This article provides an industrial policy-sensitive understanding of the problem of quality of Indian generic medicines supplied both to the domestic market and to weakly regulated markets in Asia, Africa, and South America. Most of these medicines come from micro, small and medium enterprises (MSME). While all drugs manufactured in the country must comply with standards under the revised Schedule M of the Drugs and Cosmetics Act, 1945, the deadline for MSMEs’ compliance has been extended repeatedly, and even as of March 2026, drugs are manufactured in the country in two categories of manufacturing facilities — one compliant with the revised standards and another non-compliant with the revised standards.

While double standards are unacceptable, the policy discourse on medicine quality focuses entirely on uniformity of standards, and their regulation, without setting an industrial policy-sensitive context for the reasons for poor quality, and for developing an appropriate response.

We argue that the problem of medicine quality is closely connected to the structural changes in the industry after India signed the Agreement on Trade Related Aspects of Intellectual Property Rights. Large-scale enterprises depend on MSMEs — many of which are poorly equipped — for supplying branded generic medicines in the domestic market and poorly regulated markets abroad. Further, a sharp decline in the indigenous manufacture of raw materials and active pharmaceutical ingredients has left the industry vulnerable, because of its dependence on China for the import of these materials.

We propose that poor quality must be addressed through industrial policy-specific changes, institutional collaboration, and technical support, not merely by closing down MSMEs. Quality assurance cannot depend on a system of inspection alone; quality by design must be built into the manufacturing process, and there must be strict enforcement of standards.