​Conditional ease: on the Central Drugs Standard Control Organization guidelines

The new guidelines to compound minor drug violations that the Central Drugs Standard Control Organization (CDSCO) has released, operationalise a legal change in the works since 2023. Until recently, many instances of relatively minor or technical non-compliance under the Drugs and Cosmetics Act, 1940, invoked criminal prosecution. The new guidance and standard operating procedures are meant to standardise compounding instead, whereby, at the regulator’s discretion, firms can settle certain offences by reporting them and applying to pay a fine, instead of litigating. The legal backdrop is the Jan Vishwas (Amendment of Provisions) Act that was framed as an exercise in “decriminalising and rationalising offences … for ease of living and doing business”. In the 1940 Act, Jan Vishwas broadened the scope of Section 32B by adding heads into the group of offences that could be compounded; this now includes making a drug to sell or distribute in breach of the 1940 Act but not covered by its Section 27(a-c) and stocking or exhibiting such a non-spurious or non-adulterated drug, among others. If compounding is granted and paid for, the key benefit is “immunity from prosecution” for that case, subject to conditions. This change is for the better if the regulatory apparatus implements it in good faith. For offences based on record keeping and disclosure, compounding prevents needless criminalisation and lets enforcement focus on direr violations.

The main pitfalls are the guidelines regressing into a ‘pay and pass’ scheme and the CDSCO’s transparency. Firms can seek compounding “before or after” prosecution. If, however, the CDSCO does not publish (even redacted) compounding orders and the underlying case details, the public may lose faith in the legal proceedings and in the regulator. Even if repeat offenders cannot avail of the benefit, there needs to be a publicly auditable trail. The guidance’s emphasis on discretion and conditions cannot substitute for public reporting that lets independent actors check whether the same firms are repeat offenders. Similarly, the published process does not create room for consumer groups or whistle-blowers to make representations before immunity is granted. Next, the way the errors that can be compounded are written is broad enough in practice to cover a wide range of behaviours, from lapses in paperwork to more substantive compliance failures. If the compounding fines are also set too low, applied inconsistently or used routinely in place of deterrence, compliance will only falter. Perhaps most of all, the CDSCO also needs to link compounding to corrective and preventive actions, follow-up inspections, and, where relevant, public-facing actions such as issuing alerts or directing firms to recall products. Otherwise, there may not be a durable reduction in risk over time.