Drug licensing in India plays an important role in safeguarding public health by ensuring that only safe, effective, and quality drugs and cosmetics reach the market. The legal foundation for this system is laid down by the Drugs and Cosmetics Act, 1940, one of the earliest legislations enacted to control and standardize the pharmaceutical sector in India. Complementing this Act are the Drugs and Cosmetics Rules, 1945, which provide the detailed procedures, forms, and conditions for licensing, inspections, and compliance requirements for businesses engaged in the import, manufacture, distribution, and sale of drugs and cosmetics.

The administration of drug licensing is carried out at two levels. At the central level, the Central Drugs Standard Control Organization (CDSCO) oversees matters such as approvals for new drugs, import licenses, and medical devices, while the State Drug Control Authorities regulate sale, retail, and manufacturing within their respective states. Together, these regulatory bodies ensure that businesses comply with quality standards and legal provisions, thereby protecting consumer interests.

In this article, CA Manish Mishra talks about Drug License Registration in India: Process, Types, and Rules.

Legal Framework

Drugs and Cosmetics Act, 1940

The Drugs and Cosmetics Act, 1940 is the primary legislation that regulates the import, manufacture, distribution, and sale of drugs and cosmetics in India. It was enacted to ensure that drugs and cosmetics sold in the country are safe, effective, and conform to quality standards.

• Establishes Standards: The Act prescribes uniform standards for drugs and cosmetics to prevent substandard, adulterated, or misbranded products from entering the market. These standards cover aspects like strength, quality, purity, and labeling.

• Government Powers (Sections 26A & 26B): The Act empowers the Central Government to regulate or even prohibit the manufacture, sale, or distribution of any drug or cosmetic in the public interest. For instance, if a drug is found unsafe, lacking therapeutic value, or misused, the Government can immediately restrict its availability.

• Penalties (Section 27): Strict penalties are prescribed for violations. Manufacturing or selling spurious or substandard drugs can lead to imprisonment, fines, or both. These provisions are designed to deter illegal practices and protect consumer health.

Drugs and Cosmetics Rules, 1945

The Drugs and Cosmetics Rules, 1945 were framed under the Act to provide detailed procedures for its implementation. These rules form the operational backbone of the drug licensing system in India.

• Licensing Forms, Conditions, and Fees: The Rules specify the different license forms for retail, wholesale, import, and manufacturing of drugs and cosmetics. Each license type has defined conditions and prescribed fees, ensuring transparency and uniformity across states.

• Obligations for Qualified Staff, Storage, and Record-Keeping: Every licensed premises must employ qualified technical staff, usually a registered pharmacist or a competent person, to ensure that drugs are dispensed responsibly. Proper storage facilities, including cold-chain equipment for sensitive drugs, are mandatory. Detailed records of purchases and sales must be maintained and made available for inspection.

• Special Controls for Schedule Drugs: The Rules also provide special provisions for controlled categories:

  • Schedule H & H1 Drugs: These are prescription-only medicines. Pharmacies can sell them only against a valid prescription, and Schedule H1 drugs require additional record-keeping in a register.

  • Schedule X Drugs: These include narcotic and psychotropic substances. They are subject to even stricter controls, requiring locked storage, special license forms, and detailed inventory maintenance to prevent misuse.

Types of Drug Licenses

Drug licensing in India is structured to cover every stage of the pharmaceutical supply chain from manufacturing to retail sale. The Drugs and Cosmetics Act, 1940 and Rules, 1945 prescribe various license types depending on the nature of the activity, scale of operations, and type of drugs.

Sale Licenses

Sale licenses regulate how medicines are distributed at retail and wholesale levels.

• Retail Drug License (Form 20 & Form 21): A Retail Drug License is required for pharmacies and medical shops selling medicines directly to consumers. Form 20 applies to general medicines, while Form 21 covers Schedule C and C(1) drugs such as vaccines, insulin, and sera. A registered pharmacist must be employed at the premises.

• Wholesale Drug License (Form 20B & Form 21B): Wholesalers and distributors selling medicines to retailers, hospitals, or stockists must obtain a Wholesale License. Form 20B is for general drugs, while Form 21B applies to Schedule C and C(1) medicines. Unlike retail, a competent person with prescribed qualifications may be appointed instead of a pharmacist.

• Restricted Licenses (Form 20A & Form 21A): These are meant for small-scale businesses or vendors who wish to conduct limited drug sales without fulfilling the full infrastructure requirements of a standard pharmacy or wholesale outlet.

• Schedule X Licenses (Form 20F & Form 21G): Special licenses are required for selling Schedule X drugs, which include psychotropic and narcotic substances with high misuse potential. Form 20F applies to retail sale and Form 21G to wholesale. Strict compliance is required, including locked storage and detailed registers to prevent diversion or abuse.

Manufacturing Licenses

Any business involved in producing bulk drugs, formulations, or even repackaging must obtain a Manufacturing License. Compliance with Schedule M of the Drugs and Cosmetics Rules, 1945 is mandatory, which specifies Good Manufacturing Practices (GMP). These standards include hygienic infrastructure, quality control labs, validated processes, documentation, and safety protocols. Manufacturing licenses can be issued for different categories, such as allopathic medicines, ayurvedic and unani drugs, homeopathic products, and veterinary medicines.

Import Licenses

Businesses importing drugs, cosmetics, or medical devices into India must secure an Import License from the Central Drugs Standard Control Organization (CDSCO). Importers must demonstrate that the product meets Indian quality and safety standards, provide product dossiers, and submit proof of foreign approvals. Different categories, such as APIs (Active Pharmaceutical Ingredients), finished formulations, and medical devices, require separate licenses. The objective is to ensure that only safe and effective products enter the Indian market.

Specialized Licenses

Certain activities in the pharmaceutical sector require special licenses:

• Blood Banks: Blood banks need licenses to collect, store, test, and distribute blood and blood products. Stringent conditions apply to ensure donor and patient safety.

• Testing Laboratories: Laboratories testing drugs for quality and safety must obtain a license under Schedule L-1, which prescribes infrastructure, equipment, and procedural standards.

• Cosmetics Manufacturing: Cosmetics manufacturing is governed by the Cosmetics Rules, 2020. Manufacturers must register their products, maintain safety and quality standards, and comply with labeling requirements to prevent misleading claims.

Documents Required

Proof of Constitution of Business

Applicants must submit legal documents that establish the nature of the business. This may include a Certificate of Incorporation for companies, an LLP Agreement for Limited Liability Partnerships, or a Partnership Deed for partnerships. Sole proprietors can provide a GST certificate, shop act license, or other business registration proof. These documents confirm the legal identity and structure of the applicant.

Qualification Certificates of Registered Pharmacist/Competent Person

For retail licenses, a registered pharmacist’s qualification and registration certificate is mandatory, as only a pharmacist is legally permitted to dispense prescription drugs. For wholesale licenses, the law requires a competent person with the necessary educational background (such as a science graduate) or professional experience. Submitting these certificates assures regulators that medicines will be sold responsibly.

Proof of Premises (Rent Agreement/Ownership)

Applicants must demonstrate legal possession of the premises where drugs will be stored or sold. This is done by submitting either a rent/lease agreement with the landlord or an ownership document such as a property tax receipt or sale deed. Regulators verify that the premises meet prescribed requirements for size, safety, and suitability.

Layout Plan of the Shop/Warehouse

A detailed layout plan of the premises must be provided, showing storage areas, counters, refrigeration space, and other relevant sections. This helps the Drug Inspector verify whether the premises comply with structural requirements such as ventilation, cleanliness, and security measures.

Refrigerator/Cold Storage Proof

For drugs that require storage at controlled temperatures, applicants must provide proof of refrigerator or cold storage facilities. Items like vaccines, insulin, and biological products fall into this category. This ensures the integrity of temperature-sensitive drugs during storage and sale.

Identity Proof and Photographs of Partners/Directors

All directors, partners, or proprietors associated with the business must submit valid identity proofs (Aadhaar, PAN, Passport, or Voter ID) along with passport-size photographs. This is a KYC (Know Your Customer) requirement to confirm the authenticity of the applicants.

Fee Receipt and Application Forms (TM-48, as required)

The application must be submitted in the prescribed forms, such as Form 20, 21, 20B, 21B, etc., depending on the type of license sought. Along with this, the fee receipt confirming payment of government charges must be attached. In some cases, an authorization such as Form TM-48 (Power of Attorney) is needed if the application is being filed by an authorized representative on behalf of the business.

Process of Drug License Registration

Preliminary Step – Trademark Search of Business Name

Before applying, businesses should ensure that their proposed trade name or firm name does not conflict with any existing licensed entity. A trademark search is advisable to avoid duplication or objections from the licensing authority. Using a unique business name also helps in creating a distinct brand identity in the pharmaceutical market.

Application Filing

The application for a drug license must be filed online through the respective State Drugs Licensing Portal or, in some cases, through the Online National Drug Licensing System (ONDLS) or the CDSCO portal for central approvals. Applicants must choose the correct license type (retail, wholesale, manufacturing, or specialized) and submit the prescribed application forms (such as Form 20, 21, 20B, or 21B), along with the required fees.

Document Scrutiny

Once the application is submitted, the licensing authority conducts a pre-verification of all documents. This includes checking the constitution of the business, proof of premises, pharmacist/competent person qualifications, layout plans, and cold storage facilities. Any deficiencies or discrepancies must be rectified before the application proceeds further.

Inspection by Drug Inspector

A Drug Inspector visits the premises to verify compliance with statutory requirements. During inspection, aspects such as the minimum area of the shop, hygienic conditions, ventilation, proper storage facilities, presence of a refrigerator for sensitive drugs, and appointment of a qualified pharmacist or competent person are examined. This step ensures that the business is ready to operate as per the Drugs and Cosmetics Act, 1940 and Rules, 1945.

Grant of License

If the documents are satisfactory and the inspection report is positive, the licensing authority issues the appropriate Drug License. The license is granted in prescribed forms such as Form 20/21 for retail sale, Form 20B/21B for wholesale, or other applicable forms depending on the type of business. The granted license must be prominently displayed at the business premises.

Validity and Renewal

A drug license is generally valid for five years from the date of issue. Businesses must apply for renewal before the expiry date to ensure uninterrupted operations. Renewal requires submission of updated documents, proof of continued compliance, and payment of prescribed fees. Failure to renew on time can result in suspension or cancellation of the license.

Manufacturing License and Schedule M

Good Manufacturing Practices (GMP) under Schedule M

For any pharmaceutical company involved in producing formulations, bulk drugs, or repackaging, obtaining a Manufacturing License is mandatory. The licensing authority requires compliance with Schedule M of the Drugs and Cosmetics Rules, 1945, which prescribes Good Manufacturing Practices (GMP).

• Premises Design and Infrastructure: The facility must be constructed with hygienic design, proper ventilation, controlled temperature, pest-free environment, and segregation of different production areas to prevent contamination. Water systems must provide purified water suitable for pharmaceutical use.

• Equipment Qualification: All machinery and production equipment must be installed, calibrated, and maintained as per qualification standards. This ensures consistent performance and product safety.

• Validation, Documentation, and Data Integrity: Every step in the manufacturing process must be validated through written procedures. Detailed records of raw materials, production stages, testing, and packaging must be maintained. Data integrity principles, such as secure record-keeping and audit trails, are mandatory to prevent falsification or errors.

• Quality Management System (QMS): A robust QMS must be implemented, covering quality assurance, in-process controls, product recalls, and corrective and preventive actions (CAPA). This ensures continuous compliance and patient safety.

Recent Update – December 2023 Amendment

In December 2023, the Indian Government revised Schedule M to bring Indian GMP standards in line with World Health Organization Good Manufacturing Practices (WHO-GMP). The changes emphasize pharmaceutical quality systems across the entire product lifecycle, stricter documentation, and greater accountability of senior management.

• Larger Manufacturers: Companies with higher turnovers and larger production capacities are required to comply immediately with the revised Schedule M standards. Inspections and audits are already being conducted to verify compliance.

• Small and Medium Enterprises (SMEs): To ease the financial burden on smaller businesses, the Government provided additional time. SMEs with a turnover of up to ₹250 crore have until December 2025 to fully implement the revised GMP standards. This phased approach balances regulatory stringency with industry readiness.

Special Regulatory Categories

Medical Devices (MDR 2017)

Medical devices in India are regulated separately under the Medical Devices Rules, 2017 (MDR 2017), framed under the Drugs and Cosmetics Act, 1940. These rules introduced a risk-based classification system:

• Class A: Low-risk devices (e.g., surgical dressings).

• Class B: Low-to-moderate risk (e.g., hypodermic needles).

• Class C: Moderate-to-high risk (e.g., ventilators).

• Class D: High-risk devices (e.g., implantable devices, heart valves).

The classification determines whether the license is issued by the State Licensing Authority (Class A & B) or by CDSCO (Class C & D). Importers must apply for licenses through Form MD-14/MD-15. Since October 2023, registration of all medical devices has been made mandatory, ensuring stricter oversight of both domestic manufacturing and imports.

Cosmetics (Cosmetics Rules, 2020)

The regulation of cosmetics was separated from drugs with the introduction of the Cosmetics Rules, 2020. These rules require separate licenses for both manufacturing and import of cosmetics. Unlike drugs, cosmetics must undergo registration for each product and each pack size/variant before being placed in the market. The rules emphasize compliance with safety standards, restrictions on harmful ingredients, and proper labeling requirements (such as expiry dates, manufacturer details, and usage warnings). This ensures consumer protection and prevents misleading claims in the beauty and personal care industry.

New Drugs and Clinical Trials (NDCTR 2019)

The approval of new drugs, biologicals, and clinical trials is governed by the New Drugs and Clinical Trials Rules, 2019 (NDCTR 2019). These rules centralized the approval process with CDSCO, bringing transparency and efficiency. For any clinical trial or new drug introduction, Ethics Committee registration is mandatory, ensuring ethical oversight and protection of trial participants. The rules also introduced defined timelines for approvals to avoid delays—for example, accelerated review mechanisms for drugs addressing urgent medical needs. This regulatory framework strengthens India’s role in global pharmaceutical research while safeguarding public health.

Compliance Obligations

Retail/Wholesale Sale

Holders of retail and wholesale drug licenses must adhere to strict compliance measures to ensure safe distribution of medicines:

• Display of License at Premises: The issued drug license must be prominently displayed at the business premises for transparency and easy verification by inspectors or customers.

• Employment of a Qualified Pharmacist: Retail pharmacies must employ a registered pharmacist, while wholesalers must have a competent person with prescribed qualifications. This ensures that medicines, especially prescription-only drugs, are sold responsibly.

• Maintenance of Prescription Records: For Schedule H1 drugs (antibiotics and anti-tuberculosis medicines prone to misuse), a separate register must be maintained. This includes details of the patient, prescribing doctor, and quantity sold, allowing traceability and monitoring.

• Locked Storage for Schedule X Substances: Medicines falling under Schedule X (narcotics and psychotropic drugs) require special handling. They must be stored in a secure, locked facility with restricted access, and stock records must be meticulously maintained to prevent diversion or abuse.

Manufacturers

Manufacturers holding a drug license have broader responsibilities covering production quality and safety:

• Regular Audits and GMP Compliance: All manufacturing units must follow Good Manufacturing Practices (GMP) as prescribed under Schedule M. This includes routine self-inspections, internal audits, and compliance with hygiene, equipment standards, and documented processes.

• Stability Studies and Testing under Schedule L-1: Manufacturers are required to conduct stability testing to ensure drugs maintain their safety and efficacy throughout their shelf life. Testing laboratories must comply with Schedule L-1, which specifies infrastructure, equipment, and protocols for quality control.

• Renewal and Modification Reporting: Licenses must be renewed before expiry, typically every 5 years. Additionally, any changes in premises, technical staff, partners/directors, or manufacturing activities must be promptly reported to the licensing authority. Failure to update such modifications can result in suspension or cancellation of the license.

Enforcement and Penalties

Civil and Criminal Liability

The Drugs and Cosmetics Act, 1940 imposes strict penalties to deter violations and safeguard public health.

• Spurious or Misbranded Drugs: If a manufacturer or seller is found dealing in spurious, adulterated, or misbranded drugs, they can face imprisonment and hefty fines under Section 27 of the Act. In serious cases involving risk to human life, imprisonment can extend up to life, reflecting the seriousness of the offense.

• Unauthorized Sale Without License: Running a pharmacy, wholesale business, or manufacturing unit without a valid drug license is a serious violation. Such activities can lead to immediate cancellation of the license application (if pending), confiscation of stock, and criminal prosecution of the owner.

Inspection Powers

To enforce compliance, the Act grants broad powers to Drug Inspectors and other authorities.

• Seizure of Samples and Records: Drug Inspectors are authorized to enter premises, inspect facilities, and seize drug samples, invoices, registers, or other records for testing and investigation. These samples are sent to government-approved laboratories for analysis to verify compliance with quality standards.

• Special Courts for Drug-Related Offenses: Offenses under the Drugs and Cosmetics Act are tried in Special Courts designated for speedy trials of drug-related crimes. This ensures that cases of spurious drugs, illegal sales, or violations of licensing conditions are dealt with quickly and effectively, minimizing risks to public health.

Recent Developments

Revised Schedule M (2023–2025) for GMP Compliance

The Government revised Schedule M in December 2023 to align Indian GMP norms with WHO-GMP standards. Larger manufacturers must comply immediately, while SMEs with turnover up to ₹250 crore have time till December 2025. The revision strengthens pharmaceutical quality systems, documentation, and data integrity, ensuring global competitiveness and safer medicines.

Full Coverage of Medical Devices under MDR 2017

From October 1, 2023, all medical devices are regulated under the Medical Devices Rules, 2017. Devices are classified from Class A (low risk) to Class D (high risk). Licensing is mandatory via CDSCO or state authorities, and imports require Form MD-14/15, ensuring patient safety and stricter quality oversight of devices.

CCTV Mandates in Pharmacies

Several states, including Delhi, have directed pharmacies to install CCTV cameras to track the sale of restricted drugs. The focus is on Schedule H1 and Schedule X medicines, prone to misuse. CCTV monitoring ensures transparency, prevents illegal distribution, and strengthens surveillance by drug inspectors, improving accountability in pharmaceutical retail operations.

Drugs, Medical Devices and Cosmetics Bill, 2023

The 2023 Bill aims to replace the Drugs and Cosmetics Act, 1940, introducing a modernized regulatory framework. It proposes formal regulation of e-pharmacies, stricter penalties for violations, and updated standards for drugs, cosmetics, and devices. Once passed, it will significantly reform India’s healthcare compliance and bring it closer to global benchmarks.

Conclusion

Drug License Registration is not merely a regulatory formality but a vital safeguard to ensure public health and safety. Every stakeholder in the pharmaceutical supply chain retail chemists, wholesalers, manufacturers, or importers must secure the appropriate license and operate in compliance with the Drugs and Cosmetics Act, 1940 and its allied rules. Adherence to Good Manufacturing Practices (GMP), proper storage facilities, and prescription protocols is essential to maintain the integrity of medicines and protect consumers from harmful or substandard products.

With recent developments like the revised Schedule M, expanded coverage of medical devices, and stricter monitoring of prescription drug sales, compliance has become a continuous responsibility. Proper licensing not only prevents penalties and legal action but also strengthens business credibility, builds investor confidence, and enhances consumer trust, making it indispensable for sustainable growth.

Frequently Asked Questions (FAQs)

Q1. What is a Drug License in India?

Ans. A Drug License is an official authorization issued by the State or Central Drug Authority that permits a business to manufacture, sell, or distribute drugs and cosmetics in compliance with the Drugs and Cosmetics Act, 1940.

Q2. Who issues Drug Licenses in India?

Ans. Drug Licenses are issued by the State Drug Control Authorities for sale and manufacturing within the state, and by the Central Drugs Standard Control Organization (CDSCO) for imports and certain specialized categories.

Q3. What are the main types of Drug Licenses?

Ans. The main types include Retail Drug License, Wholesale Drug License, Manufacturing License, Import License, and specialized licenses for blood banks, testing labs, and cosmetics.

Q4. What documents are required for obtaining a Drug License?

Ans. Key documents include proof of business constitution, pharmacist qualification, premises proof, site layout, identity proof of partners/directors, cold storage details, and the prescribed application forms with fees.

Q5. What is the process for obtaining a Drug License?

Ans. Applicants must file an online application, submit documents, undergo a site inspection by a Drug Inspector, and on approval, receive the license in the prescribed form (20/21/20B/21B etc.).

Q6. What is Schedule M and why is it important?

Ans. Schedule M under the Drugs and Cosmetics Rules specifies Good Manufacturing Practices (GMP) for drug manufacturing. Compliance is mandatory for obtaining and renewing manufacturing licenses.

Q7. How long is a Drug License valid in India?

Ans. Typically, a Drug License is valid for five years and must be renewed before expiry to avoid penalties or cancellation.

Q8. What are the penalties for selling drugs without a license?

Ans. Selling or manufacturing drugs without a license can lead to imprisonment, heavy fines, and permanent cancellation of business operations under the Drugs and Cosmetics Act.

Q9. Are Medical Devices and Cosmetics covered under Drug License rules?

Ans. Medical Devices are regulated under the Medical Devices Rules, 2017, while cosmetics are governed by the Cosmetics Rules, 2020. Both require separate licenses from CDSCO or State Authorities.

Q10. What are the recent updates in Drug Licensing in India?

Ans. Recent updates include the revised Schedule M (2023) for stricter GMP compliance, mandatory registration of all medical devices from October 2023, and new compliance measures like CCTV in pharmacies in certain states.