In a significant regulatory shift, pharmaceutical companies and medical device manufacturers in India facing minor compliance lapses can now avoid protracted criminal trials. The government has formally established a mechanism to settle such eligible cases outside the courtroom through a compounding process.
What is the New Compounding Framework?
The new system is detailed in the Drugs and Cosmetics (Compounding of Offences) Rules, 2025. It permits specific offences under the longstanding Drugs and Cosmetics Act, 1940 to be resolved by paying a government-prescribed compounding amount. This move signals a transition towards a compliance-focused regulatory model, while authorities insist that stringent safeguards for public health remain firmly in place.
The Central Drugs Standard Control Organisation (CDSCO), India's national regulatory body, has issued comprehensive guidelines outlining the entire process. These documents specify eligibility criteria, set clear timelines, and detail the procedures for compounding offences. A key feature is the appointment of a designated Compounding Authority, which holds the power to grant official immunity from prosecution in approved cases.
How Will the New Settlement Process Work?
Entities or individuals involved in the manufacture, import, sale, or distribution of drugs, cosmetics, or medical devices can apply for compounding. This application can be submitted either before or after formal prosecution has been initiated by the authorities.
Once an application is received, the Compounding Authority will seek detailed reports from the relevant licensing and enforcement bodies. Based on this review, and after conducting a personal hearing if deemed necessary, the authority will decide to either allow or reject the compounding request.
If permission is granted, the applicant must pay the stipulated compounding amount within a fixed period. Upon successful payment, immunity from prosecution may be formally granted. However, officials emphasize that this protection is conditional. It can be revoked if the authority later discovers that material facts were concealed, false information was provided, or the set conditions were violated.
Aim: Reduce Litigation, Focus on Serious Threats
Senior officials explain that the primary objective of this mechanism is to drastically reduce litigation concerning technical or procedural lapses. By diverting these cases away from the overburdened court system, regulators and the judiciary can concentrate their resources on investigating and prosecuting serious violations that pose genuine risks to public health. These include offences related to spurious, adulterated, or unsafe drugs.
The guidance from CDSCO makes it unequivocally clear that compounding is a discretionary privilege granted by the authority and not an automatic right. Repeat offenders or those involved in serious breaches of the law are unlikely to qualify for this leniency. This reform falls under the broader Jan Vishwas framework, a government initiative aimed at decriminalizing minor offences across various sectors to ease business operations, while maintaining essential regulatory oversight.
This policy change is expected to bring relief to many in the healthcare industry, allowing them to resolve minor compliance issues more efficiently and with greater certainty, provided they act in good faith.
