nAkMACLU1ICALS DIS1kI8U1ICN SS1LMS IN INDIA

Worklng paper 1a, prepared for Workshop on '1raclng harmaceuLlcals ln SouLh Asla',
2-3 !uly 2007, unlverslLy of Ldlnburgh














lunder: LS8C / uflu
Lead auLhor: 8oger !effery, wlLh lnpuLs from SoumlLa 8asu, SamlLa 8haLLaral, eLra
8rhllkova, Abhl[lL uas CupLa, SLefan Lcks, lan Parper, aLrlcla !effery, Allyson ollock, nlLu
Slngh, and Madhusudan Sharma Subedl
hLLp://www.healLh.ed.ac.uk/ClP/ourresearch/ulluLS8CLraps.hLm
aper 1a - harmaceuLlcal ulsLrlbuLlon SysLems ln lndla



2
A.1 Introduct|on

AfLer dlscusslons ln our lncepLlon workshops, held ln uelhl and kaLhmandu ln uecember 2006, we
declded Lo begln our research by focuslng on lssues of pharmaceuLlcals producLlon and
dlsLrlbuLlon ln SouLh Asla, as Lhese were Lhe areas abouL whlch we knew leasL. 1hls paper
represenLs our flrsL aLLempL Lo summarlse whaL we have learned abouL dlsLrlbuLlon ln Lhe lnlLlal
phase of research. lL ls based on revlews of currenL dlscusslons on Lhe web, academlc and 'grey
llLeraLure' wrlLlngs, as well as our own lnLervlews wlLh reLallers, wholesalers, medlcal
represenLaLlves, donor represenLaLlves, senlor docLors and producers.
1hls worklng paper provldes a broad-brush plcLure of Lhe dlfferenL agenLs ln Lhe sysLem and Lhelr
organlsaLlon, Lhe dlfferenL procuremenL paLhways, and Lhe llcenslng aspecLs of Lhe regulaLory
framework. We show some of Lhe problems wlLh over-neaL descrlpLlons, and Lhe challenges LhaL
Lhese problems pose for Lhe legal and regulaLory framework relaLlng Lo drug dlsLrlbuLlon. CerLaln
Lhemes remaln under-speclfled ln Lhls reporL, for example Lhe lmpllcaLlons of wldespread parallel
sysLems of dlsLrlbuLlon relaLed Lo Lhe lndlgenous sysLems of medlclne (also known as A?uSP,
from Ayurvedlc, unanl, Slddha and PomoeopaLhy).
Accordlng Lo a recenL deflnlLlon, Lhe drugs dlsLrlbuLlon sysLems of some counLrles can be
descrlbed as 'unregulaLed' lf Lhey meeL Lhe followlng crlLerla:
'lrom a more Lechnlcal perspecLlve, an unregulaLed markeL for drugs can be consldered
Lo exlsL where: (a) unllcensed lndlvlduals and/or enLlLles Lrade ln drugs LhaL Lhey are noL
auLhorlzed or enLlLled Lo deal wlLh or ln conLravenLlon of Lhe appllcable laws, regulaLlons
and norms, or (b) Llcensed lndlvlduals and/or enLlLles Lrade ln drugs LhaL Lhey are noL
auLhorlzed or enLlLled Lo deal wlLh or ln conLravenLlon of Lhe appllcable laws, regulaLlons
and norms' (lnLernaLlonal narcoLlcs ConLrol 8oard 2007: 1-2).
Cne purpose of Lhls paper, Lhen, ls Lo ask how far Lhls descrlpLlon ls Lrue of Lhe drug dlsLrlbuLlon
sysLem of lndla, and wheLher Lhe lmpllcaLlons of Lhls slLuaLlon are fully capLured by some
sLandard descrlpLlons of Lhe sysLem and lLs regulaLlons.
ln Lhe slmple models popular wlLh lndusLry analysLs [see ulagrams 1 and 2], Lhe lndlan drug
dlsLrlbuLlon sysLem has a small number of layers (four or flve): Lhe pharmaceuLlcal manufacLurers,
clearlng (or carrylng) and forwardlng agenLs (ClAs)/depoLs/super sLocklsLs, sLocklsLs, wholesalers,
aper 1a - harmaceuLlcal ulsLrlbuLlon SysLems ln lndla



3
and reLallers. 1he slmple models also deflne only a small number of rouLes Lhrough whlch drugs
flow.
Accordlng Lo ulagram 1, sLocklsLs supply wholesalers as well as hosplLals and oLher klnds of
medlcal lnsLlLuLlon (such as CovernmenL and oLher procuremenL agencles), accordlng Lo dlagram
2, Lhere ls no dlsLlncL role of wholesalers, and Lhe super-sLocklsLs have also dlsappeared. We sLarL
by examlnlng Lhe layers ldenLlfled ln Lhese dlagrams: who are Lhe ClAs, sLocklsLs, wholesalers and
reLallers and whaL ls Lhe exLenL Lo whlch Lhey conform Lo Lhe formal accounLs?

A.2 ko|es and Statuses |n the keta|||ng of Drugs
A.2.1 C|ear|ng and forward|ng agents]Depots and D|str|butors
1he poslLlon of ClAs ls one of Lhe weakesL ln Lhe supply chaln: Lhey exlsL only because of lndla's
parLlcular LaxaLlon sysLems, and new reLall chalns are aLLempLlng Lo by-pass Lhe ClA and deal
dlrecLly wlLh producers. 1he raLlonale for Lhe ClA depends on Lhe dlvlslons beLween cenLral and
SLaLe sales Lax sysLems:
1he dlsLrlbuLlon seL-up ln Lhe lndlan pharma lndusLry ls hlghly fragmenLed and has
evolved on Lhe basls of Lhe Lwo Ller sales Lax sLrucLure, vlz. Lhe cenLral sales Lax (CS1) and
Lhe local sales Lax. Whlle Lhe lnLer-sLaLe sale of goods aLLracLs CS1, lnLer-sLaLe Lransfer of
goods does noL aLLracL any Lax. 1herefore, ln order Lo avold CS1, all Lhe medlum and blg
pharma cos have a Carrylng and lorwardlng AgenL (ClA)/company depoL ln each sLaLe
and Lransfer goods as lnLer-sLaLe sLock Lransfer. 1he smaller companles (sales less Lhan
uSu 20 mllllon or 8s 100 crore) adopLed Lhe super-sLocklsL model as Lhe cosL of
lnfrasLrucLure for depoLs or ClAs ouLwelghs Lhe accrued Lax advanLages" (LrnsL & ?oung
2006: 10).
ln prlnclple, each of Lhe larger pharmaceuLlcals producers has one ClA ln each of lndla's SLaLes, ln
pracLlce, especlally ln Lhe case of a larger company, Lhere may be several ln each of Lhe larger
SLaLes, buL noL all SLaLes may warranL a ClA (kanorla 2006). lf Lhe 60 or so large companles have
an average of 23 ClAs, Lhen Lhere are abouL 1300 ln LoLal: buL Lhlngs seem Lo be more
compllcaLed Lhan Lhls. lyer provldes a brlef accounL of Lhe growLh of ClAs ln lndla followlng
llberallsaLlon. harmaceuLlcals companles, lyer suggesLs, lncreaslngly replaced company-owned
depoLs and warehouses wlLh ClAs, ln order Lo cuL overheads: for example, Claxo replaced all lLs
aper 1a - harmaceuLlcal ulsLrlbuLlon SysLems ln lndla



4
warehouses wlLh ClAs ln 1996. 8y lmpllcaLlon, some companles may sLlll have depoLs under Lhelr
dlrecL conLrol, raLher Lhan uslng ClAs. 1here ls also some confuslon over wheLher ClAs are
essenLlally parL of a producLlon company and operaLe under conLracL Lo a slngle company, or lf
Lhey can work for several companles: Lhe LrnsL and ?oung accounL above suggesLs Lhe former,
whereas kanorla (2006), suggesLs LhaL a Lyplcal ClA would represenL abouL slx companles. lrom
Lhe polnL of vlew of Lhe sLocklsLs, however, when Lhey recelve goods from a ClA Lhey are lnvolced
ln Lhe name of Lhe producer, noL ln Lhe name of Lhe ClA.
1he fee of Lhe ClA may be a flxed percenLage margln or may depend on Lurnover, and agaln Lhere
ls uncerLalnLy abouL how much Lhey recelve: ls lL as reporLed by kanorla [chalrman & Mu of
Anglo-lrench urugs & lndusLrles LLd], beLween 2 and 4 per cenL (kanorla 2006), or as reporLed by
lyer, from 4 per cenL on a hlgh Lurnover producL Lo 10 per cenL on a low Lurnover one (lyer 2000)?
lL ls also noL clear whaL has been happenlng Lo Lhe ClAs when companles merge or are Laken over:
as wlLh Lhe sLocklsLs (see below) mergers and Lake-overs produce a LheoreLlcal surplus of ClAs,
and we do noL yeL know whaL happens ln Lhese clrcumsLances, wheLher each ls glven a reglon
wlLhln a SLaLe, or reLalns parL of Lhe buslness of Lhe comblned company.
1he lndlan sales Lax sysLem ls belng slowly buL sLeadlly replaced by a value added Lax, and lf Lhls
process ls successfully compleLed, Lhe LaxaLlon lncenLlve for Lhls sysLem may dlsappear. llnally,
Lhe new reLall chalns are negoLlaLlng dlrecL conLracLs wlLh producers, Lhus savlng Lhemselves Lhe
fees pald Lo ClAs. ln response, Lhe members of Lhe reLall pharmacy organlsaLlons are also
developlng co-operaLlve markeLlng arrangemenLs (see below). lf Lhese succeed, Lhe ClA's days
may be numbered.

A.2.2 Stock|sts]who|esa|ers
lyer argues LhaL durlng Lhe 1970s and 1980s, as aLLempLs were made Lo expand drug dlsLrlbuLlon
Lo emerglng markeLs, many small players (lL ls noL clear lf Lhls means reLallers or producLlon
companles) became sLocklsLs and wholesalers, ln order Lo compeLe (wlLh reLallers, presumably)
and because of Lhe hlgher proflLablllLy of drug markeLlng ln comparlson Lo drug producLlon (lyer
2000).
SLocklsLs Lyplcally markeL producLs of 6-8 pharmaceuLlcal companles, only a few dlsLrlbuLe
producLs of more Lhan 30 companles (lyer 2000). Mergers and acqulslLlons of pharmaceuLlcal
aper 1a - harmaceuLlcal ulsLrlbuLlon SysLems ln lndla



5
companles have almosL doubled Lhe number of sLocklsLs per company and creaLed qulLe Lough
compeLlLlon aL Lhls dlsLrlbuLlon level. SLocklsLs of Lhe same company are compeLlng agalnsL each
oLher and Lhus posslbly sLrengLhenlng Lhe bargalnlng poslLlon of reLallers. SLocklsLs have Lhelr
own vlslLlng salesmen who conLracL and sLock reLallers on a frequenL basls. Cnce agaln we have
dlsagreemenLs over Lhe marglns pald Lo wholesalers and sLocklsLs: accordlng Lo kanorla (2006)
sLocklsLs geL 8-10 of Lhelr sale prlce Lo Lhe reLaller, lyer (2000), by conLrasL, reporLed a margln of
8 on Lhe maxlmum reLall prlce of prlce-conLrolled drugs and 16 on de-conLrolled drugs.
1
Pow
far Lhese formal agreemenLs work ln pracLlce ls unclear, however. Some sLocklsLs apparenLly pass
up Lo 6 Lo reLallers, leavlng Lhemselves wlLh marglns of only 2-2.3 (here, lyer refers Lo klshore
Shah, presldenL of Lhe 8eLall ChemlsLs and urugglsLs AssoclaLlon, Lhe Mumbal branch of AlCCu.)
Cn Lhe oLher hand, sLocklsLs also someLlmes geL dlscounLs of 3-10 from manufacLurers ln Lhe
form of free packs, some of whlch Lhey may pass on as a dlscounL Lo reLallers.
8oLh lyer (2000) and LrnsL & ?oung (2006) esLlmaLe Lhe number of sLocklsLs ln lndla aL 60,000. As
wlLh Lhe number of reLallers (see below), Lhls seems Lo be a flgure supplled by Lhe All-lndla
CrganlsaLlon of ChemlsLs and urugglsLs (AlCCu), who clalm Lo be able Lo conLrol enLry lnLo Lhls
poslLlon. lndeed, Lhere are also dlfferenL llcenslng arrangemenLs for wholesalers and for reLallers.
WlLh Lhe lncreaslngly Lough compeLlLlon, and wlLh many sLocklsLs movlng Lo Lhe apparenLly more
lucraLlve reLalllng, we mlghL expecL a decrease ln Lhe number of agenLs aL Lhls level.

A.2.3 keta||ers]pharmac|es]d|spens|ng pract|t|oners
1he remalnder of Lhe markeL ls made up of a large number of small-scale suppllers, who ofLen acL
as prescrlbers as well as reLallers. 1he number of reLallers ls sub[ecL Lo some conslderable marglns
of error: Lhe LrnsL & ?oung reporL lndlcaLes LhaL Lhere are abouL 300,000 reLallers or pharmacles
ln 2003 (LrnsL & ?oung 2003), whereas lyer menLloned more Lhan 330,000 reLallers by 2000 (lyer
2000). Cnce agaln, Lhese flgures seem Lo be Lhe same as Lhe clalmed membershlp of Lhe AlCCu,
and slnce lL ls noL clear wheLher all reLall ouLleLs selllng pharmaceuLlcals are ln facL members,
Lhese flgures should be used wlLh care. lndusLry sources clalm LhaL reLallers accounL for abouL 70-
80 per cenL of Lhe pharmaceuLlcals sales ln Lhe counLry, wlLh Lhe remalnder belng sold dlrecLly
Lhrough hosplLal pharmacles (!ayakumar 2007). ln rural and small-Lown lndla (probably
accounLlng for 23-33 per cenL of Lhe markeL) prlvaLe medlcal pracLlLloners (wheLher formally
Lralned or noL) usually keep sLocks of mosL of Lhe medlclnes Lhey expecL Lo prescrlbe. MosL small

1
kolkaLa sources say LhaL Lhls varles wlldly and marglns can be much hlgher.
aper 1a - harmaceuLlcal ulsLrlbuLlon SysLems ln lndla



6
hosplLals and nurslng homes also have ln-house pharmacles and requlre paLlenLs Lo buy Lhe drugs
on Lhe premlses, wheLher Lhey are ln- or ouL-paLlenLs.
harmaclsLs' recommendaLlons abouL drugs and Lhelr alLernaLlves seem Lo be based on
proflLablllLy and on relaLlonshlps wlLh represenLaLlves of varlous companles. We were Lold by
some kolkaLa sources LhaL Lhe power of Lhe reLallers parLly comes from Lhelr power nC1 Lo sell a
parLlcular brand. 1hey can leL lL gaLher dusL and shlp lL back Lo Lhe suppller, pushlng Lhe more
proflLable brands lnsLead.
8eLallers are enLlLled Lo marglns of 16 for conLrolled formulaLlons and 20 for deconLrolled
formulaLlons on Lhe Maxlmum 8eLall rlce: Lhls ls seL by law and may be prlnLed on Lhe
medlcaLlon (uomaln-b 2000a, see also kanorla 2006). 8uL Lhls formal poslLlon seems Lo mask
conslderable varlaLlons, wheLher by company, reLaller, drug or for parLlcular Llmes when Lhere ls
an lmbalance beLween demand and supply, or when a sLock of drugs ls nearlng lLs 'sell-by' daLe.
8egardlng Lhe proflLablllLy, manufacLurers, sLocklsLs, dlsLrlbuLors and someLlmes medlcal
represenLaLlves offer prlce reducLlons Lo Lhe reLallers Lo move drugs more qulckly or Lo lncrease
Lhe margln LhaL can be earned by Lhe reLaller (lnLervlew, uelhl, 3 november 2006).
1he reLallers probably comprlse a wlde varleLy of very dlfferenL klnds of operaLlon, ranglng from
small shops Lo reLall chalns. We dlscuss small shops furLher below, buL ln general Lhese are closely
llnked Lo oLher small shops ln lndla's reLall secLor. ln many cases Lhese are famlly flrms, wlLh a
slngle owner or a seL of broLhers, conLlnulng a longer famlly LradlLlon. 1hey wlll normally have a
small number of employees, who ofLen Lurnover qulLe qulckly: Lhese ex-employees can ofLen be
found ln rural areas or ln small Lowns havlng seL up buslness as drug reLallers Lhemselves, or
havlng esLabllshed a poslLlon as an 8M (8ural or 8eglsLered Medlcal racLlLloner, Lhe largesL
caLegory of pracLlLloners, who are usually noL acLually reglsLered and have no, or no relevanL,
formal quallflcaLlon). lndeed, aL Lhe rural or small-Lown level, Lhe dlsLlncLlons beLween reLaller
and pracLlLloner may be hard Lo esLabllsh.
AL Lhe oLher end of Lhe reLall conLlnuum are chalns of reLall ouLleLs. 8eLall pharmacy chalns are
relaLlvely new Lo lndla, and have been generaLlng conslderable confllcL wlLh Lhe exlsLlng reLallers
slnce abouL 2000 (lyer 2000). lor example, Subhlksha sLarLed as a supermarkeL-cum-pharmacy
chaln ln 1997, now has around 170 sLores wlLh a Lurnover of over 8s 300 crore, mosLly ln 1amll
nadu (8abu 2006). Subhlksha demanded (and apparenLly recelved) 60 per cenL of Lhe sLocklsLs'
margln, and cuL Lhe prlces Lo consumers by coverlng Lhe cosL of Lhe 6 per cenL local sales Lax. 1he
remalnlng reLallers persuaded sLocklsLs Lo sLop supplylng Subhlksha, and afLer a courL case, Lhe
aper 1a - harmaceuLlcal ulsLrlbuLlon SysLems ln lndla



7
sLocklsLs were forced Lo resume supplles, on condlLlon LhaL Subhlksha dld noL reduce prlces.
'1hough Lhls dramaLlc Lurn of evenLs has unlLed Lhe resL of Lhe Lrade, Lhe Subhlksha klnd of
pracLlces are llkely Lo be Lhe fuLure norm. ln order Lo cope wlLh Lhe lmpendlng compeLlLlon, Lhe
oLhers are merglng Lo form co-operaLlves Lo derlve slmllar beneflLs from sLocklsLs' (uomaln-b
2000b). Slmllarly, 1he Medlclne Shoppe, one of Lhe largesL reLall drug sLores ln Lhe uS, opened
Lwo reLall ouLleLs ln Mumbal ln 1999 and by May 2006 had 103 sLores across slx sLaLes, malnly ln
urban areas (Acumen lund 2006).
8y 2007 Lhese early lnlLlaLlves had spread Lo lnclude Apollo, Llfeken (wlLh 60 sLores ln 8angalore
and Chennal), Medlclne Shoppe (whlch operaLed), C8S PealLh, and PealLh Clow. 1here are also
proposed large-scale pro[ecLs of 8anbaxy/lorLls PealLhcare, Zuelllg harma, and Lhe 8ellance Anll
uhlrubhal Ambanl Croup, who are Lrylng Lo develop reLall pharmaceuLlcals chalns. An example of
Lhe klnds of changes LhaL Lhese chalns are lnLroduclng can be seen ln Lhe accounL of Lhe plans of
8anbaxy (a leadlng drug manufacLurer) and lorLls (who are bulldlng up a chaln of hlgh-Lechnology
hosplLals):
1he 'one sLop shop' chaln wlll offer prescrlpLlon and C1C drugs, healLh supplemenLs,
healLh foods, alLernaLe medlclnes llke ayurveda and homeopaLhy, home and personal
care producLs, Lelemedlclnes and paLhology collecLlon cenLres under one roof. 1o be
operaLed round Lhe clock, lL would exLend value added servlces llke free home dellvery,
prescrlpLlon remlnder servlce, loyalLy programmes and Cu appolnLmenLs", company
CLC Ashlsh klrpal andlL sald (8ureau 8eporL 2007).
A manager ln one of Lhese chalns explalned how Lhelr sysLem of 430 cllnlc-based pharmacles (ln
hosplLals and under Lhelr dlrecL conLrol) and 30 franchlsees works:
WhaL we do ls, we Lle up wlLh Lhe manufacLurers. When you have 430 pharmacles across
Lhe counLry you have huge negoLlaLlon powers wlLh Lhem. 1haL group does noL do Lhe
purchaslng Lhrough Lhe dlsLrlbuLor necessarlly. 1hey wlll poslLlon Lhemselves as Lhe
dlsLrlbuLor and buy from Lhe manufacLurer and geL Lhe wholesale marglns. 1hey buy lL aL
LhaL prlce buL sell lL aL Lhe consumer raLe. So once your marglns go up you can afford Lo
provlde beLLer servlces and added beneflLs for your paLlenLs and cusLomers. So cuL ouL
Lhe mlddle man. ?ou cannoL cuL ouL hundred percenL buL you can cerLalnly cuL ouL up Lo
70. ?ou'll sLlll need Lo buy from oLher people" (lnLervlew, Manager ln kolkaLa, 22
lebruary 2007).
aper 1a - harmaceuLlcal ulsLrlbuLlon SysLems ln lndla



8
AlLhough Lhese lnnovaLlons are largely an urban phenomenon, and probably mosLly resLrlcLed Lo
Lhe meLropollLan clLles (Mumbal, kolkaLa, uelhl, Chennal, 8angalore and Pyderabad) Medlclne
Shoppe lndla has planned by 2011 Lo esLabllsh 130 healLh cenLres ln rural areas, wlLh flnanclal
asslsLance from Lhe Acumen lund, whlch supporLs 'soclal enLrepreneurshlp' (Acumen lund 2006).

A.2.4. Cha||enges to th|s p|cture
1hls slmple plcLure ls mlsleadlng, for Lwo maln reasons. llrsLly, lndlvlduals or companles can
occupy more Lhan one poslLlon. Secondly, and parLly as a resulL, Lhe allocaLlon of marglns Lo
dlfferenL levels of Lhls sLrucLure ls more apparenL Lhan real. noL only can some acLors accrue Lhe
marglns appllcable Lo more Lhan one level, and oLhers have Lo share Lhelrs wlLh layers above or
below Lhem, buL some companles seem Lo operaLe ad hoc schemes Lo reward some players
(usually, buL noL always, Lhe flnal reLallers) wlLh speclal or Llme-llmlLed offers. lL ls also clear LhaL
changes underway ln Lhe reLall secLor (wlLh Lhe aLLempLs by large reLall chalns Lo negoLlaLe dlrecL
conLracLs wlLh producers, cuLLlng Lhe sLocklsLs/wholesalers, and perhaps also Lhe ClAs, ouL of Lhe
supply chaln) wlll lead Lo an as yeL unLesLed slLuaLlon. Pere Lhe power of Lhe reLallers assoclaLlons
may make a cruclal dlfference.

8. ub||c and pr|vate sector procurement systems
1he Lwo maln procuremenL sysLems ln lndla comprlse sLaLe or governmenL procuremenL and
procuremenL by large prlvaLe healLh lnsLlLuLlons. Lach of Lhese may comprlse sysLems wlLhln
sysLems, buL noL all of Lhem may be very sysLemaLlc. lL ls hard Lo geL conslsLenL and rellable
esLlmaLes of Lhe scale of Lhese dlfferenL procuremenL sysLems. Accordlng Lo a reporL prepared for
Lhe naLlonal Commlsslon on Macroeconomlcs and PealLh, ln 2002 Lhe comblned budgeL for drug
procuremenL by boLh Lhe CenLral and SLaLe CovernmenLs was 8s 20,000 mllllon (SakLhlvel 2003:
186). 1he annual household expendlLure on healLh care was esLlmaLed aL 8s 428,360 mllllon ln
1999-2000, and abouL 73 per cenL of Lhls was LhoughL Lo be on pharmaceuLlcal producLs,
suggesLlng LhaL governmenL procuremenL accounLs for abouL 6 per cenL of LoLal pharmaceuLlcal
sales ln lndla (SakLhlvel 2003: 186). lurLher lnformaLlon on expendlLure by funcLlon suggesLs LhaL
Lhe Medlcal SLores uepoLs and urug manufacLure accounL 8s 4,383 mllllon ln 2001-02, ouL of a
LoLal expendlLure by publlc secLor bodles (cenLral and sLaLe) of 8s 23,200 mllllon (naLlonal PealLh
aper 1a - harmaceuLlcal ulsLrlbuLlon SysLems ln lndla



9
AccounLs Cell 2003: 33). llgures for prlvaLe secLor and nCC procuremenL suggesL LhaL Lhey are of
much smaller slgnlflcance. 8uL for some drugs (probably lncludlng 8lfamplcln and CxyLocln), Lhe
publlc secLor may be much more lmporLanL.

8.1 Centra| and State Government procurement
1here ls no slngle cenLral governmenL procuremenL offlce alLhough 23 per cenL of Lhe LoLal publlc
secLor drug volume ls procured by Lhe cenLral governmenL for Lhe CenLral CovernmenL PealLh
Servlces, uefence (Armed lorces Medlcal Servlces), ubllc SecLor unlLs, and SLaLe SecLor unlLs
LhaL negoLlaLe prlces dlrecLly wlLh producers / manufacLurers.
1he Medlcal SLores CrganlzaLlon (MSC) ls responslble for Lhe procuremenL and supply of quallLy
medlclnes and medlcal lnsLrumenLs Lo CenLral governmenL hosplLals and dlspensarles ln rural and
suburban areas. lL has seven depoLs locaLed ln Mumbal, kolkaLa, Chennal, CuwahaLl, Pyderabad,
karnal and new uelhl. lL acqulres drugs dlrecLly from pharmaceuLlcal companles Lhrough Lenders
ln order Lo reduce prlces, buL only abouL 8s 1,140 mllllon worLh of sLores were purchased by lL ln
1997-98 (MlnlsLry of PealLh and lamlly Welfare 1999: Ch. 24).
1he MSC also dlsLrlbuLes drugs supplled by lnLernaLlonal organlzaLlons such as unlCLl, CluLA,
WPC, uSAlu. lL has parLlcular responslblllLles for vacclnes recelved from WPC, unlCLl, uSAlu
and oLher varlous lnLernaLlonal Agencles under varlous agreemenLs enLered wlLh CovernmenL of
lndla, and lL ls responslble for sLores requlred for naLlonal eradlcaLlon programmes such as AnLl-
Malarla, AnLl-Leprosy, AnLl-18, AluS, nML, 8CP, CSSM, as well as lamlly Welfare (lncludlng
maLernal and chlld healLh) under naLlonal PealLh and lamlly Welfare rogrammes. ln addlLlon Lo
Lhe depoLs, Lhere are Lhree Chemlcal LesLlng laboraLorles aLLached Lo Lhe Medlcal SLore uepoLs aL
Mumbal, Chennal and kolkaLa for LesLlng Lhe quallLy of Lhe drugs and medlclnes (CovernmenL
Medlcal SLores uepoL 2006).
MosL publlc secLor drug procuremenL ls carrled ouL by Lhe SLaLe governmenLs, and pracLlces vary
conslderably across Lhe counLry. ln Lhe Army, Lhe CenLral Command for Lhe armed forces has a
medlcal depoL, whlch works on raLe conLracLs". 1hey floaL Lenders for supplylng Lhe drugs LhaL
Lhey need for armed forces personnel. harmaceuLlcals companles wlLh CM" capaclLy-usually
Lhe blgger ones, buL noL necessarlly so, and Lhey could be MnC or local companles-are enLered
onLo an approved reglsLer by Lhe armed forces. When new drugs supplles are needed, Lhese
aper 1a - harmaceuLlcal ulsLrlbuLlon SysLems ln lndla



10
companles recelve requesLs Lo submlL Lenders. 8ecause Lhese companles are all consldered Lo
manufacLure quallLy producLs, Lhe declslons abouL whlch companles' quoLes Lo accepL are
supposedly made on Lhe basls of prlce, and usually Lhe cheapesL Lwo or Lhree companles wlll be
asked Lo provlde Lhe drugs. ln mosL oLher publlc secLor cases, lL would seem, Lhere ls a mlx of
cenLrallsed procuremenL llke Lhls for a llmlLed range of baslc medlclnes, and locallsed
procuremenL for more speclallsed drugs. ln pracLlce, such sysLems are cumbersome, lnefflclenL,
and open Lo corrupL pracLlce. We were glven a vlvld accounL of pracLlces ln Lhe recenL pasL ln
mlllLary procuremenL:
1here ls room for manlpulaLlon" and lnfluence" (x sald wlLh a grln) and Lhls was where
he came ln: he had Lhe advanLage (as he descrlbed lL) of belng Lhe nephew of a Ceneral
who had been Lralned ln Ldlnburgh and had speclallsed ln gynaecology, publlc healLh and
paLhology. Pe had been Lhe rlnclpal of Lhe une Armed lorces Medlcal College. lL was
Lhls laLLer LhaL gave x Lhe advanLage or Lhe selllng polnL" (as he puL lL) because mosL of
Lhe medlcal sLaff ln Lhe Lucknow CenLral Command depoL had passed Lhrough Lhe une
College and had known hls uncle-so Lhey Lended Lo say LhaL Lhey would LrusL hlm
because he was Lhe nephew of Ceneral x. Mr x sald LhaL he had been worklng for a local
company called x?Z, whlch had 3-4 producLs reglsLered wlLh Lhe armed forces depoL,
soluble asplrln and cough syrup lncluded. Pe commenLed LhaL Lhere ls a huge
consumpLlon of asplrln ln Lhe armed forces, because Lhere ls a loL of Lenslon and
headaches, and LhaL when Lhe jowos [armles] from Lhe plalns go Lo Lhe hlll Lhey ofLen
geL chesL lnfecLlons and coughs. Pe sald LhaL Lhe armed forces buy crores upon crores"
of soluble asplrlns (lnLervlew, Lucknow, 14 March 2007).
1he CovernmenL of uLLar radesh (one of our focus SLaLes) ls by general consenL reckoned Lo be
more corrupL Lhan mosL. A senlor medlcal admlnlsLraLor who Lrled Lo reduce corrupL pracLlces
was gunned down ln Lhe sLreeL ln !uly 2000. ln an lnLervlew wlLh a senlor pollceman we were
glven some lnslghLs lnLo Lhe processes aL work:
1he budgeL for medlclnes for Lhe !udges of Lhe Plgh CourL ln Allahabad ls 30 of Lhe
budgeL for Lhe whole dlsLrlcL, and lllbhlL [a small, poor and remoLe dlsLrlcL] has Lhe same
drugs budgeL as Lucknow [Lhe SLaLe caplLal]! ln boLh cases procuremenL ls managed so
LhaL large purchases are made of glucose drlps, Lonlcs eLc. 1hese are added
lndlscrlmlnaLely Lo Lhe prescrlpLlons wrlLLen by CovernmenL docLors, who are rewarded
by medlcal represenLaLlves of small companles, who domlnaLe Lhe local procuremenL
commlLLees. 1he Chlef Medlcal Cfflcer of a ulsLrlcL also Lakes a commlsslon on Lhe local
aper 1a - harmaceuLlcal ulsLrlbuLlon SysLems ln lndla



11
purchase of medlclnes, whlch ls why Lhere are only low-quallLy, ouL-daLed drugs ln healLh
cenLres. Cn an average docLors' prescrlpLlon Lhere wlll be perhaps 10 drugs, slx of whlch
wlll be useless and only Lwo wlll come from Lhe hosplLal sLores. 1here's a 'drugs mafla'
LhaL ls so well enLrenched LhaL, people say, no-one can become MlnlsLer of PealLh
wlLhouL Lhelr approval (lnLervlew, Lucknow, 24 !anuary 2007).
1he SLaLe governmenLs of 1amll nadu, Crlssa, Andhra radesh, uelhl and 8a[asLhan have sLarLed
cenLrallsed drug procuremenLs sysLems ln an aLLempL Lo overcome Lhese klnds of problems, buL
only Lhose ln 1amll nadu (Lhe 1amll nadu Medlcal Servlces CorporaLlon (1nMSC) and ln uelhl are
regarded as fully successful. 1he 1nMSC was esLabllshed ln 1994, and sLarLed work ln 1993.
Accordlng Lo lLs webslLe lL uses Lhe WPC llsL of essenLlal medlclnes, wlLh 90 per cenL of lLs budgeL
golng on Lhe procuremenL of 268 lLems on Lhls llsL vla an open Lender sysLem. urchases are
made noL Lhrough agenLs or dlsLrlbuLors buL only from manufacLurers wlLh a Cood ManufacLurlng
racLlce (CM) cerLlflcaLe,a markeL sLandlng for aL leasL Lhree years and a mlnlmum Lurnover, Lo
ellmlnaLe very small flrms LhaL may fall Lo meeL Lhelr dellvery commlLmenLs. lL also follows WPC's
recommendaLlon ln uslng lnLernaLlonal non-prlorlLy or generlc names (lnn).
WlLh Lhe dual ob[ecLlves of malnLalnlng quallLy and prevenLlng wasLages and pllferages,
all LableLs and capsules are procured wlLh only sLrlp or bllsLer packlng, as agalnsL Lhe
earller pracLlce of bulk packlng whlch requlres manual handllng aL Lhe Llme of dlsLrlbuLlon.
8oLh lnner and ouLer packages of all lLems as well as Lhe LableLs and capsules are requlred
Lo bear Lhe logo of 1nMSC wlLh a marklng Lo show LhaL Lhe drugs are manufacLured only
for SLaLe CovL. supply and noL for Sale" (1amll nadu Medlcal Servlces CorporaLlon 2007).
Some lndlcaLors of Lhe complexlLy of Lhe publlc healLh sysLem aL Lhe sLaLe level can be gaLhered
from Lhe dlfferenL caLegorles of lnsLlLuLlons LhaL Lhe 1nMSC supplles: Medlcal 1eachlng
lnsLlLuLlons, ulsLrlcL Pead CuarLers PosplLals, 1aluk Pead-CuarLers hosplLals, rlmary PealLh
CenLres, and Lhrough Lhem, Sub-CenLres, LSl [Lmployees' Soclal lnsurance] PosplLals and
ulspensarles, 1nL8 [1amll nadu LlecLrlclLy 8oard] Medlcal laclllLles, anchayaL unlon
ulspensarles, ollce Medlcal laclllLles, !uvenlle Pomes, rlson and 8ehablllLaLlon homes, Co-
operaLlve Sugar lacLorles, veLerlnary lnsLlLuLlons, 1ransporL CorporaLlon ulspensarles, Soclal
Welfare ueparLmenL, and Soclal uefence lnsLlLuLlons.
1he 'uelhl Model' ls a [olnL lnlLlaLlve, also wlLh WPC backlng, buL lncludlng an lnpuL from Lhe uelhl
SocleLy for romoLlon of 8aLlonal use of urugs (see Chaudhurl 2003: 233 for a summary). lLs maln
purposes, llke Lhose of Lhe 1nMSC, are Lo reduce Lhe range of medlclnes purchased, ln llne wlLh
aper 1a - harmaceuLlcal ulsLrlbuLlon SysLems ln lndla



12
WPC recommendaLlons on essenLlal drugs, and Lo reduce Lhe prlces pald wlLhouL compromlslng
on quallLy. 1he programme has flve componenLs: developmenL of a drug pollcy, llsL of essenLlal
drugs (LuL), pooled procuremenL, quallLy assurance, and Lralnlng ln raLlonal prescrlblng (8oy
Chaudhury eL al. 2003). lLs lmpacL on drug procuremenL ln uelhl ls llmlLed, however. AlLhough lL
supplles hosplLals and healLh cenLres run by Lhe SLaLe governmenL, Lhls means LhaL lL covers only
abouL one Lhlrd of Lhe hosplLal beds ln uelhl, excludlng (for example) Lhe largesL publlc secLor
hosplLals (AllMS, Safdar[ang, for example), whlch are run by Lhe CenLral CovernmenL.

8.2 r|vate purchas|ng by |arge users
Large prlvaLe hosplLals negoLlaLe prlces wlLh ClAs and dlsLrlbuLors Lo avold sLocklsL and reLaller
marglns ln addlLlon Lo geLLlng bulk purchase dlscounLs. We have also been Lold ln kolkaLa LhaL
prlvaLe hosplLals also geL Lhelr drugs sLralghL from manufacLurers. Some prlvaLe hosplLals lnvlLe
Lenders. Small hosplLals and dlspenslng pracLlLloners buy drugs from wholesalers.
1he CommunlLy uevelopmenL Medlclnal unlL (founded ln 1984 ln kolkaLa as Lhe CenLral urug
MarkeLlng unlL, CuMu) operaLes ln much Lhe same way as Lhe 1nMSC and 'uelhl Model'. lL
supplles approxlmaLely 430 organlsaLlons, aL prlces well below Lhose quoLed by manufacLurers for
general purchase (Chaudhurl 2003: 234). ln addlLlon, nCC-run lnsLlLuLlons can also buy dlrecLly
from producers who offer Lhem speclal Lerms. Cne of Lhese ls LoCosL, seL up ln 1983 ln 8aroda Lo
supply noL-for-proflL lnsLlLuLlons.


8.3 Cha||enges to th|s p|cture
Cne problem ln undersLandlng Lhls sysLem ls LhaL Lhe sysLem ls noL sLaLlc and Lhe apparenL
dlvlslons beLween Lhe prlvaLe sales of drugs Lhrough reLallers and Lhe more cenLrallsed sysLems
are somewhaL lllusory. harmaceuLlcals move beLween Lhe dlfferenL supply chalns aL several
polnLs. 1hus, for example, drugs procured under Lhe governmenL and non-governmenL sysLems
leak ouL lnLo Lhe general reLall sysLem, as hosplLal employees or governmenL docLors use Lhem as
parL of Lhelr prlvaLe pracLlces. urugs sold Lhrough Lhe general reLall sysLem also augmenL Lhe
drugs procuremenL processes, slnce Lhe drugs procured ln Lhese ways are rarely sufflclenL Lo meeL
aper 1a - harmaceuLlcal ulsLrlbuLlon SysLems ln lndla



13
overall demand (nor do Lhey cover Lhe full range of drugs prescrlbed ln Lhe publlc secLor). A clear
vlsual lmpresslon of Lhls ls provlded by Lhe locaLlon of prlvaLe reLall pharmacles, as polnLed ouL by
acLlvlsLs ln WesL 8engal:
ln a sLudy where we compared avallablllLy ln prlvaLe and publlc secLors, we found lL's
aLroclous ln Lhe publlc secLors. MosL of Lhe medlclnes we asked for were noL avallable
whlch was avallable ln Lhe prlvaLe secLor. We ldenLlfled reLall shops [usL ouLslde Lhe
governmenL hosplLals. We flnd mosL of Lhe reLall shops are really around Lhe governmenL
hosplLals and as you move furLher Lhe denslLy of reLall shops per populaLlon decreases.
1he more dlsLanL you are from a healLh faclllLy Lhe lesser Lhe chance of geLLlng a medlclne
shop. ln oLher counLrles, before glvlng a llcense Lo a medlclne shop Lhey see LhaL ls Lhe
locaLlon and how dlsLanL lL ls from Lhe nearesL medlclne shop. lL's noL regulaLed here"
(lnLervlew, WesL 8engal PealLh AssoclaLlon, 10 !anuary 2007).

C. 1he ro|e of co||ect|ve organ|sat|ons |n the reta|| sector
1he maln assoclaLlon ls Lhe All-lndla CrganlsaLlon of ChemlsLs and urugglsLs (AlCCu), wlLh lLs
SLaLe branches. 1hls daLes from 1921, when Lhe 8engal ChemlsLs & urugglsLs AssoclaLlon (8CuA),
was esLabllshed, followed by assoclaLlons ln Madras, 8ombay and uelhl. ln 1944, Lhese
esLabllshed Lhe All lndla lederaLlon of ChemlsLs & urugglsLs, buL lL was faced wlLh compeLlLlon
from Lhe All lndla 8eLall ChemlsLs AssoclaLlon, and, from 1972, from Lhe lndlan CrganlzaLlon of
ChemlsLs & urugglsLs. ln 1973 Lhe Lhree all-lndla bodles merged lnLo Lhe All lndla CrganlzaLlon of
ChemlsLs & urugglsLs (AlCCu).
Slnce 1981 Lhe AlCCu has been negoLlaLlng agreemenLs wlLh Lhe drug producers assoclaLlons (Lhe
lndlan urug ManufacLurers AssoclaLlon (luMA), and Lhe CrganlsaLlon of harmaceuLlcal roducers
of lndla (Cl)). Cne agreemenL, whlch daLes backs Lo 1984, speclfles Lhe percenLage of Lrade
marglns for varlous caLegorles of drugs, and allows Lhe local branches of Lhe AlCCu Lo block Lhe
enLry of new companles. lor example, ln kolkaLa:
8efore Lhe company appolnLs us as sLocklsL we need a 'no Cb[ecLlon' leLLer [from Lhe
8engal ChemlsLs and urugglsLs AssoclaLlon, 8CuA]. 1hey [usL acL as waLchdogs. Also Lhey
see lf Lhere are already enough sLocklsLs for a cerLaln company, Lhen Lhey Lry Lo sLop new
sLocklsLs for LhaL company from enLerlng Lhe markeL. Also Lhe manufacLurers are afrald of
aper 1a - harmaceuLlcal ulsLrlbuLlon SysLems ln lndla



14
Lhem [Lhe 8CuA], Lhey wlll noL do anyLhlng wrong" (lnLervlew, ulsLrlbuLor ln kolkaLa, 3
March 2007).
8ecenL press reporLs suggesL LhaL all Lhe dlsLrlbuLors ln Lhe counLry are members of AlCCu, and
LhaL lL ls powerful enough Lo sLop producers from supplylng goods Lo reLallers who don'L agree Lo
Lhelr Lerms (8hasln 2007). Accordlng Lo Lhe manager of a reLall chaln ln kolkaLa, Lhe 8CuA ls a
gulld LhaL ls even able Lo force pharmacles Lo break Lhe law (by addlng local sales Lax Lo Lhe
maxlmum reLall prlce):
1hey are forclng people Lo charge Lax or else Lhere was LhreaL of physlcal vlolence. 1hey
were even forclng us, who were noL charglng Lax accordlng Lo Lhe law. [CLherwlse you
would have advanLage over Lhe oLhers?] CorrecL, and Lhey wlll noL sell as much. [1hey
were LhreaLenlng you?] ?es, we had our glasses broken. 1he wlndow panes and all were
broken ln SalL Lake as we declded LhaL lf we cannoL do someLhlng accordlng Lo Lhe law,
we wlll noL" (lnLervlew, kolkaLa, 22 lebruary 2007).
1he AlCCu ls ln Lhe process of floaLlng corporaLe reLall drug companles ln MaharashLra and uelhl,
and posslbly elsewhere, Lo help Lhelr campalgn of confronLlng Lhe organlsed reLall drug chalns
(!ayakumar 2007). 1hey are respondlng Lo Lhe percepLlon LhaL consolldaLlon ln drug dlsLrlbuLlon,
whlle sLlll aL a very formaLlve sLage, ls llkely Lo lead Lo corporaLlsaLlon. "CorporaLlsaLlon would
lead Lo ellmlnaLlon of aL leasL one layer of dlsLrlbuLlon. 1hls would enable companles Lo offer
hlgher marglns Lo reLallers. Consumers Loo wlll beneflL as drug companles would be ln a poslLlon
Lo pass on Lhe beneflLs Lo consumers. CorporaLlsaLlon of Lrade would mean fewer players. 1hls
would lmprove admlnlsLraLlon and enhance cusLomer relaLlonshlp," says Lhe dlsLrlbuLlon head of
a leadlng lndlan company (uogra 2006). 1here seems Lo be a general percepLlon LhaL, ln Lhe
meLropollLan and second-Ller clLles, Lhere ls a surplus of pharmacy sLores, and LhaL new Lradlng
pracLlces (ofLen buL noL only wlLh forelgn fundlng and followlng forelgn models) wlll pose a ma[or
LhreaL Lo exlsLlng sLores. lewer commenLaLors, however, have noLed LhaL Lhese changes are llkely
Lo have dlfferenL effecLs on Lhe large number of sLores servlng Lhe counLryslde and poorer urban
areas.
ln order Lo counLer Lhe lnfluence of Lhe AlCCu Lhe new reLall chalns are reporLed Lo be sponsorlng
a new body, Lo be called Lhe AssoclaLlon of rofesslonal ChemlsLs and ulsLrlbuLors of lndla (ACul).
1he ldea was lnlLlaLed by 8a[endra raLap CupLa, head, reLall and supply chaln, 8ellance PealLh.
CLher organlsed reLallers have agreed Lo Lhe ldea. Powever, many lnslders have responded Lo Lhe
move wlLh scepLlclsm, saylng LhaL Laklng on Lhe AlCCu ls exLremely dlfflculL (!ayakumar 2007).
aper 1a - harmaceuLlcal ulsLrlbuLlon SysLems ln lndla



15

D. L|cens|ng
As we noLed aL Lhe beglnnlng of Lhls paper, Lhe exlsLence of llcenslng, and Lhe exLenL Lo whlch lL ls
applled fully, are Lhe maln crlLerla for decldlng wheLher or noL a counLry has an 'unregulaLed'
drugs markeL. 1hls perspecLlve Lends Lo underplay Lhe oLher soclal, pollLlcal and economlc
funcLlons fulfllled by llcences, and we wlll dlscuss Lhese brlefly aL Lhe end of Lhls secLlon. ln
dlscusslng llcenslng, Lherefore, we shall flrsL descrlbe Lhe formal sysLem and Lhen Lry Lo
undersLand Lhe everyday experlence of Lhe llcenslng sysLem. LxcepL where oLherwlse lndlcaLed,
we draw here on Lhe work of Cross and aLel for deLalls (Cross & aLel 2002).
ln lndla, Lhe ma[or source for pharmaceuLlcal regulaLlon of all producLs, wheLher lmporLed or
made ln lndla, ls Lhe urugs and CosmeLlcs AcL 1940 (uCA), under whlch are Lhe urugs and
CosmeLlcs 8ules (uC8). 1he uCA regulaLes Lhe lmporL, manufacLure, dlsLrlbuLlon and sale of drugs
ln lndla and Lhe leglslaLlon ls enforced by Lhe unlon CovernmenL (ueparLmenL of Chemlcals and
lerLlllzers, MlnlsLry of Chemlcals and eLrochemlcals) ln new uelhl, wlLh Lhe offlce of Lhe urug
ConLroller of lndla (uCl) havlng prlme responslblllLy. AL Lhe fleld level, however, enforcemenL ls
done by Lhe lndlvldual SLaLe governmenLs Lhrough Lhelr lood and urug AdmlnlsLraLlons. MaLLers
of producL approval and sLandards, cllnlcal Lrlals, lnLroducLlon of new drugs, and lmporL llcenses
for new drugs are handled by Lhe uCl, whlle approvals for seLLlng up manufacLurlng faclllLles, and
obLalnlng llcenses Lo sell and sLock drugs are provlded by Lhe SLaLe CovernmenLs (Cross & aLel
2002).
CLher relevanL leglslaLlon lncludes Lhe harmacy AcL, 1948, Lhe urugs and Maglc 8emedles
(Cb[ecLlonable AdverLlsemenL) AcL, 1934, Lhe narcoLlc urugs and sychoLroplc SubsLances AcL,
1983, Lhe Medlclnal and 1olleL reparaLlons (Lxclse uuLles) AcL, 1936, Lhe urugs (rlces ConLrol)
Crder 1993 (under Lhe LssenLlal CommodlLles AcL), Lhe lndusLrles (uevelopmenL and 8egulaLlon)
AcL, 1931, Lhe 1rade and Merchandlse Marks AcL, 1938, Lhe lndlan aLenL and ueslgn AcL, 1970,
and Lhe lacLorles AcL (CenLral urugs SLandard ConLrol CrganlzaLlon 2007). 1he harmacy AcL of
1948 has a parLlcular slgnlflcance for Lhe reLall Lrade, because lL regulaLes Lhe professlon of
pharmacy ln lndla, especlally wlLh respecL Lo Lhe requlremenLs for reglsLraLlon of pharmaclsLs
(CenLral urugs SLandard ConLrol CrganlzaLlon 2007).

aper 1a - harmaceuLlcal ulsLrlbuLlon SysLems ln lndla



16
D.1 L|censes to manufacture drugs
All manufacLurlng of drugs ln lndla requlres a llcense. ManufacLurlng ls deflned by Lhe uCA as
lncludlng any process or parL of a process for maklng, alLerlng, ornamenLlng, flnlshlng, packlng,
labelllng, breaklng up or oLherwlse LreaLlng or adopLlng any drug wlLh a vlew Lo lLs sale or
dlsLrlbuLlon. lL does noL lnclude dlspenslng or packlng aL Lhe reLall sale level. A llcense ls requlred
for each such locaLlon aL whlch drugs are Lo be manufacLured, and also for each drug Lo be
manufacLured. 1he llcense has Lo be renewed perlodlcally." (Cross and aLel, 2002)
1he 8e-reglsLraLlon Clrcular LeLLer by ulrecLoraLe Ceneral of PealLh Servlces (urugs ConLrol
SecLlon) from uecember 2004 speclfles LhaL Lhe llcense ls valld for Lhree years from Lhe lssulng
daLe, unless lL ls sooner suspended or cancelled (urugs ConLrol SecLlon 2004). 1he urugs and
CosmeLlcs 8ules speclfy Lhe CM and requlremenLs of premlses, plan and machlnery, rules for
malnLenance of raw maLerlals and records, and requlremenLs for Lhe quallLy conLrol sysLem:
1he uCA also speclfles oLher condlLlons for Lhe granL or renewal of a llcense: compeLenL
Lechnlcal sLaff lncludlng a pharmacy/pharmaceuLlcal chemlsLry/sclence/chemlcal
englneer/chemlcal LechnologlsL/equlvalenL forelgn quallflcaLlon wlLh experlence ln drug
manufacLure, requlremenLs of Lhe LesLlng laboraLory and quallflcaLlons of Lhe head of Lhe
LesLlng unlL. 1he appllcanL musL also show (ln case of paLenL or proprleLary medlclnes),
LhaL Lhe medlclnes conLaln Lhe consLlLuenL lngredlenLs ln Lhe LherapeuLlc/ prophylacLlc
quanLlLles as deLermlned ln relaLlon Lo Lhe clalms or condlLlons for whlch Lhe medlclnes
are Lo be used, LhaL Lhe medlclnes are safe for use ln Lhe conLexL of Lhe vehlcles,
exclplenLs, addlLlves and pharmaceuLlcal alds used ln Lhe formulaLlon, are sLable ln Lhe
condlLlons of sLorage recommended, and conLaln such lngredlenLs and ln such quanLlLles
for whlch Lhere ls LherapeuLlc [usLlflcaLlon" (Cross and aLel, 2002).

ManufacLurers of cerLaln drugs (lnvolvlng recomblnanL unA Lechnology, use of nuclelc aclds as
Lhe acLlve prlnclples and formulaLlons based on use of speclflc cells/ Llssue - LargeLed
formulaLlons) need an addlLlonal llcense ln accordance wlLh Lhe lndusLrlal ollcy lssued by Lhe
CenLral CovernmenL. CLher manufacLurers have only Lo flle an lndusLrlal LnLrepreneur's
Memorandum (lLM) wlLh deLalls of Lhe proposed lLems Lo be manufacLured, Lhe capaclLy, Lhe
locaLlon, Lhe source of Lechnology, Lhe raw maLerlal requlremenL, Lhe process descrlpLlon and
oLher deLalls' (Cross and aLel, 2002).
aper 1a - harmaceuLlcal ulsLrlbuLlon SysLems ln lndla



17
Cross and aLel (2002) also llsL oLher reglsLraLlon and llcenslng requlremenLs regardlng drug
manufacLurlng faclllLles: Llcense for CaplLal Coods lmporL (for lLems oLher Lhan Lhose freely
lmporLable under Lhe lmporL ollcy), Llcense for raw maLerlals lmporL (for lLems oLher Lhan Lhose
freely lmporLable under Lhe lmporL ollcy), lacLorles AcL reglsLraLlon, Labour laws reglsLraLlons,
olluLlon ConLrol 8oard clearance, LlecLrlclLy supply, 8ulldlng permlsslon, WaLer supply, Land
lease/purchase, Lxclse duLy reglsLraLlon, Sales Lax reglsLraLlon, Lxploslves llcense, Llcenses Lo
sLore peLroleum producLs, 8eglsLraLlon under Lhe 8ollers AcL, 8eglsLraLlon wlLh Lhe SLaLe ulrecLor
of lndusLrles, 8eglsLraLlon under SLandards of WelghLs and Measures AcL.
1he oLher formallLles are Lo be complled wlLh aL Lhe SLaLe or local governmenL level, where Lhe
facLory ls locaLed.

D.2 L|cens|ng of Drug keta||ers
under Lhe uCA, sales offlces, pharmacles or any oLher sales ouLleL or sLocklng polnL for drugs
musL be llcensed Lo do so by Lhe SLaLe CovernmenL havlng [urlsdlcLlon over Lhe offlce/pharmacy.
Where drugs are sold/ sLocked for sale aL more Lhan one place, a separaLe llcense ls requlred for
each such locaLlon. A llcense once lssued ls valld Llll uecember 31sL of Lhe year followlng Lhe year
ln whlch Lhe llcense has been granLed. 1he requlremenLs and condlLlons for a llcense Lo sLock and
sell drugs (oLher Lhan on a wholesale basls) lnclude:
speclfled mlnlmum area and equlpmenL
compoundlng of drugs on Lhe premlses should be done by a 8eglsLered harmaclsL
sales of any drugs on prescrlpLlon should be under Lhe supervlslon of a 8eglsLered
harmaclsL (quallflcaLlon and experlence proflle are speclfled), and a prescrlpLlon reglsLer
(for compounded drugs) or cash or credlL memo book (for oLher medlclnes) malnLalned
prescrlpLlon reglsLer or sale memo should conLaln Lhe speclfled parLlculars of Lhe sale
(lncludlng baLch number of manufacLure ln case of prescrlpLlon drugs)
no prescrlpLlon drug ls Lo be sold wlLhouL a prescrlpLlon
1here are resLrlcLed llcenses for ouLleLs LhaL do noL need Lhe servlces of a 8eglsLered harmaclsL
(called drugsLores"), and Lhose where no compoundlng Lakes place (called chemlsLs and
drugglsLs"). CuLleLs may use LlLles such as harmacy," harmaclsL," harmaceuLlcal ChemlsL,"
aper 1a - harmaceuLlcal ulsLrlbuLlon SysLems ln lndla



18
or ulspenslng ChemlsL" only lf Lhey use Lhe servlces of a 8eglsLered harmaclsL and malnLaln a
pharmacy for compoundlng.
Wholesale and reLall ouLleLs would also need local reglsLraLlon under:
Lhe Shops and LsLabllshmenL AcL
Lhe SLandard of WelghLs and Measures AcL
labour leglslaLlon
sales Lax leglslaLlon
A recenL descrlpLlon of Lhe llmlLaLlons of Lhe small-scale reLalllng operaLlons LhaL, aparL from Lhe
exaggeraLed expecLaLlons wlLh respecL Lo 'modern aspecLs', ls a falr descrlpLlon of Lhe mlsmaLch
beLween regulaLlons and pracLlces:
lndla's pharma Lrade, parLlcularly, Lhe reLall pharmacles, conLlnues Lo be dlsorganlzed
and unprofesslonal. MosL of Lhese 6 lakh [600,000] chemlsL shops are belng run by Lraders
wlLh no sufflclenL sLorage space, no alr condlLlonlng and wlLh no presence of pharmaclsLs
aL Lhe counLer. AlLhough Lhese are sLaLuLory requlremenLs, very few among Lhe Lrade
follow Lhem. And wlLh perpeLual shorLage of lnspecLlon sLaff, drug conLrol deparLmenL ln
mosL sLaLes do noL Lake any Llmely acLlon agalnsL such offences. WlLh subsLanLlal growLh
ln demand for pharmaceuLlcals over Lhe years, Lhe number of pharmacles ls mulLlplylng
leadlng Lo severe compeLlLlon and uneLhlcal pracLlces amongsL Lhem. Cne of Lhe maln
concerns ls perLalnlng Lo Lhe dellvery of drugs Lo paLlenLs, Lhe prlmary responslblllLy of a
reLall pharmacy. lor proper dellvery of drugs Lo paLlenLs, advlce of a quallfled pharmaclsL
ls consldered necessary. lor Lhls, Lhe pharmaclsL should be equlpped wlLh Lhe knowledge
of communlLy pharmacy, modern aspecLs of dlspenslng, paLlenL counselllng, blochemlsLry
and cllnlcal pharmacy and drug sLore managemenL. 8uL mosL pharmacles ln Lhe counLry
do noL have a pharmaclsL aL Lhe counLer leadlng Lo several unreporLed dlspenslng errors"
(lrancls 2006).
1he formal regulaLlons concernlng pharmacles requlre a degree ln pharmacy, a medlcal
quallflcaLlon, a sclence degree and 2-3 years experlence ln prescrlblng, or maLrlculaLlon wlLh
sclence sub[ecLs and flve years of experlence. Slnce Lhere are only abouL 200,000 pharmacy
graduaLes, mosL pharmacles do noL have Lhe servlces of someone Lralned ln pharmacy or
pharmacology. A common pracLlce ls Lo open a shop Laklng Lhe name of a pharmaclsL, who may
be named on several oLher llcences as well, and may rarely lf ever aLLend Lhe pharmacy:
aper 1a - harmaceuLlcal ulsLrlbuLlon SysLems ln lndla



19
Many Ayurvedlc medlclne shops also keep Lngllsh medlclnes wlLhouL holdlng any llcense.
lL ls a rule Lo dlsplay Lhe phoLo of Lhe llcense holder ln Lhe shop. lL ls noL allowed Lo sell
wlLhouL prescrlpLlon. lL ls a rule Lo keep a record of whaL Lhey sell and purchase. Shop-
owners pay money Lo pharmaclsLs Lo obLaln llcense. 1hey [pharmaclsLs] are belng pald
money on a monLhly basls by Lhe shopkeepers: one pharmaclsL may have several shops
opened ln hls name buL none of Lhese shops has a quallfled pharmaclsL on slLe" (lnLervlew,
Lucknow, 12 lebruary 2007).
lL ls noL clear whaL klnds of enforcemenL acLlvlLles Lake place wlLh respecL Lo Lhese reLall and
wholesale llcences. 1he range and complexlLy of Lhe rules offer plenLy of opporLunlLles for
reLallers Lo fall shorL of Lhe requlremenLs (narayanan 2007). 1he uelhl SLaLe assoclaLlon afflllaLed
Lo AlCCu aLLempLed Lo clrculaLe Lhe phoLographs of "orlglnal" drug lnspecLors who are ln charge
of Lhelr respecLlve reglons ln 2004, afLer Lwo persons were arresLed for poslng as drug lnspecLors
and movlng around Lhe sLaLe, exLracLlng "brlbes" and "collecLlng flnes" from Lhe reLall chemlsLs
(8ureau 8eporL 2004).
MosL reLallers and wholesalers we have Lalked Lo abouL llcenses suggesL LhaL Lhe process of
geLLlng a llcense ls a chore, and LhaL Lhe regulaLlons have no real lnLrlnslc slgnlflcance. Pere are a
dlsLrlbuLor and a wholesaler Lalklng abouL Lhe experlence:
u: Cur llcense ls 30 years old and we keep renewlng lL every year. 1he rules have changed
a loL buL slnce we [usL renew lL, lL does noL apply Lo us as such. When Lhere ls a change ln
ownershlp, Lhey do lnspecLlon Lhoroughly agaln. So when l Look over from my faLher, Lhey
came for a more Lhorough lnspecLlon. 1hey see lf we have a worklng frldge or noL, and
such oLher Lhlngs. 1hey requlre quallfled people ln Lhe shop before lssulng llcense. ln my
faLher's Llme lL was easy, buL lL was noL as easy ln my Llme (lnLervlew, kolkaLa, 3 March
2007).
---
SL: So you whaL do you need from Lhe governmenL? ?ou need Lhe llcense?
W: ?es and Lhere are a loL of rules.
SL: WhaL are Lhey?
aper 1a - harmaceuLlcal ulsLrlbuLlon SysLems ln lndla



20
W: Llke l have Lo have a place, you have Lo glve a drug llcense, you have Lo have your sale
Lax number, you have Lo have you lncome Lax number. So all Lhese sLlpulaLed rules you
wlll have Lo follow. unLll and unless, you have Lhe drug, real number LhaL we call, and Lhe
wholesale llcense number, you cannoL deal wlLh medlclnes. nobody can come up and
brlng up a shop and sLarL worklng for medlclnes. ?ou have Lo have a llcense for LhaL. ?ou
have Lo be quallfled enough and Lhere are a loL of paper works.
SL: WhaL klnd of quallflcaLlons do Lhey look for?
W: 1he prlmary quallflcaLlon ls Lhe place. lL has Lo have a sLlpulaLed helghL and oLher
requlremenLs, Lhe place should be clean enough. 1here are a whole loL of rules. 1hese wlll
have Lo be meL and Lhen Lhe governmenL wlll glve you a llcense. Cnce you have Lhe
llcense, Lhen only you can buy and purchase medlclnes.
SL: ls lL dlfflculL Lo geL a llcense?
W: nowadays, Lhe governmenL ls noL wllllng enough Lo glve. l Lhlnk lndla has Lhe hlghesL
number of reLall shops. Lvery nook and corner, you wlll flnd a reLall shop. So now Lhey are
curLalllng down on Lhe llcense.
no caLegory of drugs ls legally speclfled as 'C1C'. 1he uCA speclfles cerLaln drugs Lo be sold only
under prescrlpLlon, and Lhe remalnlng drugs can be sold wlLhouL prescrlpLlon, Lhough only by
llcensed ouLleLs. 1he llsL of prescrlpLlon drugs covers all anLlbloLlcs, a number of palnklllers, eLc.
rescrlpLlon drugs cannoL be adverLlsed ln Lhe general medla. 1he uCA also provldes a llsL of
allmenLs LhaL no drug may purporL Lo prevenL or cure. ln pracLlce, reLallers rarely requlre a formal
prescrlpLlon from a pracLlLloner before Lhey sell a drug, even lf lL ls on a Schedule of drugs LhaL
requlre such prescrlpLlons. Powever, Lhls does noL mean LhaL self-medlcaLlon ls common:
'pharmaceuLlcal use ls deLermlned as much by pracLlces of dlspensaLlon and by how pracLlLloners
undersLand whaL consLlLuLes Lherapy as by household undersLandlng of Lhe normal and Lhe
paLhologlcal' (uas & uas 2006: 69). AL Lhe prompLlng of Lhe pharmaceuLlcal lndusLry, Lhe
CovernmenL of lndla has seL up a commlLLee of offlclals Lo draw up a llsL of C1C lLems LhaL would
be allowed Lo be adverLlsed ln Lhe general medla. AL presenL Lhere are a few so-called C1C drugs
(13-20 Lypes) such as rubs and balms, paln rellevers, anLaclds, eLc. PealLh drlnks are, of course,
commonly adverLlsed (Cross & aLel 2002) as are Ayurvedlc, unanl, Slddha and PomoeopaLhlc
[A?uSP] preparaLlons.
aper 1a - harmaceuLlcal ulsLrlbuLlon SysLems ln lndla



21
Cur own research so far suggesLs LhaL llcences fulfll a number of funcLlons wlLhln Lhe drug
dlsLrlbuLlon sysLem, and LhaL wlLhln Lhese funcLlons, LhaL of proLecLlng Lhe consumer or ensurlng
professlonal pracLlce come raLher low down ln Lhe prlorlLles. As many commenLaLors have
dlscussed, ln a 'llcence 8a[', as lndla was descrlbed as havlng developed under nehru, and whlch ls
sLlll parLly ln place Loday, Lhose who lssue Lhe llcences are able Lo earn 'economlc renLs' by
explolLlng Lhe poslLlons Lhey hold. 8uL lL ls also Lhe case LhaL Lhose who manage Lo acqulre
llcences expecL Lhem Lo be used Lo reduce compeLlLlon from new enLranLs. ln addlLlon, llcences
are somewhaL of a feLlshlsLlc commodlLy: Lhelr appearance on Lhe walls of offlces or shops ls
LesLlmony Lo Lhe moral recLlLude of Lhe owners, and a sLaLemenL abouL Lhelr soclal poslLlon,
raLher Lhan a slgn LhaL parLlcular professlonal norms are belng up-held. All of Lhese apply, of
course, LhroughouL Lhe world: buL Lhe balance beLween Lhe dlfferenL funcLlons seems Lo be more
welghLed Lowards Lhe more resLrlcLlve, self-lnLeresLed funcLlons of llcences Lhan ls Lrue ln many
oLher places.



L. 1owards a more accurate ref|ect|on of drug d|str|but|on |n Ind|a
ulagram 3 [see Lhe end of Lhls paper] ls an aLLempL Lo use Lhe maLerlal dlscussed so far ln Lhls
paper Lo move Lowards a more useful represenLaLlon of Lhe drug dlsLrlbuLlon sysLem Lhan ls
provlded by elLher ulagram 1 or 2. Cne example of addlLlonal complexlLy ls Lhe dlsLlncLlon we
have made beLween large and small-scale producers. Whlle Lhe border beLween Lhem may be
uncerLaln, lL ls clear LhaL Lhe exLremes operaLe ln very dlfferenL ways. 1he large companles should
agaln be dlsLlngulshed accordlng Lo wheLher Lhey produce Lhe acLlve pharmaceuLlcal lngredlenLs
(Al) or are merely ln Lhe buslness of formulaLlons. A furLher dlsLlncLlon ls Lo show LhaL Lhe ClA ls
Lo some exLenL parL of Lhe producLlon company, even Lhough lf Lhey represenL more Lhan one
company LhaL deplcLlon ls somewhaL mlsleadlng.
Large companles dlsLrlbuLe Lhelr producLs Lhrough elLher company depoLs or ClAs, whereas Lhe
smaller companles use super-sLocklsLs. 8uL Lhe boundary beLween Lhe Lwo klnds of companles ls
noL as clear-cuL as Lhey mlghL seem, because small companles also ofLen acL as addlLlonal
producers for Lhe large companles. Small companles ofLen formulaLe drugs and package Lhem
aper 1a - harmaceuLlcal ulsLrlbuLlon SysLems ln lndla



22
wlLh Lhe name of Lhe large company, on whaL ls called a 'loan llcence': a llcense Lo manufacLure a
producL ln Lhe facLory premlses owned by anoLher parLy, (Cross and aLel, 2002). 1hese drugs are
Lhen sold ln exacLly Lhe same way as Lhe branded verslons LhaL have been produced ln facLorles
owned by Lhe large producer. 1he use of loan-llcenslng may be Lo avold exclse duLy or sales Lax, or
Lo Lake advanLage of Lhe small-scale producer's ablllLy Lo pay lower wages, and smaller soclal
welfare paymenLs and oLher perqulslLes. 1he pracLlce of loan-llcenslng also provldes one of Lhe
channels by whlch 'counLerfelL' medlclnes reach Lhe markeL. ln such cases, Lhe small company
produces more Lhan Lhe quanLlLy conLracLed for, and Lhen sells Lhe remalnder. ln Lhls case Lhe
Lerm 'counLerfelL' refers Lo Lhe lack of approval from Lhe company whose name appears on Lhe
package: Lhe drug quallLy may or may noL be accepLable, because Lhe purpose here ls Lo avold Lhe
drugs appearlng ln Lhe books of Lhe wholesalers or reLallers for LaxaLlon purposes.
lndlvlduals also cross Lhe boundarles beLween some of Lhese caLegorles, maklng Lhem more fluld
and permeable Lhan Lhey appear ln Lhls dlagram. Cne example ls Lhe dlsLlncLlon beLween
reLaller/pharmaclsL and pracLlLloner: lL ls common ln much of Lhe norLh lndlan counLryslde (and
also ln smaller Lowns) for paLlenLs Lo approach a pharmaclsL and recelve a dlagnosls and
prescrlpLlon (ofLen lncludlng powerful prescrlpLlon drugs) wlLhouL Lhe lnLervenLlon of any oLher
klnd of pracLlLloner. Slmllarly, ln mosL small Lowns and vlllages, Lhe pracLlLloner hlmself (and
occaslonally herself) also prescrlbes and dlspenses Lhe medlclnes Lhey prescrlbe: lndeed, Lhere ls
rarely a consulLaLlon fee, buL Lhe pracLlLloner makes hls/her lncome from dlspenslng prescrlpLlons.
llnally, Lhe eLhnographlc maLerlal suggesLs LhaL lL ls also necessary Lo deconsLrucL Lhe ldea LhaL
drugs, once havlng reached a paLlenL, are Lhen consumed by LhaL person. 8aLher, we have also Lo
undersLand Lhe llfe of drugs afLer Lhls polnL, ln whlch Lhe porLlon unconsumed may be passed on,
sold or Lraded wlLh oLher paLlenLs, and prescrlpLlons may have a llfe of Lhelr own, generaLlng
furLher drug purchases elLher for Lhe orlglnal paLlenL or for someone else enLlrely (see Worklng
aper 2, and (uas & uas 2006).
1he maln addlLlonal llnks ln ulagram 3 [see end of paper], as compared wlLh ulagrams 1 and 2,
are Lhose LhaL reflecL Lhe 'leakages' from one procuremenL sysLem (mosLly Lhe CovernmenL
procuremenL sysLem) Lo and from Lhe prlvaLe reLall chalns, whlch we have dlscussed above. We
mlghL also wanL Lo clarlfy Lhe relaLlonshlps wlLhln Lhe chaln of dlsLrlbuLlon from CovernmenL
procuremenL agencles Lo hosplLals, cllnlcs and medlcal or para-medlcal workers (whlch are
addressed more ln Worklng aper 1b, wlLh respecL Lo nepal, and ln Worklng aper 2, wlLh respecL
Lo CxyLocln and, evenLually, Lo 8lfamplcln). We hope Lo dlscuss Lhese lssues more fully durlng Lhe
workshop.
aper 1a - harmaceuLlcal ulsLrlbuLlon SysLems ln lndla



23

I. D|scuss|on
As we have made clear LhroughouL Lhls paper, lL ls enLlrely provlslonal, and lL wlll have meL lLs alm
lf lL generaLes dlscusslon and helps Lo clarlfy declslons wlLh respecL Lo our plans for Lhe nexL sLage
of our research. Among some posslble areas for furLher aLLenLlon mlghL be:
Whlch parLs of Lhe llcenslng arrangemenLs are Laken more, and whlch parLs less serlously
by llcenslng bodles?
Pow can we besL move beyond a slmple framlng of 'Lhe problem' as one of corrupLlon, or
of lnadequaLe resources belng allocaLed Lo regulaLlon?
WhaL ls Lhe slgnlflcance of Lhe soclal consLrucLlon of pharmaceuLlcals dlsLrlbuLlon by
commerclal analysLs such as LrnsL & ?oung or kMC?
ls lL worLhwhlle Lo follow-up furLher Lhe lssue of counLerfelL medlclnes?
aper 1a - harmaceuLlcal ulsLrlbuLlon SysLems ln lndla



24
D|agram 1
Channe|s of drug d|str|but|on

Source: hLLp://www.domaln-b.com/lndusLry/pharma/20000107dlsLrlbuLlon_channels.hLml
D|agram 2: Current D|str|but|on Setup |n Ind|a

Source: (LrnsL & ?oung 2006: 11)
ManufacLurer
uepoL/ClA
SLocklsLs
harmacles PosplLals
aper 1a - harmaceuLlcal ulsLrlbuLlon SysLems ln lndla



25
D|agram 3: Show|ng more comp|ex re|at|onsh|ps


Large harma
roducer
Small
harma
roducer
Clearlng and
lorwardlng AgenL or
Company uepoL
Super
SLocklsL

PosplLal

CovernmenL or
nCC Agency
8eLaller or
harmaclsL
racLlLloner

at|ent or
kepresentat|ve

Wholesaler
or SLocklsL
atterns of d|str|but|on of pharmaceut|ca|s |n Ind|a
CounLerfelL
roducer
key
Maln channels
CLher channels
Channels for counLerfelL drugs
aper 1a - harmaceuLlcal ulsLrlbuLlon SysLems ln lndla



26
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