In May 2026, the Delhi High Court issued notice on a public interest litigation that put a name to something the pharma industry has quietly known for years: medicine labeled "for sale in India only" was allegedly being bought out of the domestic market by exporters, blended into otherwise legitimate export consignments, and shipped abroad. The petitioners — citing a CDSCO Office Memorandum from January 2024 that had already flagged the practice — asked the court to order a real investigation. The respondents named in the petition include the CDSCO, the DGFT, customs authorities, and India's revenue intelligence agencies. That's five separate authorities, which is itself a clue to how this kind of diversion slips through: it touches regulatory, export, and customs jurisdiction all at once, and no single one of them owns the whole picture.

$28B+
India's pharmaceutical exports through the first eleven months of FY26 alone — and since January 2025, there has been no dedicated India-side track-and-trace system built specifically to follow that export volume after it leaves the factory.

How Export Diversion Actually Works

"Export diversion" isn't one thing. It's a label for several distinct ways a consignment stops being what its paperwork says it is, somewhere between commissioning and the end market.

1Domestic-restricted stock sold as export
This is the mechanism at the center of the Delhi HC case: medicine explicitly labeled for sale within India only — often high-value drugs under tighter domestic pricing or regulatory controls — is purchased through normal domestic channels and then mixed into export shipments by merchant exporters, exploiting the fact that outbound consignments get less item-level scrutiny than the imports arriving on the other end.
2Misdeclaration and under-invoicing
Trade misinvoicing — understating quantity, value, or destination on export documentation — isn't unique to pharma, but it's a well-established channel for moving regulated goods through customs with less friction than the true shipment would attract, and it leaves genuine export volume harder to reconcile against what actually left the country.
3Genuine exports, redirected after departure
A shipment can leave India entirely correctly documented for one destination and still end up somewhere else — rerouted through a free trade zone, a transshipment hub, or a distributor relationship that redirects stock into a higher-margin grey market once it's outside Indian jurisdiction and, often, outside any jurisdiction running serialized verification at all.

The Gap Left by a Withdrawn System

India did, in fact, build a dedicated export track-and-trace system once. The DGFT's Track & Trace System for pharmaceutical exports dates back to 2011, with barcoding requirements phased in at the tertiary and secondary packaging levels over the following two years. The primary-pack level — the barcode on the actual strip or bottle, the layer that would have mattered most for catching exactly the kind of diversion described above — was repeatedly deferred for over a decade, through extension after extension, before the entire system was formally withdrawn on 31 January 2025.

The official reasoning was administrative: the Commerce Ministry described it as aligning export regulation with the Health Ministry's own framework, noting that drug formulation authentication would now sit with CDSCO and the Drugs Rules, 1945, and that most destination markets already run their own serialization requirements that provide traceability on arrival. Both of those things are true. Neither one closes the actual gap, which is the export leg itself — the part of the journey between an Indian factory and a foreign border, which a destination country's verification system by definition cannot see.

The system never got to the point of actually working — primary-level barcoding was deferred for fourteen years and then the whole requirement was withdrawn before it arrived. That's not a scandal, it's just how the timeline played out. But it means Indian exporters have spent over a decade without ever operating under a functioning, primary-pack-level export tracking regime, and now there isn't one on the horizon at all. — Ratifye pharma intelligence team

What This Means If You Export

No Backstop
There is currently no India-side government system tracking export consignments at the unit level. Whatever verification exists today happens either at the destination country, if it runs its own serialization mandate, or not at all.
Domestic ≠ Export
CDSCO's Top 300 QR code mandate covers domestic high-selling brands — it was never built as an export control. A pack serialized for the Indian market and a pack genuinely destined for export aren't automatically distinguishable at the level this diversion pattern exploits.
Destination Only
DSCSA and EU FMD verification catches a diverted pack only once it's scanned inside that regulatory zone. A shipment diverted into a market with no serialization mandate at all — which describes a large share of global pharma destinations — has no verification layer waiting for it anywhere.
This isn't a call to assign blame

The Track & Trace System's long deferral history reflects genuine operational difficulty — primary-pack serialization at export scale is a real engineering problem, not a box-ticking exercise, and the industry's pushback over the years had legitimate cost and complexity arguments behind it.

What matters now is simpler: whatever the reasons for the gap, it exists, it's the explicit subject of active litigation, and waiting for a new mandate to arrive before building a verification layer is a bet on timing that the last fourteen years don't support.

Why This Isn't Just a Compliance Footnote

Export diversion carries a cost beyond the direct regulatory exposure of any one shipment. India's pharmaceutical industry has spent years managing a reputational problem around the global perception of its export quality — a perception shaped in part by cases where the product that actually reached a foreign shelf wasn't the product India's own regulators had approved for that purpose, or wasn't handled through a channel anyone could verify. Every diversion case that surfaces, whether through litigation like the Delhi HC petition or a quality complaint traced back to a diverted batch, reinforces that perception for an industry that supplies roughly one in five generic medicines consumed worldwide and has real commercial reasons to want that reputation to reflect its actual manufacturing standards.

There's also a narrower, more immediate stake: market access itself. Regulators in destination countries that find diverted or mislabeled Indian stock in their supply chain don't typically respond by investigating one exporter quietly — they tend to increase scrutiny on the entire country-of-origin category, which raises compliance friction for every legitimate Indian manufacturer shipping into that market, not just the one responsible for the diversion. A verification gap that looks like an internal Indian regulatory question from here can turn into a market-access problem for the whole industry from the receiving end.

Closing the Gap Without Waiting for a New Mandate

The practical fix doesn't require a new government system to materialize. It requires treating export SKUs with the same unit-level discipline already being built for domestic Top 300 compliance and for destination markets that do require it — generated once, at commissioning, rather than assembled separately for each regulatory audience.

Serialize
Generate a unique, GS1-compliant identifier for export-bound units at the point of production, independent of whether the destination market currently mandates one — so the record exists regardless of what any single regulator requires.
Document
Keep an internal, queryable record of what was commissioned, for which market, and when it left the facility. That's exactly the shipping-document and export-record trail the Delhi HC petitioners argue would reveal the scale of this problem — and it's far better to already have it than to reconstruct it under a court order.
Reconcile
Match commissioning data against actual export volume and destination-market verification where it exists, turning a mismatch between what left the factory and what gets scanned abroad into an early internal flag rather than something a regulator discovers first.

None of this waits on DGFT, CDSCO, or any court outcome. It's the same underlying discipline this blog has covered for domestic diversion, EU FMD, and DSCSA — one serialization event at commissioning, structured to answer every downstream question rather than invented separately each time one gets asked, whether that question comes from a customs officer, a destination regulator, or a Delhi High Court bench.

Take Action

The government's export tracking system is gone. Your own record of what left the factory doesn't have to be.

Ratifye generates unit-level serialization at commissioning for domestic and export SKUs alike — so there's a verifiable record of what shipped, where, and when, whether or not a mandate currently requires one.

Talk to our team
Sources: Reporting on the May 2026 Delhi High Court public interest litigation on pharmaceutical export diversion (Wadhwa & Sharma v. Union of India and others); DGFT and Commerce Ministry notifications on the withdrawal of the Track & Trace System for pharmaceutical exports, effective 31 January 2025; Pharmexcil and industry reporting on India's pharmaceutical export volumes for FY26. Figures and case details are as publicly reported at time of writing and are cited for directional reference; this litigation was pending at time of writing and its outcome should be checked independently, and legal counsel should be consulted for compliance decisions specific to your export operations.