A paediatrician keeps a cupboard of syrups and hands a bottle to the parent at the end of the visit instead of sending them down the road. A physician gives a diabetic patient a strip of metformin to last until the weekend. Neither has a drug licence. Are they breaking the law?
No, and the reason is a single entry in a schedule most doctors have never read.
An exemption covers most clinics
Section 18(c) of the Drugs and Cosmetics Act, 1940 is the hard rule: nobody shall sell, stock, exhibit or offer for sale, or distribute any drug except under a licence. Rule 123 of the Drugs and Cosmetics Rules, 1945 then carves out Schedule K, which lists classes of drugs exempted from that whole chapter of the Act on stated conditions.
Entry 5 of Schedule K covers "Drugs supplied by a registered medical practitioner to his own patient". The exemption is complete, from all of Chapter IV and the Rules under it. But it dies the moment any of three things is true of the practitioner: he is keeping an open shop, he is selling across the counter, or he is dealing in drugs in India to a degree that makes him liable under Chapter IV anyway.
Read those three again, because they are the whole article. Your own patient, after your own consultation, is inside the exemption. Anyone who walks in off the street asking for a strip of something is outside it.
The conditions attached
The exemption is not unconditional. Schedule K attaches four.
Buy only from a dealer or manufacturer licensed under the Rules, and keep records of those purchases showing the names and quantities of the drugs, their batch numbers and the names and addresses of the manufacturers. A drug inspector can ask to see them, make enquiries about your purchases and take samples for test.
For any medicine containing a substance in Schedule G, H or X, more follows. Label it with your name and address. Label it "For external use only" if it is for external application, or with the dose if it is for internal use. And enter in a register, at the time of supply, the name of the medicine or its ingredients and quantities, the dose, the patient's name, the date of supply, and the name of the person who gave the prescription. Number that entry and write the number on the container label. Keep the register and the prescription for not less than two years from the last entry.
Then: store the drug under the conditions its own label states, and supply nothing after its expiry date.
Most clinics doing this informally fail on the register and on the numbered label. It is not a difficult record, but it has to exist at the time of supply, not be written up afterwards.
A separate entry, 5A, exempts hospitals and dispensaries maintained or supported by government or a local body from the sale-licence requirement on their own conditions, including supervision by a qualified person. A private nursing home does not fit that entry.
The moment it changes
Sell to someone who is not your patient and you are outside Schedule K entry 5. At that point Section 18(c) applies in full and you need a retail licence, which is what people mean by a medical store licence. The forms are these.
Stage | Form | Covers | Central fee |
|---|---|---|---|
Application | Form 19 | Retail or wholesale, drugs other than Schedule X | Rs 1,500 |
Application | Form 19A | Restricted retail licence, no registered pharmacist engaged | Rs 500 (Rs 10 for an itinerant vendor or a town of 5,000 or fewer) |
Application | Form 19C | Schedule X drugs | Rs 500 |
Licence | Form 20 | Retail of drugs other than Schedules C, C(1) and X | issued on the above |
Licence | Form 21 | Retail of Schedule C and C(1) drugs, excluding Schedule X | issued on the above |
Licence | Form 20A / 21A | The restricted versions of each | issued on Form 19A |
Licence | Form 20B / 21B | Wholesale | issued on Form 19 |
Most clinic counters selling ordinary medicines and a few injectables need Form 20 and Form 21 together. A duplicate licence, if the original is damaged or lost, costs Rs 150. The licence runs five years from grant or renewal. Apply for renewal before it expires; a late application within six months still works but carries an additional fee for every month or part of a month, and after six months the licence is treated as gone.
Premises and people
The area rule is specific. For a licence in Form 20 or Form 21, or both, the premises must be not less than 10 square metres. Hold retail and wholesale together, in Form 20 or 21 plus Form 20B or 21B, and the floor goes to 15 square metres. Premises licensed before the 1997 amendment that brought these figures in are not caught by them.
The person rule is the one that decides whether a clinic can do this at all. Under Rule 65(2), supplying any drug on a Registered Medical Practitioner's prescription, other than by wholesale, must be done by or under the personal supervision of a registered pharmacist. Compounding on the premises needs the direct and personal supervision of one as well. A registered pharmacist here means one registered under the Pharmacy Act, 1948. A restricted licence in Form 20A exists precisely for dealers who do not engage a pharmacist, and it limits you to drugs that can be sold without that supervision.
Rule 64(1) adds the general test the licensing authority applies before granting anything: the premises must be adequate, equipped with proper storage accommodation for preserving the properties of the drugs, and in the charge of a person competent in the authority's opinion. If the licence is for a pharmacy, meaning a place where drugs are dispensed or prescriptions compounded, Schedule N applies too: a dispensing area of at least 6 square metres for one pharmacist with 2 more for each additional one, a ceiling at least 2.5 metres high, a smooth washable floor, a dispensing bench with an impervious top, and a cupboard with a lock for poisons marked POISON in red on white.
Refrigeration is handled through those storage words, not by a stated temperature. Form 19 asks for particulars of special storage accommodation only where you intend to sell products that need it, so if you plan to stock insulin or vaccines, say so on the application and be able to show the cold chain.
Finally, the name over the counter is regulated. Under Rule 65(15), "Drugstore" is for licensees who do not need a registered pharmacist, "Chemists and Druggists" for those who employ one but do not compound, and "Pharmacy" for those who employ one and maintain a pharmacy for compounding against prescriptions.
State by state, and why the internet disagrees with itself
Rule 59(1) puts the State Government in charge of appointing licensing authorities. So the central Rules fix the forms, the fees named above, the area and the pharmacist requirement, while your state decides the portal, the document checklist, the inspection practice and the timeline. In Maharashtra, for example, FDA applicants are told to create credentials and apply through the Aaple Sarkar portal, with a separate FDA licensing portal alongside it. Another state will ask for a different set of attachments in a different order.
That is why online guides quote fees that contradict each other. Take the form numbers and the conditions from the central Rules, and take the amount payable, the document list and the waiting time from your own state drug control department. There is also the ethics side: clause 6.3 of the 2002 conduct regulations says a physician should not run an open shop dispensing prescriptions written by other doctors, while prescribing or supplying drugs to your own patients is not unethical as long as there is no exploitation of the patient. GST on medicines sits in a third place again, and our pharmacy billing article covers the September 2025 rate change and the outpatient-inpatient distinction.
Where software fits, and where it does not
Software does not get you a licence, does not deal with your drug inspector, and is not itself the Schedule K register the rules describe. What it does is make the underlying records exist. If every dose you hand a patient is recorded against that patient, with the batch and the date, at the moment you hand it over, then the register the rules ask for is a report, not an evening's writing.
ExaHealth sits on the prescribing and billing side of that counter. Doctors choose medicines from a drug list instead of typing names, interactions are flagged before a prescription goes out, the patient gets a PDF on WhatsApp, and invoices show who has paid and who has not. It does not run a dispensary, track batches and expiry, or produce a statutory register, so if you are licensing a counter you will want a pharmacy system beside it; the trade-offs are in our guide to a pharmacy management system for clinics.
If you want to see how prescriptions and clinic billing hang together before you decide what to add on the pharmacy side, have a look at ExaHealth for doctors.
Sources
Section 18(c) of the Drugs and Cosmetics Act, 1940 prohibits selling, stocking, exhibiting…
Ethics position: "A physician should not run an open shop for sale of medicine for…
State variation: in Maharashtra, applicants are directed to create login credentials and…
Frequently Asked Questions
Can I keep medicines at my clinic without a drug licence?
Yes, for supply to your own patients, under entry 5 of Schedule K read with Rule 123. You lose the exemption if you keep an open shop, sell across the counter, or deal in drugs to the degree that would make you liable under Chapter IV anyway. The conditions still bind: buy from licensed sources, keep purchase records with batch numbers, follow the labelling and register rules for Schedule G, H and X medicines, store to the label and never supply expired stock.
What licence does a clinic pharmacy that sells to the public need?
Apply in Form 19 with the central fee of Rs 1,500 and you are granted Form 20 for ordinary drugs and Form 21 for Schedule C and C(1) drugs, usually both. Schedule X drugs need a separate application in Form 19C. Premises must be at least 10 square metres, and retail supply against a prescription must happen by or under the personal supervision of a registered pharmacist. Your state drug control department sets the portal, the documents and the timeline.
How long is a retail drug licence valid?
Five years from the date it is granted or renewed, under Rule 63. If you apply for renewal before expiry, or within six months after with the additional monthly fee, the licence stays in force until your application is decided. Miss the six-month window and it is deemed to have expired.