Abhijeet Das, Senior Associate, Singhania and Partners, opines that there are multiple fronts on which the aggrieved pharma companies can contest the ban
On March 10, 2016, vide its notifications bearing S.O. 705(E) through S.O. 1048(E) (Notifications), the pharmaceutical sector was dealt a clinical blow from the Ministry of Health and Family Welfare which prohibited “the manufacture for sale, sale and distribution for human use” of 344 drugs constituting fixed dose combinations (FDCs). The Notifications were issued under the aegis of Section 26A of the Drugs and Cosmetics Act, 1940 (Act). This was swiftly followed by a circular dated March 12, 2016, whereby the Drugs Controller General (India) (DCGI), went on to reiterate the prohibition and further instructed the Drug Controllers of all states and union territories to take necessary action in furtherance thereto.
These Notifications have led to a frenzy of activities, starting from likes of Pfizer, Abbott and P&G announcing stoppage of sale of popular products such as Corex, Phensedyl and Vicks Action 500, respectively. Subsequently, the Delhi High Court has granted interim injunctions suspending the operation of the Notifications in favour of Pfizer, Abbott and P&G (amongst others), with the court observing that the Notifications “do not disclose any grave urgency.” The matters would be heard next on March 21, 2016, when the government would submit its counter affidavits and argue for the interim relief to be vacated. All this has occurred within a span of a week of the Notifications and it seems likely that the other pharma majors would soon follow suit and seek similar relief from the Delhi High Court and/or other High Courts in the coming days.
The roots of the Notifications can be traced back to the year 1988, when the Drugs and Cosmetics Rules, 1945 (Rules), were amended to the extent to bring in a new requirement of seeking prior permission from the Licensing Authority i.e., DCG(I) before import or manufacture of FDCs. In 2002, the Rules were further amended, mandating the grant or renewal of a license for manufacture of drugs described in Schedule C (Biological and Special Products) and Schedule C (1) (Other Special Products) falling within the ambit of the term “new drug” (including FDCs) by the State Licensing Authorities i.e., the Drug Controllers of the respective states (SLAs), to be preceded by the approval from the DCG(I).
Thereafter, the issue came to the fore again when the Parliamentary Standing Committee of the Ministry of Health and Family Welfare in its 59th report on the functioning of Central Drugs Standard Control Organization (CDSCO) presented on May 8, 2012, took note of some SLAs issuing manufacturing licenses for a very large number of FDCs without prior clearance from the DCG(I). Subsequently, the DCG(I) had issued a circular on January 15, 2013 directing the manufacturers to prove the safety and efficacy of FDCs licensed by the SLAs prior to October 1, 2012 within 18 months, failing which they will be considered for being prohibited for manufacture and marketing in India. The FDCs approved after October 1, 2012, were to be considered for being prohibited, straightway. In the meanwhile, in July 2013, the Expert Committee under the Chairmanship of Prof CK Kokate presented its report on Policy Guidelines for Approval of FDCs in India. In a follow up to the circular dated January 15, 2013, the DCG(I) noted that hardly any manufacturers have approached the CDSCO for providing the safety and efficacy of such FDCs and set a deadline of August 30, 2013 for submission of such applications.
Though similar action has also be undertaken in the past, the scale and ambit of the Notifications is simply unprecedented, as the hammer has befallen so many at once. Though looking back, some similar instances that come to mind, like when in the year 2007, directions were issued to the SLAs to withdraw 294 FDCs which were licensed without approval of the DCG(I). However, these directions were stayed by the Madras High Court. Further, in June 2013, FDC of Flupenthixol and Melitracen (marketed by Lundbeck India Private Limited under the name ‘Deanxit’) was prohibited, which was later quashed and remanded the matter back to be reconsidered afresh in the case of Lundbeck India Private Limited vs. Union of India & ors., 2014 (5) KarLJ 440. Thereafter, the Drugs Technical Advisory Board examined the issue of suspension of manufacture and sale of the said drug, and recommended that the use of the drug to be discontinued from the country and consequently, the FDC was ultimately banned again in July 2014.
Coming to the question of the tenability of these Notifications, there are multiple fronts on which the aggrieved pharma companies can contest them. They can mount a challenge on the Notifications suffering from legal infirmities or that they violate the fundamental right to “to carry on any occupation, trade or business” guaranteed under Article 19 (1) (g) of the Constitution of India or even on technical grounds such as safe withdrawal from habituated medications.
A plea that Section 26A of the Act itself is unconstitutional could be one of the arguments advanced in these proceedings, however, it is extremely unlikely that such a stance would make much headway with the courts. Such arguments have been attempted on multiple occasions on the grounds that Section 26A does not provide for right of hearing or appeal to the effected entity and it confers the Central Government with unfettered, unrestricted power to prohibit sale, distribution or manufacture of a drug etc. These arguments have not been entertained by inter alia the Apex Court in the past (refer E. Merck (India) Limited vs. Union of India, AIR 2001 Del 326 and Union of India v. Cynamide India Limited, 1987 (2) SCC 720).
One argument advanced by the Pfizer on March 14, 2016 was that “no enquiry was made from the petitioner or show cause notice issued” prior to issuance of the Notifications against it. While Section 26A itself does not stipulate to these steps being undertaken prior to taking the action, however, the courts have in the past, built in the requirements of natural justice to be met before coercive action is taken under Section 26A (Refer State of Tamil Nadu vs. K Sabanayagam, (1998) 1 SCC 318 and Systopic Laboratories Private Limited vs. Dr. Gupta, 1994 Supp. (1) SCC 160).
In the E Merck Case (supra.), the Delhi High Court has laid out that before imposition of such ban under Section 26A the following ingredients are to be fulfilled:
(i) Satisfaction of the Central Government;
(ii) Satisfaction has to relate to: (a) likely to involve risk to humans and animals, or (b) it does not have a therapeutic value as claimed or purported to be claimed for it; or (c) it contains ingredients and in such quantity for which there is no therapeutic justification; and
(iii) it is necessary or expedient in public interest to do so.
This ‘satisfaction’ of the Central Government has often been linked to the consideration of the recommendations of the Drug Technical Advisory Board (“DTAB”) or the Drug Consultative Committee (DCC) constituted under the Act. Further, there has to be proof of evaluation to arrive at the conclusion that the drug falls within item (ii) above. For instance, in the Lundbeck India Case (supra.), the quashing of the notification by the High Court of Karnataka was as result of the government being unable to demonstrate “consideration of definite materials to record the satisfaction of the Central Government”. In the case of CIPLA Limited vs. Union of India, (2011) 8 Mad LJ 281, the Madras High Court has gone a step further and held that “it is mandatory on the part of the Government to take a comprehensive consultative process and advise from the DTAB, which is essential for the Central Government to come to a satisfaction on prohibition or ban of a drug in public interest”. It is pertinent to mention here that this view of the Madras High Court has not been followed by the Karnataka High Court in the Lundbeck India Case (supra.).
Interestingly, from a perusal of the minutes of the meetings of DTAB available in the public domain as on date, the FDCs prohibited in the Notifications have not been considered as a part of its agenda. Though, the Report of the 47th meeting of the DCC does mention that DCGI “has received over 5000 applications for approval of FDCs from various manufacturers and these formulations are being examined by the various expert committees”. It is also mentioned in the minutes of the meetings of DTAB held on November 2013 that certain FDCs were examined by the New Drug Advisory Committees also. The reports of these expert committees are not available in the public domain, with only the conclusions vis-à-vis a handful of drugs considered in the meeting of March 2014 available on the website of the CDSCO.
These above represent some of the many arguments/facts that would be advanced by the opposing counsels in the coming days, including the hearing scheduled for March 21, 2016. The cards have been dealt, the bets are in and now we are in for an interesting contest to say the least. While the pharma companies have had the upper hand in the early exchanges, the next few hearings in the proceedings would bring some clarity, as to whether the government played by the book on this occasion, or is this another exercise of ‘act first and ask later’ that is bound to fail the test of judicial scrutiny.