India: Biotechnology Laws in India

Biotechnology involves the modification of the basic genetic material in living things namely DNA , which imparts new properties and capabilities in organisms including plants, animals and micro organisms which can be harnessed for a number of useful applications.

Vast changes to facilitate growth in this sector are taking place in the country.

Approximately, 60% of the industry is devoted to human health applications, 10% to agricultural biotechnology and 30% to industrial applications, bioinformatics and genomics. The Recombinant DNA (rDNA) technology is being successfully used in various sectors such as agriculture, health care, process industry and environment management. The current focus is on genomics, proteomics, transgenics, stem cell research and product development.

• Foreign companies may partner with India at the drug discovery stage of research, and use the Indian companies for contract research and manufacturing. This is because an increasing number of large pharmaceutical companies are finding it difficult to conduct the entire drug discovery process-in-house. India on the other hand provides a cheaper infrastructure. This has given rise to contract research organizations specialising in drug discovery services. Contract research services are largely focused on molecular biology, bioinformatics, genomics & stem cell research. Clinical research and trials are expected to grow exponentially over the next 5 years.

• There are tremendous opportunities in India for data-mining, gene annotation, and the development of software interfaces. These require:

• enormous computing power for which India has established its supremacy. 

• Foreign companies may form joint ventures with Indian companies, or enter into technology transfer agreements or strategic research partnerships with key research institutions.

• The Indian market provides opportunities to produce and sell vaccines and therapeutics that respond to the needs of the millions of poor in India.
• In the agricultural biotechnology sector, with the approval for commercial release of first genetically modified product (Bt Cotton), India is expected to approve other crops, including mustard, soyabeans, corn and potatoes, in the near future.

• Trained manpower and knowledge base
• Good network of research laboratories
• Rich Biodiversity: India's human gene pools offer an exciting opportunity for genomics.
• Well developed base industries (e.g.: pharmaceuticals, seeds)
• Access to intellectual resources of Non-residents Indians in this area
• Extensive clinical trials and research and access to vast & diverse disease population

• Lack of venture capital
• Relatively low R&D expenditure by industry

• The Indian government has entered into a number of biotechnology co-operation agreements with various countries in an effort to foster additional growth in this sector.

• Several State Governments such as Karnataka, Tamil Nadu, Andhra Pradesh, Maharashtra have taken out their specific policies to boost the biotechnology sector in their respective areas. Some of the key steps taken by the State Governments include: announcing separate Biotechnology Policy for their States, setting up of Task Forces with experts to guide them on policy issues, setting up of exclusive Biotechnology Parks with agriculture and health biotechnology as key areas. The city of Bangalore, located in the State of Karnataka and known as the IT capital of India, is emerging as the hub of Biotechnology industry in India.

A new entrant to the Indian market should consider one of the following options, depending on the expected volume of business, the nature of business (whether it’s an active pharma ingredient/generic bulk drug or a pharma product), market potential and its long term strategy for the Indian market.

1. A foreign company may appoint a distributor as this is the ideal entry option, which does not require much in the way of resources. But the selection of the right distributor is essential. For most industrial products, one exclusive indenting agent or distributor is the most common arrangement.
2. A foreign company may open its Liaison Office in India. However, a liaison office is not allowed to transact any business. It could only undertake market development activities. Expenses of this type of office must be met through inward remittances from the Head Office abroad. The Reserve Bank of India (RBI) grants approval for the opening of such offices.
3. Opening of a Branch Office by foreign companies engaged in manufacturing and trading activities abroad is another option available to undertake buying and selling activities in India. A branch office may render technical support and professional consultancy services but it is not allowed to undertake manufacturing activities. Permission from the RBI is required to set up this type of office.
4. Joint Venture/Wholly Owned Subsidiary: A foreign company can commence operations in India through incorporation of a company under the provisions of the Indian Companies Act (1956).

Department of Biotechnology [DBT] constituted under the Ministry of Science and Technology is the nodal agency for policy, promotion of R&D, international cooperation and manufacturing activities. Together with DBT, Genetic Engineering and Approval Committee [GEAC] constituted under Ministry of Environment and Forests [MoEF] is the leading regulatory body in the area of Biotechnology in India. Several committees have also been constituted under the said ministries to regulate the activities involving handling, manufacture, storage, testing, and release of genetic modified materials in India. These committees have statutory authority. Most of the committee members are from the scientific community and staff of DBT and MoEF. DBT appoints the members to the committees. The GEAC is supposed to be assisted by the State Biotechnology Coordination Committees (SBCC) and District Level Committees (DLC).

The most important committees are:

• The Institutional Biosafety Committees (IBSC), responsible for the local implementation of guidelines,

• Review Committee on Genetic Manipulations (RCGM) responsible for issuing permits;

• GEAC responsible for monitoring the large scale and commercial use of transgenic materials.

The Biotechnology industry in India is governed by the following enactments depending upon their relevance/applicability on case to case basis:

1. Environment Protection Act, 1986
2. EXIM Policy
3. Foreign Exchange Management Act, 1999
4. Laws pertaining to Intellectual Property Rights
5. Rules for the Manufacture, Use/Import/Export and Storage of Hazardous Micro Organisms/Genetically Engineered Organisms or Cells, 1989 notified by Ministry of Environment & Forests on December 5, 1989 under Environment and Protection Act, 1986.
6. Revised Recombinant DNA Safety Guidelines
7. Guidelines for Research in Transgenic Plants & Guidelines for Toxity and Allergenicity Evaluation of Transgenic Seeds, Plants and Plant Parts, 1998
8. National Seed Policy, 2002
9. Seeds Act, 1966
10. The Plants, Fruits and Seeds [Regulation of import in India] Order 1989 issued under the Destructive Insects and Pests Act, 1914.
11. Guidelines for Generating Preclinical and Clinical Data for rDNA Therapeutics, 1999
12. Drugs & Cosmetic Act 1940 along with Drugs and Cosmetic Rules
13. Drug Policy, 2002
14. Biological Diversity Act

Under the Foreign Direct Investment [FDI] Scheme of the Government of India, a person resident outside India [including foreign companies, Non-Resident Indians (NRIs) and Overseas Corporate Bodies (OCBs)] can invest in the Indian company not engaged in agriculture including plantation by way of subscription of up to 100% of its shares, without obtaining any prior approval provided that the person resident outside India does not have a previous financial or technical collaboration in India.

Under the automatic route of the RBI, an Indian company may issue shares to the person resident outside India provided:

• that the Indian company does not require an industrial licence under the provisions of the Industrial [Development & Regulation] Act, 1951 or under the locational policy notified by the Government of India under the Industrial Policy; and

• the shares of the Indian company are not being issued with a view to acquiring existing shares of any Indian company.

If the person resident outside India has a previous financial or technical collaboration or a trademark agreement in India in the same or allied field in which the Indian company is engaged, then the approval of the Ministry of Finance, is required to be obtained prior to making any investment. Also, if the shares are being issued with a view to acquiring the existing shares of the Indian company, prior approval of the Ministry of Finance and thereafter, of RBI is required. Ministry of Finance approval takes about 4-6 weeks and RBI approval takes about 2 weeks.

The initiation and execution of any research project, production activity and field trials are preceded by necessary procedures of notification and approval of competent authority including IBSC, GEAC depending on the nature of the project and activities.

"Recombinant DNA Safety Guidelines, 1990" were released by Department of Biotechnology which cover areas of research involving genetically engineered organism and these guidelines were further revised in 1994. The revised guidelines are in respect of safety measures for the research activities, large scale use and also the environmental impact during field applications of genetically altered material.

Further, "Research in Transgenic Plants & Guidelines for Toxity and Allergenicity Evaluation of Transgenic Seeds, Plants and Plant Parts, 1998" [Guidelines] specifically covers rDNA research on plants including the development of transgenic plants and their growth in soil for molecular and field evaluation. The guidelines also deal with import and shipment of genetic modified plants for research use.

Under the said guidelines, the following clearances are required:

IBSC is the nodal point of interaction within a commercial organisation/applicant company involved in rDNA research for the implementation of rDNA guidelines. Therefore, in the first instance, applicant company intending to carry out research activities involving genetic manipulation of microorganisms should constitute IBSC comprising of the Head of the applicant company, scientists involved in DNA work, a medical expert and a nominee of the DBT.

All recombinant research carried out by the applicant company shall designate a Principal Investigator [PI].

i. In case of Category I routine recombinant experiments mentioned in the guidelines, the PI is required to intimate to the IBSC in the prescribed proforma.

ii In case of Category II experiments, the PI shall seek permission of IBSC before starting the experiment. IBSC shall intimate its decision to the RCGM before execution of the experiments and RCGM shall put the information on record.

iii. Category III experiments, where the risk involved in the experiments are considered to be of higher magnitude having the potential of polluting/endangering the environment, the biosphere, the eco system, the animals and the human beings could be conducted only after obtaining clearance from RCGM and upon being notified by the DBT.

All experiments conducted in green house and open field conditions not belonging to the Category II, would fall under Category III.

Therefore, IBSC shall review and give clearance to the project proposals falling under the restricted category that meets the requirements under the guidelines. Where the clearance from the RCGM is required, IBSC shall forward its report to the RCGM after screening along with its recommendation.

The RCGM under the DBT comprises of representatives of a) DBT; b) Indian Council for Medical Research; c) Indian Council for Agricultural Research; d) Council for Scientific and Industrial Research; and e) other experts in their individual capacity.

Before conducting the research in rDNA work involving risk categorized as category III and above under these guidelines, the PI/Applicant is required to obtain the permission of RCGM following approval from the IBSC. After reviewing the application, the RCGM may recommend the application to Monitoring cum Evaluation Committee [MEC] of the DBT for agronomic benefits and evaluation. After detailed deliberations, the MEC recommends the modified application back to RCGM. For making its evaluations and recommendations, MEC may visit trial sites, analyze data, inspect facilities and conduct environmental risk assessments.

An applicant shall also seek the permission of the RCGM for conducting green house trials and small-scale field trials to generate data to assess the safety of GM/transgenic crops that are intended to be released into open fields. The safety studies include environmental safety studies (pollen flow, emergence of volunteers, persistence etc.), food safety studies (toxity, allergenicity, pathogen drug resistance, alteration of nutritional value etc.], and the assessment of agronomic advantage over non-transgenic crops.

Large-scale field trials would also require the approval of the GEAC.

In case of large scale field trials, deregulation and commercialization, in addition to the DBT approval process mentioned above, permission of GEAC constituted under the MoEF is also required.

Precisely, approval of the GEAC is required from the environmental angle on:

i. Import, export, transport, manufacture, process, selling of any microorganisms or genetically engineered substances or cells including food stuffs and additives that contain products derived by gene therapy.

ii. Discharge of genetically engineered/classified organisms/cells from Laboratory, hospitals and related areas into environment.

iii. Large scale use of genetically engineered organisms/classified microorganisms in industrial production and applications. Production can only be commenced after obtaining such approval.

iv. Deliberate release of genetically engineered organisms.

All approvals of GEAC shall be for a specified period not exceeding 4 years at the first instance renewable for 2 years at a time.

All imports of seeds and planting material etc. will be allowed freely subject to EXIM Policy guidelines and the requirements of the Plants, Fruits and Seeds (Regulation of Import into India) Order, 1989 and shall require a permit granted by the Plant Protection Advisor to the Government of India.

In addition, permits authorizing the import or receipt of regulated materials for research and specifying the conditions under which the agent or vector is shipped, handled and used are issued by RCGM. The RCGM issues the import certificate after looking into the documents related to the safety of the material and the national need. Based on such import permit issued by DBT on the recommendations of RCGM, the importer has to apply to the National Bureau of Plant Genetic Resources [NBPGR] for phytosanitary clearance after which the transgenic crops/seeds can be imported. Large scale imports also require the approval of GEAC.

The import consignment is required to be accompanied by an appropriate phyto-sanitary certificate issued by the authority of the country of export regarding their transgenic character or otherwise. The consignment on arrival at entry point would be inspected by Plant Protection Advisor, who after inspection, fumigation, disinfection or disinfestation, will accord quarantine clearance for the entry of the crops into India.

Transgenic crops/varieties are tested to determine their agronomic value for at least two seasons under the All India Coordinated Project Trials of ICAR, in coordination with the tests for environment and bio-safety clearance as per EPA before any variety is commercially released in the market. Based on such trials and recommendation, GEAC shall inform its decision to the concerned administrative ministry/ authorize body and also inform the applicant to follow the relevant acts.

After the transgenic plant variety is commercially released, its seed is required to be registered and marketed in India as per the provisions of the Seeds Act. After commercial release of a transgenic plant variety, its performance in the field, will be monitored for at least 3-5 years by the Ministry of Agriculture and State Departments of Agriculture.

Under the FDI Scheme of the Government of India, person resident outside India can invest up to 100% under the automatic route of the RBI by way of subscription of the shares in the share capital of the Indian company engaged in the manufacture of drugs and pharmaceuticals provided that the activity does not attract compulsory licensing or involve the use of recombinant DNA technology and specific cell/tissues targeted formulations.

Industrial licensing under the Industrial [Development & Regulation] Act, 1951 is compulsory for:

• bulk drugs produced by the use of recombinant DNA technology;
• bulk drugs requiring in-vivo use of nucleic acids as the active principles; and

• specific cell/tissue targeted formulations.

Therefore, investment in Indian companies engaged in the manufacture of licensable drugs and pharmaceuticals and bulk drugs produced by recombinant DNA technology requiring in-vivo use of nucleic acids, and specific cell/tissue targeted formulations, will require prior regulatory approval of the MINISTRY OF FINANCE . Human cloning is not allowed as a matter of principle.

Automatic permission is also given by the Government for Foreign Technology Agreements for all bulk drugs cleared by Drug Controller General of India [DCGI] which satisfy the standard conditions attached to such approvals, except in case of above mentioned products.

In the pharmaceutical biotechnology sector, approvals are required for the following purposes, apart from other statutory approvals:

For carrying out research and development in the field of recombinant DNA, the applicant company is required to submit the rDNA research proposal to IBSC constituted by it. The said proposal shall contain the prescribed particulars viz., rationale, molecular biology of genetically modified organisms, containment facility, risk management.

IBSC shall make an application to RCGM for seeking its permission for experiments (up to 20 litres of capacity). RCGM upon giving its approval shall also intimate its decision to State Biotechnology Coordination Committee (SBCC) and Drug Controller General of India (DCGI).

The manufacture of a new drug of rDNA base involves the following steps:

1. Production of Test Batch Invitro Characterisation

Firstly, an application is required to be made to the DCGI seeking permission to manufacture trial batches of the drug. Five such batches of drugs are manufactured upon obtaining such permission and the batches are characterized as physico chemical, biological and contaminants.

2. Conducting Animal Trials (Preclinical Studies)

The objectives of the preclinical studies are to define physiological, toxicological and efficacious potential of rDNA product prior to initiation of human studies. The preclinical studies begin with the formulation of animal testing protocol. An application is then required to be made to the Institutional Animal Ethics Committee (IAEC) seeking permission to conduct animal trials and for approval of the protocol so developed. After obtaining such permission, proposal is submitted to RCGM for animal study.

3. Conducting Human Trials (Clinical Studies)

A necessary pre-requisite for a clinical study/trial is that pre-clinical data must provide sufficient evidence of potential safety of the product through animal studies. The clinical studies are conducted in following three phases:

Phase I : It involves preliminary evaluation of safety of drug in healthy volunteers.

Phase II : It involves initial efficacy trial on small number of patients.

Phase III : It involves assessment of safety and efficacy of large scale multicentric trials on patients.

The initiation of clinical study begins with the development of a protocol in consultation with the study center and the same must be approved by the Institutional Ethics Committee (IEC). Thereafter, application for Phase I of the clinical studies is required to be submitted to RCGM and DCGI. Such an application is accompanied by IEC approval, study center details and pre-clinical trial report. Application is reviewed and approval is given by RCGM and DCGI.

Thereafter, application is required to be made to DCGI for next phase trial along with the necessary data.

Application is then made to the GEAC for clearance from environmental angle along with Phase III clinical data. The GEAC may approve the application subject to conditions it may impose in this regard.

Thereafter, subject to the reports of testing, permission may be given by DCGI and the concerned state authority to manufacture and market the drug as per the Drugs and Cosmetics Act, 1940.

Imports of drugs and pharmaceuticals is governed as per EXIM policy in force and the Drugs and Cosmetics Act, 1940 and Rules made thereunder.

Permission/Licence for import of rDNA drugs requires the making of an application to GEAC for clearance from environmental angle. After obtaining such approval, application is made to DCGI for import permission for a test batch. Trials shall be required to be conducted and stage of trials shall depend upon the product approval stage in the country of origin, usage, exposure of Indian population.

Trial data is then submitted to GEAC and DCGI and permission to import and market the drug is given as per the Drugs and Cosmetics Act, 1940.

Potential risks are associated with the use of genetically modified organisms in both agriculture and healthcare to human health, environment and biological diversity. Many countries have developed biosafety regulations to address these risks. There have been initiatives to harmonize biosafety regulations by international organizations. The most ambitious attempt to produce a globally harmonized regime for biosafety has been under the Convention on Biological Diversity (CBD). The Cartagena Protocol on Biosafety was negotiated and adopted under the aegis of CBD on January 29, 2000. The protocol seeks to protect biological diversity from the potential risks posed by living modified organisms. India is a party to the CBD and a signatory to Cartagena Protocol on Biosafety and has also decided to ratify the same.

Presently, India has rDNA Safety Guidelines, 1990, which were revised in 1994. The revised guidelines prescribe bio-safety measures which must be undertaken in India both for contained research activities, large scale environmental release of genetically altered agricultural and pharmaceutical materials and also for screening transgenic plants and seeds for toxicity and allergenicity. The guidelines are to be followed prior to the commercial release of genetically modified technologies.

Being a signatory to the Trade Related Intellectual Property Rights [TRIPs] Agreement of WTO, India has amended its legislations pertaining to intellectual property through various legislations including Patents (Amendment) Act, 1999, formulation of Protection of Plant Varieties and Farmers Rights Act, 2001 [PVP Act].

The current system in India allows patent protection on methods and processes of substances intended for use or capable of being used as food, medicine or drug and not on the end result/product itself. Companies are therefore able to study the end product and produce it using an unpatented processing method. However, in keeping with the TRIPS provision, it is now possible to file application for patent in India on product claims relating to drug/medicinal product and obtaining of priority date for such invention with effect from January 1, 1995 as amended by Patents (Amendment) Act, 1999. These applications are categorized as Mail Box applications and shall not be processed until the end of 2004 due to transition period of 10 years. However, Exclusive Marketing Rights (EMR) can be obtained based on such applications.

TRIPs Agreement allow countries to formulate their own sui generis regime for plants as an alternative to patent protection. To fulfill its commitment, India has passed PVP Act on plant variety protection that incorporates intellectual property rights. This law recognizes farmers’ rights and adapts some relevant provisions of UPOV 1978 and 1991 versions, based on the realities and requirements of India as an agriculture-based economy that equally recognizes the contribution of farming communities and private investments in the development of new plant varieties. The PVP Act provides for protection of registered varieties of plants for-- 15 years for annual crops and 18 years for trees and vines and includes the exclusive right to produce, sell, market, distribute, import or export the variety or its propagating material and to licence other persons to do the same.

Present position is that UPOV has allowed India to join the 1978 provisions of the treaty and India has also decided to be a member of the same.

The Biological Diversity Act is India's effort to interpret the Convention of Biodiversity. The Act aims to establish a National Biological Authority (NBA) with powers to protect biological resources in all ecozones within the country, provide approval to foreign agents to access biological resources or inventions derived from them and their exports. It further stipulates that before seeking any form of intellectual property rights on an invention based on India’s biological resources, prior permission of the authority constituted under the Act must be obtained.  Such authority will have the power to impose conditions to ensure a share of profits accruing from the intellectual property rights of the biological resources.  Biological resources have been defined to include plants, animals and micro-organisms, or parts thereof, their genetic material and by-products, for actual or potential use, but do not include human genetic material.

• A company engaged in the business of biotechnology and incurring any expenditure on scientific research (not being in the nature of cost of any land or building) on in-house research and development facility as approved by the prescribed authority is allowed deduction of 150% of the expenditure so incurred.

  For the purpose of above deduction, ‘expenditure on scientific research’, in relation to drugs and pharmaceuticals shall include expenditure incurred on clinical drug trial, obtaining approval from any regulatory authority under any Central, State or Provisional Act and filing an application for a patent under the Patents Act, 1970.

• Tax holiday has been extended to Indian companies carrying on scientific research & development which obtain approval from the prescribed authority upto 31 March 2004. The amount of deduction for such companies is 100% of the profits & gains of such business for a period of 10 consecutive assessment years, beginning from the initial assessment year, if such company fulfills such conditions as may be prescribed.

• Some Indian States offer concessional or nominal sales tax rates for "high end" new biotechnology products, as may be notified by the respective State Government, manufactured by units located within biotechnology parks established within those States.

• All units including those dealing with biotechnology products are eligible to avail of Export Oriented Units (EOU) Scheme or Export Processing Zones (EPZ) Scheme. Such units are eligible to import free of duty all types of goods including captive power plants, raw materials and components, prototypes, office equipment and consumables for office use, material handling equipment, except those contained in the negative list. The entire production of EOU/EPZ units shall have to be exported except for permitted levels of rejects and domestic sales. The unit should be a net foreign exchange earner. It shall have minimum net foreign exchange earning as a percentage of exports (NFEP) as specified in the policy and minimum export performance (EP) of US $ 0.50 Million or 3 times the CIF value of imported capital goods, whichever is higher for five years. Such units are also eligible to get deduction of specified percentage of profits from its total income (90% for the assessment year 2003-04) for calculation of corporate tax till the assessment year 2009-10 and is also eligible to get reimbursement/exemption from other indirect taxes.

The biotechnology industry in India is an emerging industry with significant promise for growth. There is a solid base of expertise in the country and strong government support for the industry at both national and State levels, which provides appropriate opportunities for investment in the biotechnology sector.

Actual resolution of legal issues depends upon many factors, including variations of fact and laws of the land. Though we have taken utmost care in the preparation of this Article, the information contained herein is not intended to constitute any legal advice and we cannot accept any responsibility towards those who rely solely on the contents of this booklet without taking further specialist advice. The reader should always consult with legal counsel before taking action on matters covered by this article.