The intent is clear: prevent interference and ensure quality.But is the cost justified? This is the crux of the debate sparked by the revised Schedule M mandate which bans nutraceuticals in drug-licensed facilities.While it impacts pharma players,it may benefit standalone nutra companies by leveling the field.The Karnataka High Court’s temporary stay gives manufacturers time to pause and reflect
In striking the right balance between safety and business, India’s nutraceutical industry stands at a pivotal crossroads. The recent revision to Schedule M bans the production of nutraceuticals in drug-licensed facilities to prevent cross-contamination. And, this has sparked a fiery debate. While it impacts pharma players, it may benefit standalone nutra companies by leveling the playing field. The Karnataka High Court’s temporary reprieve allows manufacturers to pause and reflect—for now. This pause came after a significant pushback from industry associations like the Karnataka Drugs and Pharmaceutical Manufacturers Association (KDPMA), Federation of Pharma Enterprises (FoPE) and The Council of Softgel Manufacturers Association Interest challenged Schedule M. They argued that the regulation would disproportionately burden smaller manufacturers, forcing costly infrastructure changes without clear evidence of safety benefits. The government had previously signaled it would act against facilities producing nutraceuticals, supplements, and drugs under one roof. Now, with enforcement on hold, manufacturers have a chance to present their case. At the heart of the issue lies a critical question: Can India find a middle ground that satisfies both sides?
Setting the context
In a broader context, the Indian government has already taken steps to explore how nutraceuticals should be regulated within the existing framework for pharma and food products. In February 2024, the government constituted a panel to consider bringing nutraceuticals under the purview of the Central Drugs Standard Control Organisation (CDSCO), instead of the Food Safety and Standards Authority of India (FSSAI), which currently governs the sector. This move was prompted by concerns over the regulatory challenges posed by the interchangeable use of certain ingredients and nutrients at different doses for pharma and nutra purposes. The panel, which includes members from various ministries and regulatory bodies, will explore multiple issues, including the feasibility of enforcing price controls on certain nutra categories, the introduction of Good Manufacturing Practice (GMP) provisions for nutraceuticals, and the potential certification of these products in alignment with Schedule M for pharmaceuticals. As the panel continues its work, the industry remains in limbo, awaiting clarity on how best to navigate these regulatory challenges.
Decoding the mandate
As these deliberations progress, the government’s potential move in the revised Schedule M to segregate pharma and nutra manufacturing marks a critical step towards stricter regulations, directly influencing the operational landscape for manufacturers. The move, though aimed at improving quality assurance, presents challenges such as increased compliance costs and potential supply chain disruptions. Sparking significant industry discussions. Sanjaya Mariwala, Executive Chairman and MD, OmniActive Health Technologies, and President, Association of Herbal and Nutraceutical Manufacturers of India (HADSA) welcomes the move, “Segregating production lines to meet stricter quality standards is a commendable move to ensure product integrity. However, it comes with significant challenges such as increased costs, potential supply chain disruptions, and reduced exports.”
Mariwala further suggests that high standard pharma plants, which meet rigorous benchmarks, should be permitted to produce nutraceuticals, but the reverse should not apply due to stricter drug requirements. “Collaboration between regulators and manufacturers is essential to address industry concerns and ensure practicality,” he further suggests.
Looking through a regulatory perspective, Amit Srivastava, Founder and Chief Catalyst, NutifyToday, notes that the amendments represent a regulatory shift addressing quality and safety. “By prohibiting shared manufacturing, the government is enforcing clearer boundaries between pharmaceutical and nutraceutical production, reducing risks of cross-contamination, and ensuring product integrity.” Srivastava explains.
He explains that segregating manufacturing lines would ensure adherence to the distinct regulatory and production standards for nutraceuticals and pharmaceuticals. Dedicated facilities are necessary to minimise contamination risks, safeguarding consumer health. Additionally, aligning with international norms would enhance the global acceptance of Indian products and boost export potential. Differentiating the two industries also strengthens trust and prevents misuse of regulatory gaps, ultimately enhancing market credibility.
On the other hand, Dr Vaibhav Kulkarni, Founder and Director, Zantus Lifesciences and Honorary Secretary of the Health and Dietary Supplements Association (HADSA), presentes a different perspective. “If the manufacturing facility is approved for pharmaceuticals, the said facility is indeed mandated as compliant with Schedule M. This means the facility has adequate cleaning validation procedures and prevention of crosscontamination processes. This implies that there is no risk for manufacturing a drug with a Dietary/ Food Supplement or a Nutraceutical. All global regulators such as US FDA, EU, MCC, MHRA, TGA permits manufacturing of Drugs and Food Supplements/ Nutraceuticals in the same facility. Hence, basis the explanation, I feel shared manufacturing can be evaluated and allowed.” Dr Kulkarni states.
He questions the rationale behind the amendment, adding, “In case of revised Schedule M Rules, 2023, insertion of ‘Note’ pertaining to discontinuation of dual use of manufacturing premises for producing drugs and nutraceuticals has no basis defined or explained. Looks like a suo moto decision. This goes against the philosophy of collaborative working between government and industry to build the pharmaceutical and nutraceutical business in India.”
Pause and reflect
However, the Karnataka High Court’s decision to grant a temporary stay has divided the industry. Experts differ on its impact on the industry as well.
Prasad Nakashe, Partner, Deloitte India, comments on the potential implications of the stay on the broader reform agenda. “The stay may temporarily slow down the momentum of regulatory reforms in the nutraceutical sector by creating uncertainty and delaying implementation. However, it is unlikely to halt the overall trend toward stricter regulations. As mentioned, it could prompt further discussions and refinements, leading to more balanced amendments.”
On the other hand, Mariwala calls for a single-window regulatory framework to streamline compliance processes. “While the amendments might slow the regulatory reform process for some time as the industry adjusts to the changes, they spell out a need for a single-window regulation framework. Strengthening of FSSAI’s role as a single-window regulator will help streamline compliance-related issues, reduce redundancies, and create an innovation-friendly framework. The focus should remain on protecting consumers while enabling credible players to thrive,” Mariwala states.
Looking at the big picture, Arvind Sharma, Partner, Shardul Amarchand Mangaldas & Co, highlights broader conversations about regulatory reforms in the nutraceutical sector. “We consider the momentum in relation to regulatory reforms in the nutraceutical sector to be separate and independent from the implementation of Schedule M. We have noticed conversations surrounding the concerns around regulation of nutraceuticals, especially in relation to certain nutraceutical products which are proposed to be governed by CDSCO. The panel that was constituted in January 2024 recently submitted its report with various recommendations in relation to nutraceutical products,” Sharma explains.
Balancing act: Giants vs. SMEs
The potential enforcement of stricter Schedule M regulations will alter India’s nutra market’s competitive dynamics, creating different challenges and opportunities for large players, small and medium enterprises (SMEs), and new entrants.
Sudesh Anand Shetty, Partner in Forensic Investigations, KPMG in India, highlights how large players may benefit from their financial stability. “The large players having sound financial resources for the implementation of stringent quality control may be having a competitive edge to implement the new regulation and maintain their dominance in the sector. These established players can continue competing in the international nutraceutical market that already follow similar regulations in advanced nations,” Shetty says.
Agreeing with Shetty, Nakashe, notes that smaller players and new entrants could struggle. “SMEs may struggle with the increased compliance costs and technical demands, potentially leading to consolidation or exits. New entrants could face higher barriers to entry due to the upfront investment required for compliance, slowing their market penetration. Overall, the regulatory changes may lead to a more competitive landscape, with larger, wellfunded companies dominating, while SMEs and new players face challenges,” Nakashe adds.
Meanwhile, Dr Kulkarni highlights the broader implications of the new regulations on India’s global reputation and the “Make in India” initiative. “The Indian companies have signed contracts with leading global companies for supply and have long-term contracts. These contracts have a penalty clause for non-supply, and these relationships have been built over the years and decades. By stopping the supply, due to enforcement of these rules, they will breach their global contracts, which will cause financial pain, destroy the reputation of the suppliers as well as the reputation of India. This can dent the ‘Make in India’ programme, causing mass layoffs, closure of facilities, as well as shortages of products to consumers, both in India as well as overseas. This will also discourage investors as well as start-up founders to invest in this industry space, causing permanent damage to this sector,” Dr Kulkarni opines.
Amidst this, Mariwala, suggests a potential solution for smaller players. “This set of new regulations is bound to reshape the market.There must be collaboration between the government and industry. Financial assistance, skill development programs, and infrastructure support would go a long way in helping smaller players remain competitive. Inclusiveness and targeted support will be very vital in sustaining the growth of the sector with the protection of the interest of all stakeholders,” Mariwala suggests.
Dr Kulkarni further suggests that government action should focus on harmonising regulations with global standards. “Government can consider continuing to permit the manufacturing of drugs and dietary supplements or nutraceuticals in the same facility where such approvals are already in place. Companies should be given at least two years to re-engineer their facilities to comply with new norms. A fourfive year compliance window would enable companies to invest in new manufacturing facilities, conduct validation batches, and obtain global regulatory approvals for new sites,” Dr Kulkarni recommends.
Changing perceptions
While the potential implementation could impact market dynamics, it also has the potential to reshape consumer perceptions of nutraceuticals. However, this shift could also raise concerns about affordability and product availability.
Shetty, emphasises the positive impact on consumer confidence. “The stricter regulation under Schedule M will change the consumer perception by increasing the consumer confidence towards the safety and quality assurance of the products, leading to increasing demand for Indian nutraceuticals in both domestic and international markets,” Shetty says.
Further, Nakashe elaborates on the implications of these regulations for consumer trust. “Stricter regulations under Schedule M, which pertains to Good Manufacturing Practices (GMP) for the manufacture of pharmaceuticals, will likely change the face of nutraceuticals in the Indian market. As the nutraceutical industry becomes more regulated, the prevalence of substandard or adulterated products may decline, appealing to a segment of health-conscious consumers who prioritise credibility and certified products,” Nakashe explains.
Sharma, provides a more nuanced view on the timeline and challenges of consumer perception changes. “We do not believe that the stricter regulations under Schedule M, or rather the enhanced regulations under Schedule M, will have an immediate impact on the consumer perception of Indian nutraceuticals. We envision changes in consumer perception of nutraceuticals will be under the context of the pharmaceutical companies or contract manufacturing service providers being able to adopt and implement the requirements under Schedule M,” Sharma states.
Global standards, local shifts
As the domestic nutraceutical market braces for change, potential amendments could represent a significant regulatory shift, aligning with international standards.
Shetty pulls out the historical gaps in India’s regulatory framework. “With the increasing consumer awareness on health, India is a leading player in the global nutraceutical market. However, the regulatory standard of the nutraceutical market had been lenient in the past as compared to the global market. Until 2018, there were no guidelines related to manufacturing and testing nutraceutical products,” he states.
“Currently, FSSAI is the only key regulator to oversee these products, having issued regulations in 2018 related to labelling and health claims. The implementation of Schedule M, with stringent product quality control measures and manufacturing guidelines, is a crucial step to match the standard of the Indian nutraceutical regulatory framework with international standards. This will give a competitive edge to Indian nutraceutical products in the growing global market,” Shetty predicts.
From a market perception perspective, Srivastava notes, “By enforcing stringent manufacturing standards, Indian nutraceuticals could achieve a higher perception of quality and safety, similar to premium pharmaceutical products. This move could open doors to global markets, especially in regions like the EU and the US, where regulatory rigour is a prerequisite. Furthermore, this differentiation could attract premium pricing and build a reputation for India as a leader in the nutraceutical space. India is on the path to achieving $100 billion in the sector by 2047, which involves overhauling infrastructure.”
From a regulatory standpoint, Srivastava adds, “These changes were long overdue. Globally, countries like the US (via FDA regulations) and the EU have maintained strict separation between nutraceutical and pharmaceutical manufacturing for years. The amendments bring India in line with international standards, boosting export potential and reinforcing consumer safety domestically.”
Dr Kulkarni, however, expressed reservations, stating, “I personally do not agree with the opportunity aspect.”
Learning from the world
As India’s nutra sector explores global expansion, it must draw insights from markets with advanced regulatory frameworks to enhance safety, innovation, and market access, using these lessons to shape stronger regulations for the future.
Speaking on it, Shetty highlights key takeaways from mature markets. “India can learn several lessons from markets with mature nutraceutical regulatory frameworks. Some of these lessons include establishing clear and comprehensive regulations compliance frameworks. A riskbased approach for different categories of nutraceutical products can be implemented, and accordingly, regulatory measures should be taken. Mandatory pre-market reviews should be in place to evaluate product safety, quality, and efficacy before selling in the open market,” Shetty said.
Providing a broader perspective, Sharma comments on the relativity of market maturity in nutra regulation. “Perhaps it may not be correct to call any market in relation to nutraceuticals as mature. We can perhaps categorise them as being relatively more mature than the Indian nutraceutical market. We generally see that nutraceutical products are regulated as dietary supplements in relatively mature markets, regulation of which is segregated from the general regulation over other food products. We have seen that there can be stringent quality control, testing, manufacturing, and approval processes to ensure the safety of these products for consumption, as well as regulations on ingredients included in such products. We also see the need for global engagement in dialogue to streamline and reach a consensus on parameters surrounding nutraceuticals,” Sharma states.
The right balance is key
The proposed amendment to Schedule M appears to be a double edged sword as, while aimed at enhancing product safety and aligning with global standards, also poses significant operational and financial challenges for manufacturers, particularly smaller companies and pharmaceutical firms. It is evident that finding the right balance between safety regulations and business realities is essential for the future of India’s nutraceutical sector.
nehaaat[email protected]
