New Delhi, Oct. 12 -- In a move to spur drug innovation and restore fairness in the regulatory ecosystem, India's top drug authority plans to overhaul a rule that puts early applicants for new medicines at a disadvantage, according to official documents and people familiar with the matter. The change is aimed at easing delays and encouraging greater investment in clinical research, a crucial step as India seeks to reinforce its role as the "pharmacy of the world" and expand its $50 billion pharmaceutical market.

Under the existing framework, the first company seeking approval for a new drug must conduct clinical trials and bioequivalence studies, an expensive and time-consuming process. Subsequent applicants can, however, secure clearanc...