Can doctors dispense medicines? Schedule K explained When a clinic needs a drug licence, and the register and labels it must keep when it does not.

Short answer: yes, a registered medical practitioner in India may supply medicines to their own patients without a drug sale licence, under item 5 of Schedule K to the Drugs and Cosmetics Rules, 1945. The exemption holds only while the doctor is not running an open shop, not selling across the counter and not trading in drugs. It also comes with conditions: buy from licensed sources with records, store properly, never hand out expired stock, and for Schedule G, H or X medicines, label every supply and keep a numbered register for two years. Once the clinic sells to anyone who walks in, or fills other doctors' prescriptions, it needs a retail drug licence.

This post is about the rules for supplying medicines from a clinic, not about which medicines to supply. It does not recommend any drug, dose or treatment.

What does Schedule K item 5 say?

Rule 123 of the Drugs and Cosmetics Rules, 1945 says: "The drugs specified in Schedule K shall be exempted from the provisions of Chapter IV of the Act and the Rules made thereunder to the extent and subject to the conditions specified in that Schedule." Chapter IV of the Drugs and Cosmetics Act, 1940 is the licensing chapter. Item 5 of Schedule K, as printed in the Central Drugs Standard Control Organisation's consolidated copy (amended up to 31 Dec 2016), describes the class of drugs exempted:

Drugs supplied by a registered medical practitioner to his own patient or any drug specified in Schedule C supplied by a registered medical practitioner at the request of another such practioner if it is specially prepared with reference to the condition and for the use of an individual patient provided the registered medical practitioner is not (a) keeping an open shop or (b) selling across the counter or (c) engaged in the importation, manufacture, distribution or sale of drugs in India to a degree which render him liable to the provisions of Chapter IV of the Act and the rules thereunder.

The extent of the exemption is "All the provisions of Chapter IV of the Act and the Rules made thereunder", subject to four conditions. They are quoted in full below because they are what an inspector checks.

Who counts as a registered medical practitioner here?

Rule 2(ee) of the Rules defines the term. It covers holders of qualifications recognised under the Indian Medical Degrees Act, 1916 or the Indian Medical Council Act, 1956; persons on a state register for "the modern scientific system of medicine", excluding the Homoeopathic system; persons on another state register (not Homoeopathic) whom the state government declares by order to be practising modern medicine; registered dentists; and approved veterinary practitioners.

So an MBBS doctor and a dentist are inside the definition. Whether an AYUSH doctor is depends on that third limb and on any order your state has issued. Our post on what BAMS, BHMS and BUMS doctors may do in a clinic covers the prescribing question.

Homoeopathic and AYUSH medicines

Homoeopathic doctors have a separate exemption. Item 24 of Schedule K exempts "Homoeopathic medicines supplied by a registered Homoeopathic medical practitioner to his own patient", on the same three conditions of no open shop, no over-the-counter sales and no trading. The attached conditions are shorter: buy only from a licensed dealer or manufacturer, and keep the premises where the medicines are stocked open to inspection.

Ayurvedic, Siddha and Unani drugs are outside Chapter IV altogether. Section 33A of the Act says "nothing contained in this Chapter shall apply to Ayurvedic, Siddha or Unani drugs", and Chapter IVA deals with them separately. We did not review the Chapter IVA rules for this post; ask your state AYUSH drug licensing authority before stocking ASU medicines for sale.

What does "his own patient" and "open shop" mean in practice?

The Rules do not define "own patient", "open shop" or "across the counter". Read with the doctors' conduct rules, the ordinary meaning is clear enough for a small clinic. Regulation 6.3 of the Indian Medical Council (Professional Conduct, Etiquette and Ethics) Regulations, 2002 says a physician "should not run an open shop for sale of medicine for dispensing prescriptions prescribed by doctors other than himself", and that "It is not unethical for a physician to prescribe or supply drugs, remedies or appliances as long as there is no exploitation of the patient."

Watch the word on the board. The Explanation to rule 64 says a "Pharmacy" includes any place "which has upon it or displayed within it, or affixed to or used in connection with it, a sign bearing the word or words 'Pharmacy', 'Pharmacist', 'Dispensing Chemist' or 'Pharmaceutical Chemist'". A clinic dispensing under Schedule K should not call that cupboard a pharmacy on a sign. Our post on signboard rules covers what the board outside may say.

When does a clinic need a drug licence (Form 20 or 21)?

As soon as the clinic sells beyond its own patients, it is outside Schedule K and inside the licensing rules in Part VI of the Rules. Rule 61 sets the forms.

A Form 20 or 21 licence brings more than paperwork. Rule 64 requires the licensing authority to be satisfied that the premises are "adequate, equipped with proper storage accommodation" and in charge of a competent person, and in the case of a pharmacy, that the Schedule N requirements are met. The same rule sets a minimum area of 10 square metres for a Form 20 or Form 21 licence, and 15 square metres where retail and wholesale licences are held together. Rule 65(2) says supply of any drug on a prescription "shall be effected only by or under the personal supervision of a registered Pharmacist." Licences in Form 20F (Schedule X) are granted only to a pharmacy, or to a chemist and druggist where no pharmacy is operating.

Rule 59(2) in the CDSCO consolidated copy sets the application fee at ₹1,500 in Form 19 for drugs other than Schedule X, and ₹500 in Form 19C for Schedule X, with ₹500 for a restricted licence in Form 19A. These figures are from the copy amended up to 31 Dec 2016; check the current fee and the online application process with your state drugs control department before you apply.

What a licensed counter has to record

If you do take a licence, rule 65 sets the counter's records. Supply of any drug other than Schedule X on a prescription is recorded in a prescription register at the time of supply. Rule 65(3)(1)(h) adds that a Schedule H1 drug "shall be recorded in a separate register at the time of the supply giving the name and address of the prescriber, the name of the patient, the name of the drug and the quantity supplied and such records shall be maintained for three years and be open for inspection." Rule 65(9)(a) says Schedule H, H1 and X substances "shall not be sold by retail except on and in accordance with the prescription of a Registered Medical Practitioner", and for Schedule X the prescription must be in duplicate, with one copy kept for two years.

Schedule H, H1 and X medicines in a clinic without a licence

Item 5's extra conditions name Schedules G, H and X. They do not mention Schedule H1. Two other rules still reach the clinic:

• Buying: rule 65(9)(b) says the supply of Schedule H, H1 or X drugs "to Registered Medical Practitioners, Hospitals, Dispensaries and Nursing Homes shall be made only against the signed order in writing which shall be preserved by the licensee for a period of two years." Your wholesaler will ask for a signed order; keep your own copy with the invoice.
• Supplying: for Schedule H and X medicines the item 5 label and register conditions apply. For Schedule H1 medicines, the cautious practice is to record them in the same supply register with the same detail, since the purchase side already treats them alongside H and X.

Schedule X drugs carry more controls on storage and records for licensees, and many overlap with narcotics law, which we did not review here. A small clinic that does not hold a Form 20F licence should think carefully before stocking any Schedule X product, and ask the state drugs controller first.

Storage and expiry: what an inspector looks at

Conditions 3 and 4 of item 5 are short, and they are where clinics slip. Item 5 points to the label: store each product "under proper storage conditions as directed on the label." In practice:

• A cupboard away from direct sun and the steriliser, with a thermometer if labels say "store below 25°C".
• A refrigerator used only for medicines and vaccines if any product says "store between 2°C and 8°C", with a daily temperature log.
• Stock arranged so the nearest expiry goes out first, and a monthly check that moves anything within its last months to a separate shelf.
• Expired and damaged stock kept apart and disposed of through your bio-medical waste route. Our bio-medical waste guide covers the categories.

Can a clinic insist the patient buys medicines from it?

No national rule we read lets it. The Charter of Patients' Rights and Responsibilities, as updated on 23 Aug 2021 by the National Council for Clinical Establishments, lists a "Right to choose source for obtaining medicines or tests" and says "No patient is forced to buy medications from hospital pharmacy. He can choose the pharmacy from where he wants to purchase the medicine." Regulation 1.5 of the 2002 conduct regulations asks doctors to prescribe generic names as far as possible, and regulation 6.3 says drugs prescribed or bought from the market for a patient "should explicitly state the proprietary formulae as well as generic name of the drug."

A sound practice is to write the full prescription on the parchi as usual, and offer clinic supply as a choice. The patient who prefers the chemist next door leaves with a complete prescription.

Billing and GST on medicines supplied at the clinic

Medicines handed over with a consultation raise a tax question that is separate from the drug law question. Our post on GST on doctor consultation fees explains when a consultation is exempt. Whether separately charged medicines are part of that exempt health care service or a taxable supply of goods depends on how you supply and bill them. Our post on GST on medicines dispensed by doctors works through the cases. Ask your CA before you add a medicines line to the bill.

Whatever the tax position, show medicines as their own line on the receipt with the quantity, so the bill matches the supply register. Our guide to what a clinic bill must show covers the rest of the receipt.

What happens if a clinic sells without a licence?

If the clinic falls outside Schedule K, for example by running an open counter, the sale is one "without a valid licence as required under clause (c) of section 18". In the CDSCO consolidated copy of the Act (amended up to 31 Dec 2016), section 27(b)(ii) makes that punishable with imprisonment of "not less than three year but which may extend to five years and with fine which shall not be less than one lakh rupees or three times the value of the drugs confiscated, whichever is more", with a proviso letting the court impose less for adequate and special reasons. Any amendment after 31 Dec 2016 is not in that copy, so check the current text before relying on these figures.