India is examining a proposal to mandate pharmaceutical companies to set aside a share of their profits for free medicines during health emergencies, News18 learned.
The proposal seeks an amendment to the Drugs Rules, 1945, to include a mandatory provision requiring pharmaceutical companies to spend “at least one per cent of their net profit for providing free medicines in medicine bank” to be used by the central government during “health emergencies, disaster or any other circumstances considered necessary”.
The proposal is still under deliberation and has been placed before the country’s top statutory decision-making body on technical matters related to drugs and cosmetics, the Drugs Technical Advisory Board.
The move, according to the agenda
document accessed by News18, is being examined to assess whether emergency access to free medicines can be strengthened through regulatory changes without conflicting with company law.
What is being proposed and why?
The proposal was deliberated at DTAB’s 90th meeting held on January 25, 2024, after which the board recommended that the Ministry of Health and Family Welfare may seek the opinion of the Ministry of Corporate Affairs on the matter.
Subsequently, comments were received from the corporate affairs ministry, which flagged legal constraints. The agenda document notes that “the broad framework for CSR is laid down under Section 135 of the Companies Act, 2013”, along with Schedule VII of the Act and the Companies (CSR Policy) Rules, 2014.
It further clarifies that “the Government does not issue specific direction or intervention in the manner or geographical area in which companies choose to spend their CSR funds”, highlighting limits on directing CSR expenditure through sector-specific rules.
How could the proposal move forward?
The corporate affairs ministry has indicated that any attempt to mandate CSR-linked spending through drug regulations would need to be legally aligned with company law. The document states that “CSR is governed by Companies Act, 2013,” and therefore suggests that “the authority for CSR activity may be quoted from Schedule VII, Companies Act, 2013 and Companies (CSR Policy) Rules, 2014 and proposed amendment in Drugs Rules, 1945 need to be in sync”.
More significantly, it cautions that “any amendment in the CSR framework would require an amendment to the Companies Act”, suggesting that changes through the Drugs Rules alone may not be sufficient.
The matter has now been placed back before DTAB, with the agenda concluding that “DTAB may kindly deliberate and give its recommendations in the matter”.
The matter continues to be reviewed, with regulators weighing public health needs against existing corporate law provisions.
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