The regulation will help Indian companies mitigate some of the reputation risk stemming from the far stricter rules concerning manufacturing quality that are coming onto international markets.
IHS Life Sciences perspective | |
Significance | Pharmaceutical exporters in India will be required to use barcode technology (driven by GS1 data matrix techniques) on primary level packaging, effective from 1 April. |
Implications | The mandatory traceability system covers the entire pharmaceutical export supply chain. The potential to prevent serious health problems on a wide scale is positive, such as providing patients and pharmacists with guarantees of product authenticity, ensuring faster drug recalls in the event of contamination, and eliminating the possibility of tampering with packaging. |
Outlook | The track-and-trace initiative is not expected to create major logistical difficulties for pharmaceutical exporters that have had an extra year to prepare for the new system. However, some pharmaceutical companies claim that the regulations may marginally increase production costs. |
Pharmaceutical exports set to implement important traceability regulation
India's Directorate General of Foreign Trade (DGFT) has established a 1 April deadline for pharmaceutical exporters to comply with GS1 barcode regulation on all primary packaging. The regulation was previously deferred from July 2014 after Indian companies requested an extension.
The serialisation regulation – Public Notice No.68 (RE-2013)/2009-2014 – is intended to enhance the credibility of India's internal traceability systems, while equalising the packaging industry with global export standards. If implemented correctly and fully adhered to, the regulation could potentially give Indian firms a slight market lead ahead of countries that have yet to adopt the measures.
The new system will require the pharmaceutical industry to label each pack of medicine with a wide range of product information, including product codes, batch numbers, expiry dates, and a unique randomised serial number. In addition, domestic pharmaceutical manufacturers will in future be required to retain serialised records for a six-month period beyond the date of expiration for all exported pharmaceutical products. Companies could potentially face short-term technical difficulties in this respect, as evidenced by US FDA decisions to impose restrictions on some Indian drug imports in 2014 owing to safety and data maintenance issues. For example, there could be a spike in warning letters over non-compliance issues by recipient countries. Nevertheless, longer term, the regulation should help restore confidence to generic pharmaceutical products leaving India for export.
Stronger controls should bring clear economic benefits for the industry against counterfeit labelling, although there is likely to be some associated increase in production costs, particularly for small generics manufacturers. The measure will have a notably positive impact in terms of reducing the number of counterfeit drugs in the international markets that India supplies (especially Africa).
In April 2014, a report by the US Trade Representative stated, "10-40% of drugs sold in Indian markets are counterfeit and could represent a serious threat to patient health and safety... In many cases, the bulk active pharmaceutical ingredients that are used to manufacture pharmaceuticals that bear counterfeit trademarks are not made according to good manufacturing practices." The Indian pharmaceutical sector rejects these assertions. The Central Drug Standards Control Organisation (CDSCO) is expected to publish results in July following the testing of approximately 42,000 drug samples across a wide range of therapeutic sectors for enhanced quality control.
Complex and costly process for pharmaceutical companies to get right
Under the DGFT regulation, pharmaceutical manufacturers are required to incorporate non-cloneable 2D barcodes for strip, vial, and bottle packaging. This will necessitate the creation of a significant volume of unique data that brings with it technical and financial challenges.
The majority of companies appear ready to implement the requirements. However, it is difficult to assess how much staff training and the high-technology adoption will add to overall production costs. There have been unconfirmed reports for instance that smaller packaging companies have encountered technical difficulties achieving 100% read rates on some electronic barcode tags. There is also a degree of latent resistance from within certain industry circles to the new rules, which may result in attempts to try to skirt around the regulation. On the other hand, several industry leaders have publicly indicated that they are generally convinced of the advantages of the system; for example, in terms of using the GS1 system as a valuable business intelligence tool and in order to meet the export market expectations for the safety and integrity of drug distribution chains.
Outlook and implications
The introduction of the new system will make marketing counterfeit medicines easier to detect and trace back to their original manufacturing source. In the process, this will allow for greater supply-chain safety. Although the track-and-trace system is unlikely to guard completely against counterfeit products, it may succeed in driving up the quality of exported pharmaceuticals as well as ward off US criticism over good manufacturing practices (GMP) in respect of exporters (see India: 19 January 2015: India's drug regulator launches survey of pharmaceutical quality standards). The majority of these cases have revolved around some element of data integrity problems, including missing production records and inadequate records of warehousing procedures, rather than a health risk.
The new rules are unlikely to shrink the production cost advantages that Indian companies possess. Indeed, pharmaceutical packaging companies may raise their margins to cover the packaging costs of medicines, which would in turn give a boost to the pharmaceutical packaging sector.