Opening up of Pharma Sector vis-à-vis Medical Devices for FDI

Toeing the ‘Make in India’ initiative of the Government of India, the Ministry of Commerce and Industry released yesterday PN 2 of 2015 (to come into effect from 21^st January 2015) in relation to Foreign Direct Investment (“FDI”) in manufacture of medical devices.

Presently investment in greenfield pharmaceutical projects is permitted fully without government intervention. However, though 100% FDI is permitted in brownfield pharmaceutical entities / projects, it is subject to the government approval route and additional conditions imposed thereon.

A clarificatory note has been incorporated in the relevant paragraph of the FDI Policy Circular inter alia permitting 100% FDI under the automatic route i.e. without government approval in manufacture of medical devices irrespective of the nature of the project i.e. whether greenfield or brownfield.

‘Medical Devices’ have been defined exhaustively under the amendment to the FDI Policy as under:

1. any instrument, apparatus, appliance, implant, material or other article, whether used alone or in combination, including the software, intended by its manufacturer to be used specially for human beings or animals for one or more of the specific purposes of-

(aa) diagnosis, prevention, monitoring, treatment or alleviation of any disease or disorder;

(ab) diagnosis, monitoring, treatment, alleviation of, or assistance for, any injury or handicap;

(ac) investigation, replacement or modification or support of the anatomy or of a physiological process;

(ad) supporting or sustaining life;

(ae) disinfection of medical devices;

(af) control of conception,

and which does not achieve its primary intended action in or on the human body or animals by any pharmacological or immunological or metabolic means, but which may be assisted in its intended function by such means;

• an accessory to such an instrument, apparatus, appliance, material or other article;
• a device which is reagent, reagent product, calibrator, control material, kit, instrument, apparatus, equipment or system whether used alone or in combination thereof intended to be used for examination and providing information for medical or diagnostic purposes by means of in vitro examination of specimens derived from the human body or animals.

The Ministry has also cautiously added a disclaimer that the above definition of medical devices is subject to amendments being incorporated in the DCA. Presently the Drugs and Cosmetics Act, 1940 (“DCA”) does not contain such detailed and exhaustive definition of medical devices. Under the DCA medical devices are covered under the definition of drugs. The Drugs and Cosmetics (Amendment) Bill, 2013 alters this by adding a definition of medical devices to include any instrument, implant, material or other article, including the software, intended to be used specially for human beings or animals for the specific purposes of diagnosis, prevention, treatment or alleviation of any disease or, injury, modification of the body’s anatomy and sustaining life.

The Ministry has taken a laudable step to promote manufacture of the medical devices in India, which until now was a import dependent market segment, by permitting 100% FDI under the automatic route and by providing a carve out for medical devices which hitherto fell within same bracket as drugs.

However, the industry must take this with a pinch of salt as the definition of medical devices under the DCA amendment bill as finally passed may differ from the definition provided by the Ministry. This may impact adversely any proposed investment or further investments to be made in this field.