Jan 21, 2015

Audit on Compliance relating to Pharma

Sector

CS Bhavani RajPartner

R & A Associate

2

Mis

s Co

ncep

tion

3

Mar

ket S

egm

ent

Pharmaceutical

Active Pharmaceutical Ingredient (API) / Bulk

DrugsFormulation Contract Research

is the chemical molecule in a

pharmaceutical product.

is the process in which different

chemical substances,

including the active drug, are combined to produce a final medicinal product

Contract Research & Development of API/Formulation

Whole sale/ Retail outlets

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Appl

icab

le L

aws

to P

harm

a

Name of Enactment Objective of the ActDrugs and Cosmetics Act, 1940 To regulate import, manufacture, distribution and

sale of drugs and cosmetics.The Drugs and Magic Remedies (Objectionable Advertisements) Act, 1954

To control, the advertisement of drugs in certain cases, to prohibit the advertisement for certain purpose of remedies alleged to possess magic qualities.

Narcotic Drugs and Psychotropic Substances Act, 1985 To consolidate and amend the law relating to narcotic drugs, to make stringent provisions for the control and regulation of operations relating to narcotic drugs and psychotropic substances, to provide for the forfeiture of property derived from, or used in, illicit traffic in narcotic drugs and psychotropic substances, to implement the provisions of the International Convention on Narcotic Drugs and Psychotropic Substances and for matters connected therewith

5

Appl

icab

le L

aws

to P

harm

a

Name of Enactment Objective of the ActThe Pharmacy Act, 1948 To regulate the pharmacy education in the Country

for the purpose of registration as a pharmacist under the Pharmacy Act. They also regulate the Profession and Practice of Pharmacy

Insecticide Act, 1968 To regulate the import, manufacture, sale, transport, distribution and use of insecticides with a view to prevent risk to human beings or animals

Food Safety and Standard Act, 2006 To consolidate the laws relating to food and to establish the Food Safety and Standards Authority of India for laying down science based standards for articles of food and to regulate their manufacture, storage, distribution, sale and import, to ensure availability of safe and wholesome food for human consumption

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Appl

icab

le L

aws

to P

harm

a

Name of Enactment Objective of the ActThe Infant Milk Substitutes Act, 1992 Provides for the regulation of production, supply and

distribution of infant milk substitutes, feeding bottles and infant foods with a view to the protection and promotion of breastfeeding and ensuring the proper use of infant foods

Poisons Act 1919 An Act to consolidate and amend the law regulating the importation, possession and sale of poisons

Biological Diversity Act, 2002 An Act to provide for conservation of biological diversity, sustainable use of its components and fair and equitable sharing of the benefits arising out of the use of biological resources, knowledge

Dangerous Drugs Act, 1930 An Act to centralize and vest in the Central Government the control over certain operations relating to dangerous drugs and increase and render uniform

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Drugs and Cosmetic Act, 1940

8

This enactment deals with both Drugs and Cosmetics

Dru

gs a

nd C

osm

etic

Act

• Import

•Manufacture

• Distribution and sale

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Drug includesD

efini

tion

of D

rugs

i) all medicines for internal or external use of human beings or animals and all substances intended to be used for or in the diagnosis, treatment, mitigation or prevention of any disease or disorder in human beings or animals, including preparations applied on human body for the purpose of repelling insects like mosquitoes

ii) such substances (other than food) intended to affect the structure or any function of the human body or intended to be used for the destruction of vermin or insects which cause disease in human beings or animals, as may be specified from time to time by the Central Government by notification in the Official Gazette.

iii) all substances intended for use as components of a drug including empty gelatin capsules; and

iv) such devices intended for internal or external use in the diagnosis, treatment, mitigation or prevention of disease or disorder in human beings or animals, as may be specified from time to time by the Central Government by notification in the Official Gazette,

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Type

s of

Dru

gsAyurvedic Siddha

Unani Homeopathic

Others normally named as

Allopathic drugs

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Defi

nitio

nsDefinition of Ayurvedic, Siddha and Unani Drug

which shall includes all medicines intended for internal or external use

for or in the diagnosis, treatment, mitigation or prevention of disease

or disorder in human beings or animals, and manufactured exclusively

in accordance with the formulae described in, the authoritative books

of Ayurvedic, Siddha and Unani Tibb system of medicine, specified in

the First Schedule.

12

Defi

nitio

ns Definition of Homoeopathic medicines

include any drug which is recorded in Homoeopathic proving or

therapeutic efficacy of which has been established through long clinical

experience as recorded in authoritative Homoeopathic literature

of India and abroad and which is prepared according to the

techniques of Homoeopathic pharmacy and covers combination of

ingredients of such Homoeopathic medicines but does not include a

medicine which is administered by parenteral route.

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Impo

rtan

t con

cept

s Manufacturing includes any process or part of a process for making, altering,

ornamenting, finishing, packing, labelling, breaking up or otherwise

treating or adopting.

To import

means to bring into India

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Proh

ibiti

on o

n de

alin

g ce

rtai

n dr

ugs Dealing of following types of drugs is

prohibited:• any drug which is not of standard quality• any misbranded drug

• any adulterated or spurious drug• which are not packed or labelled in conformity of with Rules

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Qua

lity

of D

rugs Standard quality:

drug complies with the standard set out in the Second Schedule

Misbranded drug:drug shall be deemed to be misbranded

(a) if it is so coloured, coated, powdered or polished that damage is concealed

or if it is made to appear of better or greater therapeutic value than it really

is or

(b) if it is not labelled in the prescribed manner; or

(c) if its label or container or anything accompanying the drug bears any

statement, design or device which makes any false claim for the drug or

which is false or misleading in any particular

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Qua

lity

of D

rugs Adulterated drugs:

 a drug shall be deemed to be adulterated,--

(a) if it consists, in whole or in part, of any filthy, putrid or decomposed substance; or

(b) if it has been prepared, packed or stored under insanitary conditions whereby it may have been contaminated with filth or whereby it may have been rendered injurious to health; or

(c) if its container is composed in whole or in part, of any poisonous or deleterious substance which may render the contents injurious to health; or

(d) if it bears or contains, for purposes of colouring only, a colour other than one which is prescribed; or

(e) if it contains any harmful or toxic substance which may render it injurious to health; or

(f) if any substance has been mixed therewith so as to reduce its quality or strength.

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Qua

lity

of D

rugs Spurious drugs:

a drug shall be deemed to be spurious,--

(a) if it is imported under a name which belongs to another drug; or

(b) if it is an imitation of, or is a substitute for, another drug or resembles another drug in a manner likely to deceive or bears upon it or upon its label or container the name of another drug unless it is plainly and conspicuously marked so as to reveal its true character and its lack of identity with such other drug; or

(c) if the label or container bears the name of an individual or company purporting to be the manufacturer of the drug, which individual or company is fictitious or does not exist; or

(d) if it has been substituted wholly or in part by another drug or substance; or

(e) if it purports to be the product of a manufacturer of whom it is not truly a product

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Dru

gs M

anuf

actu

ring

Lice

nse Own manufacturing

i. in the case of manufacture of drugs included in Schedule X in Form24-F;ii. Drugs (Form 25 & 28)iii. Cosmetics (Form 32)iv. Homeopathic (Form 25C)V Ayurvedic (Form 25D)vi. Registration Certificate in (Form 41)Separate Registration Certificates shall be required in respect of the drugs manufactured by each factory.

Please note that for running Blood Bank also license is required. (Form 28C)

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Dru

gs M

anuf

actu

ring

Lice

nse Loan License

Definition of Loan License is not provided but the following sentence is provided in the Form 25 A

“The licence authorizes the sale by way of wholesale dealing and storage for sale by the licensee of the drugs manufactured under the licence subject to the conditions applicable to licences for sale.”

To conclude this license can be used when the manufacturer doesnot have his own facility were by he can take loan license from the regulator to manufacture drugs in the premise pertaining to a third party.

i. Drugs (25A & 28A)ii. Cosmetics (32A)iii. Ayurvedic (25E)

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Dru

gs M

anuf

actu

ring

Lice

nse Repacking license

In the case of repacking of drugs excluding those specified in Schedule X for sale or distribution is made in Form24-B

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Dru

gs L

icen

se Forms of licences to sell drugs• a licence to sell, stock, exhibit or offer for sale or distribute drugs

other than those specified in Schedule C, C (1) and X and by retail on restricted licence or by wholesale, will be issued in Form 20, Form 20-A or Form 20 –B.

• A licence to sell, stock, exhibit or offer for sale or distribute drugs specified in Schedule C and C (1) excluding those specified in Schedule X, by retail on restricted licence or by wholesale will be issued in Form 21, Form 21-A or Form 21-B.

• A licence to sell, stock, exhibit or offer for sale or distribute drugs specified in Schedule X by retail or by wholesale will be issued in Form 20-F or Form 20-G as the case may be.

(Separate Application for Sale at more than one place)• sale by wholesale or for distribution from a motor vehicle of

drugs other than those specified in Schedule and Schedule C(1) in Form 20BB and of drugs specified in Schedule C and Schedule C(1) in Form 21BB

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Secr

etar

ial A

udit

chec

k po

ints

a) Check and identify what the Company is dealing in and the respective licenses taken there at:

Sr No Activity License/Registration required

1 Import of drugs Registration (for the manufacturing facility) and license (for import of drugs)

2 Sale/ Stock/ Distribute drugs License (Form 20, 20A, 20B, 21, 21A, 21 B)

3 Sale/ stocked for sale at more than one place

Separate License

4 To sell in remote areas by agent, to give samples by travelling agent of the firm etc

License with restrictions either in Form 20A, 21A

5 Sell from motor vehicle (including those used in transferring from go down). Own vehicles

License in Form 20BB

6 Manufacturing in own facility Registration for each facility

7 Manufacturing in third party facility Loan license

8 Repacking Repacking license

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Secr

etar

ial A

udit

chec

k po

ints

b) Check whether the entity follows the standards of quality either in Import/ Manufacture/ Sale:

• any drug which is not of standard quality

• any misbranded drug

• any adulterated or spurious drug

• which are not packed or labelled in conformity of with Rules

• Conditions of imports, manufacture, sale as the case may be are complied

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Secr

etar

ial A

udit

chec

k po

ints

c) Check whether proper records are maintained as required under the Act alongwith prescription of medicines where ever required.

d) Check how the expired drugs are identified and being dealt with. Check the compliance of Bio-Medical Waste (Management and Handling) Rules, 1998.

e) Check how the recall mechanism works for the entity. Compare with the list available in the website of the regulator.

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The Drugs and Magic Remedies (Objectionable Advertisements) Act,

1954

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Dru

gs a

nd M

agic

Rem

edie

s (O

bjec

tiona

ble

Adve

rtise

men

ts)

Act Objective and imp definitions:

• Objective: To control, the advertisement of drugs in certain cases, to prohibit the advertisement for certain purpose of remedies alleged to possess magic qualities.

• Advertisement includes and notice circular, label wrapper or other document and any announcement mad orally or by any means of producing or transmitting light, sound or smokes.

• Drug includes:• A medicine for internal or external use of human beings or animals.• Any substance intended to be used for or in diagnosis, cure,

mitigation, treatment or prevention of disease in human beings or animals,

• Any article, otherthan food, intended to affect or influence in any way the structure or any organic function of the body of human beings or animals.

• Any article intended for use as component of any medicine substance or article, referred above

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Defi

nitio

ns Important definitions:• Magic Remedy includes a talisman, mantra, kavacha, and any

other charm of any kind which is alleged to possess miraculous powers for or in the diagnosis, cure, mitigation, treatment or prevention of any disease in human beings or animals or for affecting or influencing in any way the structure or any organic function of the body of human beings or animals;

• Taking part in advertisement includes:• the printing of the advertisement,• the publication of any advertisement outside the territories

to which this Act extends by or at the instance of a person residing within the said territories

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Dec

ided

Cas

esCase Laws:• High court of Medras during 1990 decided the case• Case between T K Kuppuswamy and Union of India and others• Subject matter: • The writ petitioner claims to be a dealer in a particular wooden tumbler called "Durka Ayurveda

Tumbler" which is said to be marketed by one Apsara Agencies at Bangalore. On 25-6-1981, the petitioner gave an advertisement in a Tamil Weekly called "Kalkandu" wherein it was claimed that the Durka Ayurveda Tumbler is capable of controlling diabetes, blood pressure, rheumatism, weakness, nervous debility and piles. The second respondent issued a notice dt. 29-6-1981 (served on the petitioner on 9-7-1981) invoking S.3(d) of the Drugs and Magic Remedies (Objectionable Advertisements) Act, 1954, hereinafter referred to as 'the Act' directing the petitioner to show cause why action should not be taken against him for contravention of S. 3[d) of the Act. It is the further case of the petitioner that before he could send a reply to the show cause notice on 14-7-1981, the third respondent along with certain others, raided the shop trading under the name of Sri Mahalakshmi Agency at T. Nagar and seized 10 numbers of wooden tumblers, a bill book and an advertisement notice. The petitioner proceeds to say that under the circumstances, he did not think it fit to reply to the show cause notice and has filed this writ petition challenging the validity of the Act and claiming that even if the Act is valid, the impugned advertisement does not contravene any of the provisions of the Act. Under the circumstances, the petitioner prays for a writ of mandamus or any other appropriate writ to direct the respondent not to enforce the provisions of the Act. Pending disposal of the writ petition, there was an interim order, restraining the respondents from taking any action.

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Dec

ided

Cas

esCase Laws:• Court directed that the petitioner should give explanation to the

authority and conclude whether there is violation or not

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Dru

gs a

nd M

agic

Rem

edie

s (O

bjec

tiona

ble

Adve

rtise

men

ts)

Act Secretarial Audit check points:

• Check whether any advertisements are given by the entity from the management. • Check whether the advertisements are pertaining to goods falling

under the definition of drugs as defined above• Check whether the drugs for which advertisements are falling

under section 3. If yes, there is a violation of provision of the Act

Part of Section 3Prohibition of advertisement of certain drugs for treatment of certain diseases and disorders: No person shall take part in the publication of any advertisement referring to any drug for -- the diagnosis, cure, mitigation, treatment or prevention of any disease, disorder or condition specified in the Schedule, or any other disease, disorder or condition (by whatsoever name called) which may be specified in the rules made under this Act.

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Dru

gs a

nd M

agic

Rem

edie

s (O

bjec

tiona

ble

Adve

rtise

men

ts)

Act Secretarial Audit check points:

• Check if the advertisement pertaining to drugs is not falling under section 3 but falls under section 4, then there is a violation of provisions of the Act.

Prohibition of misleading advertisements relating to drugs: No person shall take part in advertising that contains any matter which: (a) directly or indirectly gives a false impression regarding the true character of the drug; or(b) makes a false claim for the drug; or(c) is otherwise false or misleading in any material particular

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Dru

gs a

nd M

agic

Rem

edie

s (O

bjec

tiona

ble

Adve

rtise

men

ts)

Act Secretarial Audit check points:

• Check if the advertisement of any drug is made which is not falling under section 3, Section 4 but falls under section 5, then there is a violation of provisions of the Act. 

Section 5 - Prohibition of advertisement of magic remedies of treatment of certain diseases and disordersNo person carrying on or purporting to carry on the profession of administering magic remedies shall take any part in the publication of any advertisement referring to any magic remedy which directly or indirectly claims to be efficacious

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Narcotic Drugs and Psychotropic Substances Act, 1985

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Nar

cotic

Dru

gs a

nd P

sych

otro

pic

Subs

tanc

es A

ct, 1

985 Objective and Imp definitions:

• Objective: An Act to consolidate and amend the law relating to narcotic drugs, to make stringent provisions for the control and regulation of operations relating to narcotic drugs and psychotropic substances, to provide for the forfeiture of property derived from, or used in, illicit traffic in narcotic drugs and psychotropic substances, to implement the provisions of the International Convention on Narcotic Drugs and Psychotropic Substances and for matters connected therewith.

• Narcotic drug mean coca leaf, cannabis, opium, poppy straw, and includes all manufactured goods

• Phychotropic substance means any substance or material included in the list of physotropic substances specified in the Schedule

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Nar

cotic

Dru

gs a

nd P

sych

otro

pic

Subs

tanc

es A

ct, 1

985 Secretarial Audit check points:

• Check whether the Company is dealing in any way with any narcotic drug or psychotropic substance. Dealing includes to produce, manufacture, possess, sell, purchase, transport, warehouse, use, consume, import inter-State, export inter-State, import into India, export from India or tranship.

• If yes, check whether the purpose is for medical or scientific purposes. • If yes, check whether dealing is done in the manner provided in the Act, Rules

and Orders provided thereunder. Also check whether this requires any license.The section 8 (c ) is reproduced below: produce, manufacture, possess, sell, purchase, transport, warehouse, use, consume, import inter-State, export inter-State, import into India, export from India or tranship any narcotic drug or psychotropic substance, except for medical or scientific purposes and in the manner and to the extent provided by the provisions of this Act or the rules or orders made thereunder and in a case where any such provision, imposes any requirement by way of licence, permit or authorisation also in accordance with the terms and conditions of such licence, permit or authorisation.• If there is any non compliance found under any of the above points, then there

is a violation of the provisions of the Act.

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Insecticide Act, 1968

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Inse

ctici

des

Act,

1968 Objective and imp definition:

• Objective: An Act to regulate the import, manufacture, sale, transport, distribution and use of insecticides with a view to prevent risk to human beings or animals, and for matters connected therewith.

• Insecticide means --(i) any substance specified in the Schedule; or(ii) such other substances (including fungicides and

weedicides) as the Central Government may, after consultation with the Board, by notification in the Official Gazette, include in the Schedule from time to time; or

(iii) any preparation containing any one or more of such substances;• Pests means any insects, rodents, fungi, weeds and other forms

of plant or animal life not useful to human beings.

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Inse

ctici

des

Act,

1968 Secretarial Audit check points:

• Check the company is dealing with any of the insecticides, if so procure relevant registration certificate/ license copy.

Note: • Import/ Manufacture – Registration certificate• Sell / stock / exhibit to sale or distribute – License copy• Commercial pest control operations- License copy

• If the Company is into importing or manufacture of insecticides, the following shall be looked into whether they are not:

(a) any misbranded insecticide;(b) any insecticide the sale, distribution or use of which is for the time being prohibited under the Act for reason of public safety(c) any insecticide except in accordance with the conditions on which it was registered;

• If yes, the company is in violation of provisions of the Act.

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Inse

ctici

des

Act,

1968 Secretarial Audit check points:

• Identify the process followed by the Company to identify the pesticides which are expired. Check whether they are marked with not for sale, not for use , not for manufacture and kept separately. Whether the same are disposed of as provided under the enactment.

• If the Company is dealing with insecticide Sulphur, check whether there is a process to prevent theft, report at the nearest police station in case of theft and maintain separate register with details of persons to whom the same is sold.

• Whether the Company follows packing and labelling procedures as per the rules for sale of insecticides and while transport and storage of insecticides in transit by rail, road or water.

• Whether company ensures that proper medical examination of workers handling / dealing with insecticides as required in the rules or covered, provide protective clothing, providing sufficient quantities of antidotes and first aid medicines, proper training for the workers.

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Poisons Act, 1919

41

Pois

ons

Act,

1919 Objective

• An Act to consolidate and amend the law regulating the importation, possession and sale of poisons

Note: The list of poisons are provided under First Schedule

42

Pois

ons

Act,

1919

Case Law• Authority: Supreme Court of India during 1991• Between: Goodwill paint and Chemical industry Vs Union of India

and others• Subject matter: Delhi rules includes the substance commonly

known as 'thinner' containing spirit and other soluble material such as shellac in which the percentage of such soluble material does not exceed 30%" as poison and consequential amendment of rules 12 and 13 of the Rules. It was the contention of the petitioners before the authorities that their "unit is manufacturing only those thinners which contain only liquid substance, like as acetone , ethyl acetate SDS etc. and not all solubles." According to them, therefore, the substance manufactured by them would not come within the amended Rules. But finally it was concluded that it falls under Poison and entity should follow the conditions of the enactment. Petitioner contended that these rules are un constitutional but finally Court concluded that rules given by State doesnot hit the constitutional limitation.

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Pois

ons

Act,

1919 Secretarial Audit check points:

• Check whether the entity is dealing with import, store, sale of poisons listed in the schedule. If so obtain the necessary license for the same. • Check whether the entity maintains proper record of the books

covering, arrival of poison, sales including details of order as required in the schedule of the rules. • Check whether labelling, storage and form of containers for

storage are as per the rules.• Check whether if the entity is selling, the same is made against

proper prescription by medical practitioner, dentist or veterinary surgeon as prescribed in the rules. • Check whether entity is dealing with codeine cough preparations,

strychnine. If so, check the compliance of the rules.• Check whether the poisons are transported as provided in the

rules.

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Bio-Medical Waste (Management and Handling) Rules, 1998

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Bio-

Med

ical

Was

te (M

anag

emen

t an

d H

andl

ing)

Rul

es, 1

998 Objective

• To handle properly the bio medical waste without any adverse effect to human health and environment. These rules apply to all persons who generate, collect, receive, store, transport, treat, dispose, or handle bio medical waste in any form.

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Bio-

Med

ical

Was

te (M

anag

emen

t an

d H

andl

ing)

Rul

es, 1

998 Important definitions:

• Bio-medical waste means any waste, which is generated during the diagnosis, treatment or immunisation of human beings or animals or in research activities pertaining thereto or in the production or testing of biologicals, and including categories mentioned in Schedule I

Note: Out dated medicines are covered under Schedule I

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Bio-

Med

ical

Was

te (M

anag

emen

t an

d H

andl

ing)

Rul

es, 1

998 Secretarial audit check points:

• Check whether the entity generates bio medical waste in hospital, nursing home, clinic, dispensary, veterinary institution, animal house, pathological laboratory, blood bank etc. • If yes, check whether the same is treated and disposed

of in accordance with the rules. • Check whether occupier has set up requisite bio

medical waste treatment facility like incinerator, autoclave, microwave system or at common waste treatment facility • Check whether bio medical waste is segregated,

packed, stored and transported as per the rules provided thereunder.

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Bio-

Med

ical

Was

te (M

anag

emen

t an

d H

andl

ing)

Rul

es, 1

998 Secretarial audit check points:

• Check whether letter of authorisation is obtained if the treatment is done to patients on or above 1000 a month.• Check whether required Annual report is submitted

giving the details of waste that is being handled. • Check whether proper records are maintained as

prescribed.

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Pharmacy Act, 1948

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Phar

mac

y Ac

t, 19

48 Objective:• Prescribe the minimum standards of education and

approve courses of study and examinations for Pharmacists. Act to regulate the profession of pharmacy.

51

Phar

mac

y Ac

t, 19

48 Secretarial Audit check points:• Where ever it provides for requirement of registered

pharmacist, ensure that person possess the required qualification under the act and is registered himself with appropriate regulators to carry on the business or profession of pharmacist.

52

Than

k Yo

u Any questions please..

For presentation, please log on to: www.rna-cs.com

For any further queries, please contactCS Bhavani Raj

Partner

R & A Associates, Company Secretaries

bhavani@rna-cs.com