Drugs and Cosmetics Act and CDSCO

In short

The Drugs and Cosmetics Act, 1940 with the Drugs and Cosmetics Rules, 1945 is India's core law controlling the import, manufacture, distribution and sale of drugs, cosmetics, and (through separate rules) medical devices — its object is to ensure that whatever reaches a patient is of the right identity, strength, quality and purity. It is enforced jointly: the Central Drugs Standard Control Organisation (CDSCO) under the Directorate General of Health Services, Ministry of Health and Family Welfare, headed by the Drugs Controller General (India), handles imports, new drugs, clinical trials, biologicals and standards; State Licensing Authorities (state FDAs) licence manufacture and sale within the state. Every B.Pharm syllabus examines it as "Jurisprudence / Pharmaceutical Regulatory Science", and it is the single most asked area in interviews for regulatory affairs, QA, production and sales roles at Sun Pharma, Cipla, Dr Reddy's, Lupin, Zydus, Torrent, Mankind and in drug inspector / government pharmacist recruitment (UPSC, state PSC, ESIC, railways). Knowing the schedules, licence forms and the definitions of misbranded, adulterated and spurious is the practical minimum on the job.

Explained

The Act, its scope and allied laws

• Enacted 1940, Rules 1945, applies to the whole of India; amended many times — notably the Drugs and Cosmetics (Amendment) Act, 2008, which sharply raised penalties for spurious and adulterated drugs and created special courts.
• Covers: allopathic drugs, Ayurvedic/Siddha/Unani (ASU) drugs (Chapter IVA), homoeopathic medicines, cosmetics, and devices notified as drugs. It does not cover the *practice* of pharmacy (Pharmacy Act, 1948) or advertising claims (Drugs and Magic Remedies Act, 1954).
• Key definitions: a drug (Sec. 3(b)) includes medicines for internal or external use of humans or animals, substances intended for diagnosis/treatment/prevention, substances other than food intended to affect the structure or function of the body, components of drugs such as empty gelatin capsules, and notified devices. A cosmetic (Sec. 3(aaa)) is any article intended to be applied to the human body for cleansing, beautifying, promoting attractiveness or altering appearance, including anything intended for use as a component of a cosmetic. Unlike US law, the Indian definition does not exclude soap — toilet soaps are cosmetics (BIS standards via Schedule S; imported soaps need CDSCO registration).
• Allied legislation a student must be able to name: Pharmacy Act, 1948; Drugs and Magic Remedies (Objectionable Advertisements) Act, 1954; Narcotic Drugs and Psychotropic Substances Act, 1985; Medicinal and Toilet Preparations (Excise Duties) Act, 1955; Drugs (Prices Control) Order, 2013 under the Essential Commodities Act, 1955; Clinical Establishments Act, 2010; BioMedical Waste Management Rules, 2016; Legal Metrology (Packaged Commodities) Rules, 2011 for pack declarations.
• A New Drugs, Medical Devices and Cosmetics Bill to replace the 1940 Act has been circulated in draft; it is not enacted, so the 1940 Act remains the law in force.

Regulatory bodies and who licenses what

• CDSCO: headquarters at FDA Bhawan, New Delhi, with zonal, sub-zonal, port offices and central drug testing laboratories. Functions: approval of new drugs and clinical trials, import licensing and registration, laying down standards, licensing of blood centres, vaccines, r-DNA products and large-volume parenterals jointly with states, Class C and D medical devices, banning drugs under Sec. 26A, and publishing monthly lists of not-of-standard-quality (NSQ) and spurious drugs.
• DCGI: the central licensing authority and the officer who signs new-drug approvals, import licences and bans.
• Drugs Technical Advisory Board (DTAB, Sec. 5): the top technical advisory body on allopathic and homoeopathic matters; recommends amendments to schedules and rules. ASUDTAB is its ASU counterpart (Sec. 33C).
• Drugs Consultative Committee (DCC, Sec. 7): central + state officers; its job is uniformity of enforcement across states. ASUDCC is the ASU equivalent.
• Central Drugs Laboratory (CDL), Kolkata (Sec. 6): the statutory appellate testing laboratory; its report is conclusive evidence in court. CRI Kasauli tests vaccines and sera; other central labs include the Indian Veterinary Research Institute (veterinary) and CDTLs.
• State Licensing Authority / state FDA: grants manufacturing and sale licences, appoints Drug Inspectors and Government Analysts, and runs state drug testing laboratories (e.g., Maharashtra FDA, Gujarat FDCA, Tamil Nadu DDC).
• Applications are filed online through CDSCO's Sugam portal / National Single Window System; most states have their own online portals (e.g. XLN).

Offences: the four statutory quality failures, and penalties

• Not of standard quality (NSQ, Sec. 16): the drug does not comply with the standard in the Second Schedule — in practice the Indian Pharmacopoeia (IP), and where no IP monograph exists, BP/USP or the manufacturer's accepted specification.
• Misbranded (Sec. 17): coloured, coated, powdered or polished so that damage is concealed, or made to appear of better or greater therapeutic value than it is, or not labelled in the prescribed manner, or the label/container bears a false or misleading claim. Cosmetics: Sec. 17C.
• Adulterated (Sec. 17A): contains filthy, putrid or decomposed substance, prepared or stored under insanitary conditions, container composed of a poisonous or deleterious substance, contains an unsafe colour, contains a harmful added substance, or its strength differs from what it purports to be.
• Spurious (Sec. 17B): imitates or is a substitute for another drug, or is sold under a name belonging to another drug, or the label/container bears the name of a fictitious or non-existent manufacturer, or is substituted wholly or partly by another drug, or purports to be the product of a manufacturer of whom it is not truly a product. Cosmetics: Sec. 17D.
• Prohibitions: Sec. 18(a) — manufacture/sale of NSQ, misbranded, adulterated, spurious or prohibited drugs; Sec. 18(b) — sale or stocking of drugs/cosmetics imported or manufactured in contravention of the Act (sale of a patent or proprietary medicine without displaying the true formula or list of active ingredients is Sec. 18(a)(iii)); Sec. 18(c) — manufacture or sale without a licence; Sec. 10 and 10A — import prohibitions and power to prohibit import; Sec. 26A — power of the Central Government to prohibit a drug in the public interest (the basis for fixed-dose combination and drug bans).
• Penalties (Sec. 27, as amended in 2008): spurious or adulterated drug that has caused or is likely to cause death or grave injury — imprisonment not less than 10 years, extendable to life, and fine not less than ₹10 lakh or three times the value of the drugs confiscated, whichever is more; Sec. 27(c) other spurious drugs — not less than 7 years to life, fine not less than ₹3 lakh or three times the value, whichever is more; Sec. 27(b) adulterated drugs (not causing harm) and manufacture/sale without a valid licence — 3 to 5 years with fine not less than ₹1 lakh or three times the value, whichever is more; Sec. 27(d) NSQ drugs and other contraventions — 1 to 2 years with fine not less than ₹20,000. Cosmetics offences are under Sec. 27A, repeat offences Sec. 28–30.
• Procedure: offences under Sec. 27(a) and 27(c) are cognizable and non-bailable (Sec. 36AC); Sec. 36AB provides for designation of Special Courts; Sec. 32 says prosecution is instituted on the complaint of an Inspector or an aggrieved person. The Jan Vishwas (Amendment of Provisions) Act, 2023 introduced compounding of certain minor, non-quality contraventions — check the current text for the list.
• Inspector's powers (Sec. 22): inspect premises, draw samples, seize stocks and records, and enter and search with reason. Sec. 23 procedure: the sample is divided into four portions — one to the person, one sent to the Government Analyst, one to the court, one retained by the Inspector; receipt in Form 17, intimation in Form 17A, analyst's report in Form 13. Under Sec. 25(3), the accused may notify intention within 28 days of receiving the report to have the court sample tested at the CDL, whose report prevails.

The Schedules — what each one controls

• A: application and licence forms. B / B1: fees for test and analysis (B1 for ASU). C and C1: biological and special products (sera, vaccines, insulin, hormones, sterile products, bacteriophages) needing special licensing in Form 28. D: exemptions relating to imports. E1: poisonous substances in ASU medicines, dispensed only under a registered practitioner's supervision.
• F / F1: blood centres and vaccines/sera requirements. G: substances to be used only under medical supervision — label carries "Caution: it is dangerous to take this preparation except under medical supervision" (cytotoxics, some anti-diabetics).
• H: prescription-only drugs; label carries the symbol Rx and the warning that they are to be sold on the prescription of a registered medical practitioner only. H1: 40-odd third- and fourth-generation antibiotics, anti-TB drugs and some habit-forming drugs — label bears a red Rx inside a red box, and the retailer must keep a separate bound register of supplies for three years with prescriber and patient details.
• X: psychotropic/narcotic-type drugs needing a special licence (Forms 25F/28F for manufacture; sale in Forms 20F/21F); prescription in duplicate, one copy retained two years.
• J: diseases and ailments for which no drug may claim to cure or prevent (also read with the Magic Remedies Act). K: exemptions — including the village/itinerant-vendor and household-remedies exemptions and exemption for Government supply.
• M: GMP and requirements of premises, plant and equipment — comprehensively revised by notification in 2023, with a pharmaceutical quality system, QRM, product quality review, computerised-system and stability requirements; large manufacturers (turnover above ₹250 crore) had to comply within six months, and MSMEs that applied were given until 31 December 2025, so the revised Schedule M now applies to all manufacturers. M1: homoeopathic; M2 (cosmetics) and M3 (devices) are now superseded by the Cosmetics Rules, 2020 and Medical Devices Rules, 2017.
• N: minimum equipment for a pharmacy. O: disinfectant fluids. P: life period (shelf life) of drugs; P1: pack sizes. Q: permitted colours and prohibited ingredients in cosmetics. R / R1: standards for condoms and other mechanical contraceptives, and for disposable syringes/needles. S: standards for cosmetics by reference to Indian Standards. T: GMP for ASU drugs. U / U1: manufacturing and analytical records for drugs and for cosmetics. V: standards for patent and proprietary medicines. Y: was the schedule for clinical trials and import/manufacture of new drugs — replaced by the New Drugs and Clinical Trials Rules, 2019.

Licences, forms and conditions

• Manufacture: apply in Form 24 → licence Form 25 for non-specified (ordinary) drugs; Form 27 → Form 28 for Schedule C and C1 drugs; Form 27C → 28C for blood centres; loan licences Form 25A / 28A; repacking Form 25B; Schedule X Form 25F / 28F. Form 29 is a test licence for manufacture of small quantities for examination, test or analysis.
• Sale: apply in Form 19 → Form 20 (retail, general) and Form 21 (retail, Schedule C/C1); Form 20B / 21B for wholesale; restricted-licence Forms 20A/21A for shops without a pharmacist (general-store medicines). Retail sale of drugs requires a registered pharmacist present (Pharmacy Act read with Rule 65); wholesale requires a registered pharmacist or a graduate with one year's, or matriculate with four years', experience.
• Validity and renewal: licences are now generally granted on a continuing basis subject to payment of a retention fee at the prescribed interval (historically five-yearly renewal) — the exact fee and interval have changed, so check the current rules.
• Import: Form 8 → licence Form 10 to import drugs for sale; Form 12 → Form 11 for import for test, analysis or examination; Form 40 → Registration Certificate Form 41 for the overseas manufacturing site and its products, valid three years; import of a new drug or a drug for clinical trial is handled under the CT-series forms of the NDCT Rules, 2019. Sec. 9 (misbranded/adulterated/spurious imports) and Sec. 13 fix import penalties.
• New drugs and trials (NDCT Rules, 2019 — detail belongs to the clinical-research topic): a new drug is one not used to a significant extent in India, or an approved drug with a new claim, indication, dosage, route or dosage form, an FDC, a modified-release product, or a vaccine, r-DNA, living-cell, stem-cell or gene-therapy product; a drug stays a "new drug" for four years from approval. Trial permission is sought in the CT-series forms, with decision timelines of 30 working days for drugs discovered and developed in India (deemed approval if nothing is communicated) and 90 working days otherwise; registered Ethics Committees, compensation for trial injury or death, and waiver of local trials for drugs approved in notified countries are built into these rules.
• Labelling essentials (Rules 96–97): proper and generic name, name and address of manufacturer with licence number, batch/lot number ("B. No."), manufacturing date, expiry date, net content, storage conditions, Rx/NRx symbols, "For external use only" where applicable, maximum retail price inclusive of all taxes, and the Rx / XRx symbol with the boxed warning for Schedule H/H1/X (the "red line" on antibiotic packs is an awareness campaign, not a labelling rule).

Cosmetics, devices and prices

• Cosmetics Rules, 2020 (framed under Sec. 33) replaced the old Part XIV: import needs a registration certificate from CDSCO (Form COS-1 application → COS-2 certificate); manufacture needs a licence from the State Licensing Authority in the COS-series forms, with a competent technical person (a degree in pharmacy/chemistry or equivalent). Standards are in Schedule S read with BIS specifications; permitted colours, hexachlorophene, mercury and lead/arsenic limits are prescribed; testing of cosmetics on animals, and import of cosmetics tested on animals, is prohibited.
• Medical Devices Rules, 2017 classify devices risk-wise as A (low), B (low-moderate), C (moderate-high), D (high) following GHTF principles, with MD-series forms, QMS per ISO 13485, mandatory registration of all devices now notified as drugs, and essential-principles conformity.
• Prices: the National Pharmaceutical Pricing Authority (NPPA) fixes ceiling prices for formulations in Schedule I of DPCO, 2013 (aligned to the National List of Essential Medicines, 2022) as the simple average of the price-to-retailer of all brands with at least 1% market share, plus a 16% retailer margin; non-scheduled formulations may be raised by at most 10% in 12 months; scheduled ceiling prices are revised annually by the WPI. Overcharging is recovered with interest and penalty.
• Advantages of this framework: one national standard of quality, criminal liability for spurious drugs, and a route for Indian-developed drugs to be approved quickly. Limitations: dual central–state enforcement gives uneven inspection quality and licence-shopping; state analyst laboratory capacity is thin; the Act is a 1940 statute patched by rules rather than a modern consolidated law.

Key points

• Drugs and Cosmetics Act, 1940 - regulates import, manufacture, distribution and sale of drugs, cosmetics and notified devices; operative detail is in the Rules, 1945.
• CDSCO / DCGI - central authority: imports, new drugs, trials, biologicals, standards, bans, Class C/D devices.
• State Licensing Authority - manufacturing and sale licences, drug inspectors, government analysts, state labs.
• DTAB - technical advice and schedule amendments; DCC - uniform enforcement; CDL Kolkata - statutory appellate testing lab.
• Second Schedule - the standards reference; non-compliance makes a drug not of standard quality.
• Spurious vs adulterated - spurious is an identity/origin fraud (fake name, fictitious manufacturer); adulterated is a contamination or strength failure.
• Section 18(c) - no manufacture or sale without a licence; Section 26A - power to ban a drug or FDC in the public interest.
• Section 27(a) - spurious/adulterated drug causing death or grave injury: ≥10 years to life, fine ≥ ₹10 lakh or 3× value of drugs confiscated, whichever is more; cognizable and non-bailable.
• Section 23 four-part sampling - person, Government Analyst, court, Inspector; Form 13 analyst's report; CDL appeal within 28 days of the report.
• Schedule H / H1 / X - prescription-only; H1 red-box Rx with a separate register kept 3 years; X needs a special licence and duplicate prescription retained 2 years.
• Schedule M - GMP and premises; revised comprehensively by the 2023 notification; small units' extension ran to 31 December 2025.
• Schedule C and C1 - biologicals and sterile/special products licensed in Form 28, not Form 25.
• Form 25/28 manufacture, Form 20/21 retail, Form 20B/21B wholesale, Form 29 test licence, Form 10 import licence, Form 41 registration certificate.
• New drug - stays "new" for 4 years from approval; governed by the New Drugs and Clinical Trials Rules, 2019, which replaced Schedule Y.
• Cosmetics Rules, 2020 - CDSCO registration for imports, state licence for manufacture, animal testing prohibited; soap is a cosmetic in India (unlike the US).
• Medical Devices Rules, 2017 - risk classes A, B, C, D with ISO 13485-based QMS.
• DPCO, 2013 / NPPA - ceiling price = simple average PTR of brands with ≥1% market share, +16% retailer margin; non-scheduled drugs capped at 10% a year.
• Registered pharmacist - mandatory for retail sale and dispensing (Pharmacy Act, 1948, read with Rule 65).

Formulas and examples

Example 1 — Ceiling price of a scheduled formulation. Brands of a Schedule I tablet: A, PTR ₹8.00, share 3.5%; B, PTR ₹7.50, share 12.0%; C, PTR ₹9.00, share 1.5%; D, PTR ₹6.00, share 0.6%.

• D has share < 1% → excluded. Qualifying brands: A, B, C.
• Simple average PTR = (8.00 + 7.50 + 9.00) / 3 = 24.50 / 3 = ₹8.1667 per tablet.
• CP = 8.1667 × 1.16 = ₹9.47 per tablet (9.4733 rounded).
• MRP at 5% GST = 9.47 × 1.05 = ₹9.94 per tablet → a strip of 10 may be priced at ₹99.40.
• Note the average is a simple average of qualifying brands, not weighted by market share.

Example 2 — Annual WPI revision. The same ceiling price of ₹9.47 per tablet, WPI change notified at +2.12%.

• CP(new) = 9.47 × 1.0212 = 9.6708 → ₹9.67 per tablet; MRP = 9.67 × 1.05 = ₹10.15.

Example 3 — Non-scheduled drug increase. A non-scheduled syrup has MRP ₹120 per bottle.

• Maximum permissible MRP in the next 12 months = 120 × 1.10 = ₹132. Raising it to ₹140 is overcharging; NPPA recovers the excess (140 − 132 = ₹8 per bottle) × units sold, with interest and penalty.

Example 4 — Penalty for a spurious drug. A firm is found with spurious injections valued at ₹14,00,000, and a patient has suffered grave injury.

• 3 × value = 3 × 14,00,000 = ₹42,00,000; statutory floor = ₹10,00,000.
• Fine shall not be less than the greater of the two = ₹42,00,000, with imprisonment not less than 10 years, extendable to life; the offence is cognizable and non-bailable and triable by a Special Court.

Example 5 — The four-year "new drug" window. A new molecule is approved by CDSCO on 12 August 2024.

• It remains a new drug until 11 August 2028. A second company wanting to manufacture it in 2026 must obtain CDSCO (DCGI) permission first, and only then the state manufacturing licence in Form 25/28; after August 2028 the state authority can licence it without central new-drug permission, subject to the drug not being otherwise centrally controlled.

Where it is used

• Regulatory affairs departments of Indian formulation companies: licence applications, variations, product permissions and responses to CDSCO/state FDA queries through the Sugam portal.
• Production and QA in plants: Schedule M compliance, batch records under Schedule U, labelling per Rules 96–97, and handling drug inspector inspections and NSQ notices.
• Retail and hospital pharmacy: maintaining Form 20/21 licences, prescription validation, Schedule H1 and X registers, expiry and recall handling — the daily work of pharmacists at Apollo, MedPlus, Wellness Forever and in government hospitals.
• Government roles: Drug Inspector and Government Analyst posts in state FDAs, CDSCO Drugs Inspector/Technical Officer, CDL and state drug testing laboratories — recruited through UPSC and state PSC exams in which this Act is a full paper.
• Imports, exports and distribution: Form 10/Form 41 for imports; port office clearance; registration dossiers for foreign sites; WHO-GMP and CoPP certificates issued by state authorities for exporters.
• Pricing and commercial teams: DPCO ceiling-price compliance, MRP printing, Form V/Form II price intimations to NPPA, and recalls of overpriced stock.

Interview questions

• Q: Which Act and Rules govern drug manufacture in India, and who enforces them? A: The Drugs and Cosmetics Act, 1940 with the Drugs and Cosmetics Rules, 1945; CDSCO under the DCGI handles imports, new drugs and standards, while State Licensing Authorities grant manufacturing and sale licences and appoint drug inspectors.
• Q: Difference between a spurious and an adulterated drug? A: Spurious is a fraud of identity or origin — it imitates another drug or carries a fictitious manufacturer's name; adulterated means the drug is contaminated, made or stored under insanitary conditions, contains an unsafe ingredient, or differs in strength from what it claims.
• Q: What is a "new drug" under Indian law? A: Under the New Drugs and Clinical Trials Rules, 2019, a drug not used to a significant extent in India, or an approved drug with a new claim, indication, dose, route or dosage form, an FDC, a modified-release form, or a biological such as a vaccine or gene therapy — and it remains a new drug for four years from approval.
• Q: Which forms are the manufacturing and retail-sale licences? A: Form 25 for ordinary drugs and Form 28 for Schedule C and C1 drugs; retail sale is Form 20 (and Form 21 for Schedule C/C1), wholesale Form 20B/21B.
• Q: What extra obligation does a Schedule H1 drug place on a retailer? A: It must be sold against a prescription and entered in a separate bound register showing the drug, quantity, prescriber and patient, which is retained for three years; the label bears a red Rx inside a red box.
• Q: A drug inspector draws a sample from your warehouse — what happens next? A: The sample is divided into four portions (one to you, one to the Government Analyst, one to the court, one retained), you get a receipt in Form 17; the analyst reports in Form 13, and within 28 days of that report the court sample can be sent to the Central Drugs Laboratory, whose report is conclusive.
• Q: Under which section can the Government ban a drug, and give an example of its use? A: Section 26A — used to prohibit irrational fixed-dose combinations and specific drugs in the public interest on DTAB's advice.
• Q: What replaced Schedule Y, and why does it matter? A: The New Drugs and Clinical Trials Rules, 2019, which added fixed approval timelines (30 working days for drugs discovered and developed in India, 90 otherwise), compulsory Ethics Committee registration, compensation for trial injury, and waiver of local trials for drugs approved in notified countries.
• Q: Is soap a cosmetic under the Act? A: Yes — Section 3(aaa) covers any article applied to the body for cleansing or beautifying and has no soap exclusion (that exclusion is in US law), so toilet soaps follow the Cosmetics Rules, 2020 and their BIS standards.
• Q: How is the ceiling price of a scheduled formulation calculated? A: NPPA takes the simple average of the price to retailer of all brands with at least 1% market share and adds a 16% retailer margin; it is revised annually by the WPI.
• Q: Who can hold a retail drug licence, and what qualification is needed to dispense? A: The licensee must employ a registered pharmacist under the Pharmacy Act, 1948, present at the premises, to compound and dispense — a restricted licence (Form 20A/21A) without a pharmacist covers only drugs that may be sold by a general store.
• Q: Why is the dual central–state structure criticised? A: Licensing standards, inspection rigour and testing capacity vary between states, enabling licence-shopping; the DCC exists to push uniformity but its recommendations are advisory.

Common mistakes

• Saying CDSCO issues manufacturing licences — most are issued by the State Licensing Authority; CDSCO's licensing role is imports, new drugs, trials and Class C/D devices.
• Mixing up Form 25 (ordinary drugs) with Form 28 (Schedule C and C1), or quoting Form 20/21 for manufacture instead of sale.
• Confusing misbranded (label/appearance misleads) with spurious (false identity or origin) in exam answers carrying exactly these definitions.
• Still writing "Schedule Y" for clinical trials — it was replaced by the NDCT Rules, 2019 — or quoting the pre-2008 penalties for spurious drugs.
• Treating the DPCO ceiling price as a weighted average, or forgetting the 1% market-share cut-off and the 16% retailer margin.
• Confusing Schedule H with Schedule H1 and X: only H1 needs the separate three-year register, and only X needs a special licence and duplicate prescription.
• Mentioning Schedule M2 and M3 as live: cosmetics and devices now sit under the Cosmetics Rules, 2020 and the Medical Devices Rules, 2017.

Related topics

Good Manufacturing Practice (GMP) · Quality control and quality assurance · Pharmacovigilance · Clinical research and trial phases · Regulatory affairs basics · Pharmacy Act, 1948 and pharmacy practice regulations