Rules.

There are no specific regulations on the sale of medicinal products on the internet, by email or mail order. The government is proposing regulations to govern the operation of e-pharmacies in India. In August 2018, the Ministry of Health and Family Welfare published draft rules to formally recognise and regulate e-pharmacies in India. However, the rules have not been notified and are therefore not yet in force.

The Drugs and Cosmetics Act provides that a sale by way of wholesale dealing means sale to a person for the purpose of selling on and includes sales to hospitals, dispensaries, and medical, educational, or research institutions.

Any person seeking to sell, stock, exhibit or offer for sale, or distribute drugs through wholesale channels must obtain a licence. Importers must have a licence to sell drugs wholesale (in addition to an import licence).

The licence is granted for the premises where the drugs are stocked, therefore if the drugs are stocked elsewhere, the licence must be forfeited and a separate licence obtained for the new premises. The pre-requisites for a licence to sell wholesale drugs are:

An inspection of the premises is carried out to verify whether it complies with the requirements before the licence is granted.

The state licensing authorities issue licences to sell drugs and oversee compliance with conditions by the licensee. The Drugs and Cosmetics Act empowers drug inspectors to inspect premises where drugs are stocked to ensure compliance with the Act. The penalty for non-compliance with conditions of the licence is imprisonment for a period of one year, which may be extended to two years, and a minimum fine of INR20,000.

The import and export of drugs should comply with the Foreign Trade (Development & Regulation) Act, 1992 and the Export Import Policy (EXIM Policy), which is administered by the Directorate General of Foreign Trade. Before importing devices into India, an importer must obtain an Importer and Exporter Code (IEC) Number, which must be provided on the documents filed with customs for clearance of imported goods.

To obtain an IEC Number, an application in the prescribed form must be submitted to the office of the jurisdictional Joint Director of Foreign Trade, along with a bank account number and a permanent account number (an account number issued by the Indian income tax department to all individuals and businesses for banking and tax purposes).

In addition to compliance with the requirements under the general import laws, there are certain requirements under the Drugs and Cosmetics Act which must be fulfilled. To import a drug into India, the foreign manufacturing facility and the drug itself must be registered with the DCGI. To register, the foreign manufacturer, or its agent (the importer), must submit the plant master file and drug master file in the stipulated format. Once registered, the importer must obtain an import licence from the DCGI. The registration certificate and import licence are valid for three years. A drug cannot be imported without a registration certificate and import licence, unless it is being imported for export.

An importer must be based in India and have either a licence to manufacture any type of drug or a licence to sell drugs wholesale. Typically, an importer is also the authorised agent for the foreign manufacturer, responsible for the business of the foreign manufacturer in India and any resulting liability. The authorised agent is appointed through a power of attorney. There can be two or more importers of the same drug in India.

Where the drug being imported into India is new, the foreign manufacturer must obtain a marketing permission before applying for registration, and the grant of this permission depends on the foreign manufacturer or importer's ability to show that the drug is safe and efficacious.

Before an imported drug is sold in India, it must comply with local labelling requirements. It is not always possible for a drug having a global label to carry India-specific declarations before it is imported into India. In these circumstances, a label carrying India-specific declarations on the drug package can be affixed at the custom bonded warehouse before it is cleared for consumption in India.

Parallel imports are not recognised under the current applicable laws in India.

It is permissible under Indian trade mark law for goods bearing a registered trade mark that is lawfully acquired, to be further sold or dealt with, if the goods are not materially altered or impaired after they are put on the market.

The question of whether India recognises the principle of international exhaustion (where the intellectual property rights are exhausted once the product has been sold by the intellectual property owner or with its consent anywhere in the world) is currently pending before the Supreme Court of India, in the case of Samsung Electronics v Kapil Wadhwa and others.

Importing a patented product is permitted under Indian patent law by any person duly authorised under law to produce, sell, or distribute the product.

The Drugs and Magic Remedies (Objectionable Advertisements) Act, 1954 (DMRA) and the Drugs and Cosmetics Act regulate advertisement of medicinal products in India. The legislation applies to announcements made in respect of a drug over any medium. The DMRA is administered by the state licensing authorities.

In addition, the Consumer Protection Act, 2019 (Consumer Protection Act) also applies. Specifically, false or misleading advertising and unfair trade practices are prohibited. Misrepresentations and false inducements are treated as unfair trade practices. The Guidelines for Prevention of Misleading Advertisements and Endorsements for Misleading Advertisements, 2022 provide standards for advertising and endorsements, and clarify when an advertisement is not likely to be misleading. The Central Consumer Protection Authority is the designated regulator for the administration of the consumer framework.

Separately, the Uniform Code of Pharmaceutical Marketing Practices (UCPMP) is a voluntary code published by the Department of Pharmaceuticals, Ministry of Chemicals and Fertilizers which aims to regulate various kinds of promotional activities by pharmaceutical and medical device companies to market pharmaceutical products and medical devices to health care professionals. While not mandatory, the industry tends to treat the UCPMP as best practice.

Similarly, the Advertising Standards Council of India Code for Self-Regulation of Advertising content in India (ASCI Code) is a voluntary code that lays down guidelines on the content of advertisements, including ensuring that advertisements are not misleading, not offensive to the public, and compliant with the law. However, the ASCI Code is legally binding for advertisements on television channels due to its incorporation by reference into the Cable Television Networks Rules, 1994.

Advertisement has been defined under the DMRA to include any notice, circular, label, wrapper, or other document, and any announcement made orally or by any means of producing or transmitting light, sound, or smoke. The DMRA prohibits advertisements which:

In addition, the DMRA also prohibits advertisements about drugs that are indicated for diseases specified in the legislation. General public health awareness and disease awareness programmes are permitted.

While there is no regulatory requirement to set up internal procedures for managing and approving advertisements by pharmaceutical companies, compliance with applicable laws is mandatory. As an industry practice pharmaceutical companies in India do set up internal procedures for ensuring compliance with the applicable laws.

Advertising does not have to be approved by a regulator. However, companies are not prohibited from seeking a regulatory opinion on the advertisement before its publication to mitigate risk of regulatory scrutiny for non-compliance.

The UCPMP, although voluntary, sets out certain best practices to be adopted while undertaking comparative advertisements, including:

Additionally, the ASCI Code (also voluntary) provides suggestions when undertaking comparative advertisements in compliance with the applicable laws, for example, requiring advertisers to provide substantiation for comparative claims, avoiding misleading advertisements, and advertising in compliance with relevant laws.

The law requires promotions and advertisements for pharmaceutical products to be for approved indications of the product only. Only approved claims should be displayed in relation to the product information, and they must be capable of substantiation.

The DMRA also applies to internet and social media advertisements for drugs (see Question 10).

The penalty for the first violation of the DMRA is imprisonment for up to six months, or a fine, or both. For subsequent convictions, the penalty is imprisonment for up to one year, or a fine, or both. If the violations are committed by a company, every person who was in charge of, and responsible to, the company at the time the offence was committed is liable (section 9, DMRA).

The Consumer Commission can award compensation to a consumer for any loss or injury suffered by unfair trade practices or misleading advertisements (Consumer Protection Act). There is no cap on the compensation. In addition, the prescribed penalty for false or misleading advertisements which are prejudicial to the interest of consumers is imprisonment for a term which may extend to five years and fine of INR5 million.

Non-compliance with the UCPMP and ASCI Code does not attract any penalties, although directions may be issued to the company to comply with the provisions by the industry associations and the ASCI.

The rules for prescription only medicines and over the counter medicines are the same.

Advertisements for medicinal products cannot claim to treat, prevent, or mitigate certain diseases and conditions specified in the Schedule to the DMRA.

It is also illegal to advertise any medicinal product in a way that suggests, or is calculated to lead to, the use of that device for:

While these restrictions were originally enacted to apply to drugs, their scope was extended by the courts to include medical devices.

There are no restrictions on providing free samples to the public. Any special offers and discounts that sellers/distributors of drugs propose to offer must comply with the applicable laws affecting the market, for example, competition law (see Question 31).

There are no specific guidelines in respect of engagement with patient organisations in India. However, in doing so, compliance with the UCPMP must be ensured, especially while dealing with individual health care professionals within these organisations.

There is no set definition of a health care professional or health care organisation. The UCPMP provides the following in respect of advertising to health care professionals:

The Medical Council of India (MCI) Code and Dental Council of India (DCI) Code prohibit medical and dental practitioners from:

However, both the MCI Code and the DCI Code permit medical and dental practitioners to be engaged by pharmaceutical and allied health care companies as consultants, researchers, or in another professional capacity.

Government health care practitioners in India are part of a service (for example, Central Civil Services, or the Railway Services) and are regulated by the specific rules applicable to the service. Generally, the service rules prohibit government servants from placing themselves under any financial or other obligation to any individual or organisation that may influence them in the performance of their official duties.

Separately, the Prevention of Corruption Act, 1988 requires that no "gratification" should flow to a public servant that might induce them to discharge their official duties or to stop them from discharging their official duties.

The UCPMP prohibits medical device and pharmaceutical companies from:

However, the UCPMP is a voluntary code and does not have the force of law. The government is proposing to make the UCPMP mandatory in some form.

There are no disclosure requirements. However, under the MCI Code, registered medical practitioners are prohibited from accepting any gifts and monetary benefits. The UCPMP places a corresponding obligation on pharmaceutical companies to refrain from providing gifts/monetary grants. However, the UCPMP is a voluntary code and does not have the force of law. The government is proposing to make the UCPMP mandatory in some form.

The MCI Code is not directly applicable to pharmaceutical companies, therefore no penalties are triggered.

The UCPMP is a voluntary code, so there are no penalties. However, since the industry views the UCPMP as best practice, industry associations that pharmaceutical companies are part of may take action, impose sanctions, or both in accordance with its codes and procedures, for non-compliance with the UCPMP.

The Patents Act, 1970 and The Patent Rules, 2003 (amended in 2016) govern the grant, enforcement, and other matters relating to patents.

To be eligible for a grant, the inventor must establish that the subject matter of the patent:

India grants both product and process patents. However, there are specific inventions detailed in sections 3 and 4 of the Patent Act that are not patentable in India. The application for a patent can be made individually or jointly by the inventor or by their assignee or legal representative. Foreign applicants whose countries are party to the Paris Convention for the Protection of Industrial Property (Paris Convention) are given national treatment.

If the applicant is resident in India, it must apply for a patent in India before applying for a patent outside India or obtain the required permissions for making a patent application directly outside of India.

Both product and process patents can be granted in India for pharmaceutical products including drugs, biological products, and medical devices.

A patent offers the following rights to the patentee:

Where two or more persons are registered as the grantee or proprietor of a patent, unless there is an agreement to the contrary, each person (or their agent) is entitled to the above rights. However, a co-grantee of patent cannot license or assign the patent except with the consent of the other person(s).

The Patents Act does not recognise an assignment or licence of a patent unless:

Specific inventions detailed in sections 3 and 4 of the Patent Act that are not patentable in India include some pharmaceutical industry-specific inventions, including:

The Patents Act provides that any invention that satisfies the criteria of newness, non-obviousness, and usefulness can be the subject matter of a patent. Some of the non-patentable inventions under the Patents Act include processes for the medicinal, surgical, curative, prophylactic, or other treatment of human beings, animals, plants, or substances obtained by a mere admixture, resulting only in the aggregation of the properties of the components, among others.

Specifically, the Patents Act does not permit patents for the new form of an existing substance to be patented, unless it demonstrates increased efficacy. The Supreme Court of India has clarified that in the context of medicines, efficacy in section 3(d) only means therapeutic efficacy (Novartis AG v Union of India, 2013 S.C.R. 148) For this purpose, all properties of a drug are not relevant, only the properties which directly relate to its therapeutic efficacy.

To apply for a patent, an application must be made online on the e-filing website of the Indian Patent Office.

A patent application can be filed with the Indian Patent Office either with a complete specification or with a provisional specification, along with a fee. Where the application is filed with a provisional specification, the complete specification must be filed within 12 months. There is no extension of time for filing the complete specification after the 12 months have expired.

A complete specification contains the following:

There are three routes through which an application can be filed before the Indian Patent Office:

The process and timing for making an application for and obtaining a patent in India is as follows:

The approval process for drugs and medical devices is not linked to the process for patent grant. Therefore, a person may apply to the drug regulator for approval of a pharmaceutical product regardless of the existence of a patent dispute in relation to the drug.

The fees for making a patent application vary depending primarily on:

Further information on the application process and fees can be obtained from the following websites:

An Indian patent is granted for 20 years from the application date or the PCT/international filing date, after which the inventions fall into the public domain. After completion of the second year (that is, from the third year onwards), the patentee must pay a maintenance fee for each year of the remaining patent term. If there is a delay of more than six months when paying the annual renewal fees, patent protection will cease.

There is no provision for extending a patent term in India.

The Patent Act provides the following rights:

The Patents Act does not identify acts or omissions that constitute infringement of a patent. However, the Patents Act grants certain exclusive rights to the patentee and their violation is generally accepted to be an infringement. The rights of the patent holder are defined above.

Tests similar to those used internationally (for example, the doctrine of equivalents test and the pith and matter of the invention test) have also been recognised to ascertain infringement.

The following acts do not constitute patent infringement:

(Section 107A, Patents Act.)

In addition to the above, the following also do not constitute an infringement:

Claims and remedies. Where an Indian patent is infringed, the patentee, its registered exclusive licensee, the compulsory licensee, and any other licensee (subject to commercially agreed terms) can file a lawsuit for infringement before an appropriate court (either the district court or the High Court). The reliefs that can be claimed in the suit are:

A licensee with a non-exclusive license cannot bring a lawsuit for infringement by itself without first having given two months' notice to the patent holder about the infringement.

Defences for patent infringement under the Patent Act include:

Research exemption. The patented process/product can be used by any person for the purpose of undertaking any scientific experiment or carrying out research. The exemption provided under the Patent Act permits third parties to conduct research using the patented material without being accused of infringing the patent holder's rights.

IP exhaustion. The Patent Act provides that once the patented product is sold in the market, the patent rights of the inventor are exhausted.

Other exemptions. Any act of making, constructing, using, selling, or importing a patented invention solely for uses reasonably related to the development and submission of information required by any law in India or in any other country that regulates the manufacture, construction, sale, use, or import of any product is not to be considered as an infringement of patent rights.

In addition, importation of patented products by any person from a person who is duly authorised under the law to produce, sell, or distribute the product is not considered an infringement of patent rights.

India is a party to numerous international treaties including the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). With effect from 1 January 1995, India became a member of the World Trade Organization (WTO) and became a party to the TRIPS Agreement. After the adoption of TRIPS, India amended the Patent Act of 1970 to ensure compliance.

India is a member of the PCT which assists applicants in obtaining international patent protection for their inventions. By filing one international patent application under the PCT, applicants can simultaneously seek protection for an invention in a large number of countries.

India is a party to:

Trade marks are protected under both statutory law and common law. The Trade Marks Act, 1999 (TM Act) and The Trade Marks Rules 2017 (TM Rules) are the key laws that govern trade marks. However, being a common law country, India also recognises the common law remedy of passing off through its judicial system.

Registering a trade mark confers the following rights on the trade mark holder:

It is important to appreciate that the protection afforded under the TM Act is territorial in nature and has effect only within the boundaries of India. Therefore, to claim protection for a trade mark under the TM Act, use or reputation or both garnered by the relevant trade mark in India is a mandatory requirement.

The TM Act expressly provides that a trade mark can be obtained for a device, brand, heading, label, ticket, name, signature, word, letter, numeral, shape of goods, packaging, or combination of colours or any combination of them provided that the mark is:

A trade mark registration can be refused on the following grounds:

A medicinal brand that satisfies the conditions set out above and does not fall under any of the exclusions can be registered as a trade mark in India.

No word that is the commonly used and accepted name of any single chemical element or any single chemical compound (as distinguished from a mixture) in respect of a chemical substance or preparation, or which is declared by the WHO to be an international non-proprietary name, or which is deceptively similar to that name, can be registered as a trade mark.

The Indian Government is pushing pharmaceutical companies to print the generic name of medicine conspicuously on the label of the medicine. It is also pushing registered medical practitioners to prescribe the medicines by their generic name only, to the extent possible. In effect, the government is taking steps to reduce the dependency of registered medical practitioners and end consumers on brand names for medicinal products.

An application for a trade mark registration must be made to the Trade Marks Registry.

The application must contain a clear reproduction of the word/logo for which the application is being filed, including any colours, forms, or three-dimensional features, along with a statement of use and an affidavit evidencing or showing use in India (if the application is being made on a prior use basis). In addition to fulfilling the conditions described in Question 29, the application must identify the class of goods/services to which it applies.

The Trade Mark Rules provide guidance on the application procedure with regard to trade mark applications in India, along with the relevant fees. More information can be found at IP India: Trade Marks. The fee for making an application for each class and for each mark is INR10,000 where the applicant is not an individual, start-up, or small enterprise. The fee for renewal is INR10,000.

Drug regulators do not review proposed trade marks for pharmaceutical products. However, the Drugs and Cosmetics Rules were amended in November 2019 to discourage manufacturers from using brand names that may lead to confusion in or deceive the market. The amendment requires manufacturers to make an undertaking to the CDSCO that they have already conducted a search of the proposed brand name in the Trade Marks Registry, the central database maintained by the drug regulator, literature and reference books on drug formulations, and on the internet, and that the manufacturer is unaware of the existence of any drug with the same or similar proposed brand name.

The key stages involved in the trade mark registration process include:

The general timeline for registration of a trade mark application is about two years, provided that the application is straightforward, that is, there are no major objections or oppositions from either the Trade Marks Registry or a third party. However, this is subject to the discretion of the Trade Marks Registry.

The Indian competition regime is based largely on jurisprudence from the EU and the US and developed to form its own structure to govern the market system in India and functioning of firms across all sectors.

The Competition Act, 2002 (Competition Act) brought India's competition regime into line with international standards. The Competition Act's objective is to:

The Competition Act prohibits or regulates:

The Competition Act establishes the following administrative framework:

The CCI (and formerly COMPAT) has taken an active role in developing the law and creating awareness among industry players. It has imposed high penalties to deter anti-competitive practices in India and developed a stringent competition law framework.

The CCI can issue infringers with a cease and desist order, or impose a penalty not exceeding 10% of the average turnover during the preceding three years. In cartel cases, the CCI can impose a penalty of up to 10% of turnover, or three times the amount of profit derived from the cartel agreement. In cases of contravention by companies, the CCI can proceed against and punish any person who, at the time of the violation, was in charge of the company, unless that person can show that the violation was committed without their knowledge or that they exercised all due diligence to prevent the violation (section 48, Competition Act). Section 43A provides that where there has been a failure to notify a combination, the CCI will impose a penalty of 1% of the total assets or turnover of the combination.

The pharmaceutical industry seeks heavy protection of its research and development and products developed through intellectual property legislation. This industry is significant from a consumer and a market perspective. It is a sensitive sector offering health care to billions of people globally, with several laws regulating its operations. Due to increasing development in the field of intellectual property rights and with greater patent filings, most products are patented and monopolised by pharmaceutical companies impeding competition. Concerns arise when the protection afforded to these pharmaceutical companies is misused, leading them to engage in practices that go against the principles of fair market and competitive behaviour.

The pharmaceutical industry is especially prone to investigation by the CCI due to its unique nature characterised by high entry barriers in the form of:

These high entry barriers were expressly acknowledged by the CCI in In Re: Biocon Limited Case No. 68 of 2016.

The jurisprudence on the determination of relevant product markets in pharmaceuticals has evolved in the past few years. Some notable developments include:

The CCI has been active in investigating anti-competitive agreements and abuse of dominance in the pharmaceutical industry.

For example, the pharmaceutical industry recently faced a major hurdle to reach end consumers due to protectionist barriers created by national and state-level associations of wholesale and retail pharmacies. These associations mandated payment of fixed margins to their members and dictated distributor appointments, therefore controlling who can and cannot become a distributor of medicines sold by a pharmaceutical company within a demarcated area. Where a pharmaceutical company did not adhere to the conditions set by the associations, it was presented with the threat of a national or state-level boycott of its medicines by the members of the associations. Therefore, pharmaceutical companies conceded to the unfair demands of the associations. Over the years, the CCI investigated this malpractice and passed several limits including a penalty on a personal level against the office bearers of the association. The hurdles to distribution faced by pharmaceutical companies appear to have reduced significantly (In Re: M/s Sandhya Drug Agency Case No. 41 of 2011; In Re: Sudeep P.M. Case No. 54 of 2015; In Re: The Belgaum District Chemists and Druggists Association Case No. C-175/09/DGIR/27/28-MRTP).

The CCI aggressively began pursing investigation into abuse of dominance in respect of patent rights. It recently imposed a significant penalty (totalling about USD300,000) on Monsanto, its Indian subsidiaries, and joint venture companies on the grounds that they did not co-operate in its investigation. The CCI also recently imposed a significant penalty on a multi-national company when it was found that it was guilty of engaging in resale price maintenance.

There has long been a question mark over the powers of the CCI to initiate an investigation on abuse of dominance by a patent holder on account of a complaint when the complainant had separately challenged the validity of the patent before a different forum. However, Pfizer Limited and Another v Union of India and Another W.P.(C) No.2212/2016, concluded that the CCI has the power to investigate and adjudicate these cases.

India does not have rich competition law jurisprudence with respect to the generic entry of pharmaceuticals into the domestic market. This is due to lack of recognition of concepts including patent linkage and data exclusivity. This makes it easier for the industry to introduce a generic drug into the market and makes any anti-competitive agreement between the originator and a generic manufacturer economically unrewarding in the long run.

However, the CCI recently ordered an investigation into an alleged abuse of dominance by Roche and its subsidiaries to prevent the introduction of a generic form of its patented drug Herceptin. The CCI was of the view that Roche, due to its near monopoly, assumed a dominant position in the relevant market, but failed to discharge its special responsibility not to allow its conduct to impair undistorted competition in the relevant market. The grounds of the investigation can be broadly summarised as misuse of public procedures and regulations, including administrative and judicial processes, to delay the introduction of the generic product into the Indian market (In Re: Biocon Limited Case No. 68 of 2016).

Abuse of dominance issues have arisen in the pharmaceutical sector with respect to price and non-price related issues. Price-related abuse is easy to identify and prove but non-price-related abuse is difficult to identify and prove. Cases of price-related abuse in the pharmaceutical industry have yet to surface in India.

However, the CCI is currently investigating a case of non-price related abuse on account of the following actions of a patent holder:

(In Re: Biocon Limited Case No. 68 of 2016.)

There have been other complaints of abuse of a dominant position in the pharmaceutical sector in the past but the CCI has not found the accused party guilty of abuse.

It is settled that India follows the principle of international exhaustion, and language to that effect has been codified into law. Therefore, parallel imports of pharmaceuticals have not raised any significant IP and competition law issues.

Typical competition issues that can arise on the licensing of technology and patents in a pharmaceutical context are:

However, there is an exemption in relation to anti-competitive agreements, which provides that acts by persons to restrain infringement of their IP or otherwise protect their IP will not be considered to be an anti-competitive agreement (section 3(5), Competition Act).

There are no restrictions on licensing or transferring trade marks or patents to foreign parties. However, Indian residents cannot file patent applications outside of India unless:

For intellectual property transfers involving government-funded bodies (for example, government departments and publicly funded educational institutions), the transfer of the patent is governed by a separate set of rules, that is, the charter documents of the relevant public body.

Neither a patent or trade mark licence, nor any payment under it requires any kind of approval from a government or regulatory body. The licence can be enforced by instituting a civil suit before the appropriate courts in India.

The key regulators that enforce medicinal product liability include:

The DCGI, state drug licensing authorities, and drug inspectors can all inspect the premises of manufacturers and importers of medicinal products. If the medicinal product is found to be in breach of the Drugs and Cosmetics Act, or unsafe, the authority can direct the manufacturer or importer to recall the medicinal product from the market, after providing an opportunity for the manufacturer or importer to show cause as to why the action should not be initiated. Additionally, the Central Consumer Protection Authority has broad powers and is authorised to enquire into or investigate any violation of consumer rights or unfair trade practices, either of its own accord or on the basis of a complaint.

Under the Drugs and Cosmetics Act, 1940, there are numerous penalties which are applicable under various legislation in product liability cases, depending on the type of violation.

The key areas of law include:

The substantive test for medicinal product liability is largely based on whether the medicinal product that is manufactured, distributed, stocked, or sold is spurious, adulterated, counterfeit, not of standard quality, or is in any way in violation of the Drugs and Cosmetics Act or causes (or is likely to cause) harm to the general public.

The primary responsibility for ensuring that medicinal products are not defective is on the manufacturer or importer of the product. If the defect arose later on in the distribution chain, for example, during storage, transport, or distribution, the relevant person/entity responsible for the process can also be held liable for:

The Drugs and Cosmetics Rules have been amended so that the marketer of the product is also liable for defects from 1 March 2021. It is common practice for companies to indemnify themselves against potential claims by way of contract, or to obtain insurance to protect against these risks.

While there are no statutory defences available, before an action is initiated by a regulator under the Drugs and Cosmetics Act, an opportunity is provided to the defendant to show cause as to why the action should not be initiated. The manufacturer/importer can, at this stage, build a defence against the enforcement action, with possible defences including conforming with standards and evidencing proof of compliance.

The exceptions to a product liability action under the Consumer Protection Act include the following:

Aside from the exceptions detailed above there are no conditions for limitation of liability under this regime.

Limitation periods depend on the area of law. There is no period of limitation for instituting a criminal action (in most cases). For a civil action, the general period of limitation is three years. For consumer disputes under the Consumer Protection Act, the limitation period is two years.

It is possible for voluntary consumer associations and consumers to institute a class action suit before a consumer forum under the Consumer Protection Act. The Consumer Protection Act has also established a regulator empowered to protect and enforce the rights of consumers as a class.

The Drugs and Cosmetics Act allows a consumer or recognised consumer association to send any medicinal product to a government analyst, and to receive a report of the analysis.

A consumer can raise a complaint with the drug authorities, who, after verifying the complaint, can bring an action against a manufacturer or importer of a defective medicinal product.

A consumer can also approach a consumer forum and bring a complaint for defective goods (in the case of defective medicinal products) or deficiency of services (in case of deficiency at any stage of the distribution channel). The Consumer Protection Act clearly provides for instances in which the product manufacturer, product seller, and the product service provider (person providing services in respect of a product, for example, repairs and maintenance) can be held liable in case of defective goods or deficiency of services.

The following remedies are available to consumers under the Consumer Protection Act: