Medical equipment may face FDI scrutiny

Written by Kirtika Suneja | New Delhi | Updated: Aug 30 2013, 15:53pm hrs
Medical equipment and devices may also come under the stiff conditions governing brownfield FDI in the pharmaceutical sector.

The department of industrial policy and promotion (DIPP) is working on a cabinet note that will include medical equipment like implants and surgical sutures which is the thread used to hold body tissues together after a surgery or injury.

At present, medical equipment and sutures are not a part of the FDI policy which defines pharma projects as greenfield and brownfield. Even as 100% FDI is allowed in both greenfield and brownfield, the entry route is automatic for greenfield projects while foreign investments in existing projects need a nod from the foreign investment promotion board (FIPB).

Earlier this year, the Union Cabinet gave its nod to the Drugs and Cosmetics Bill, 2013, which seeks to regulate the medical equipment industry by separating it from drug manufacturing.

Medical equipment is part of the pharmaceutical sector and foreign investment in it needs to be governed, said a DIPP official.

India had opened the domestic pharma sector to 100% foreign investment via the automatic route in 2002, but last year it differentiated between the projects as greenfield and brownfield. FDI of more than R50,000 crore has come into the sector which is among the top five of all sectors.

Infact, almost 98% of pharma FDI proposals are of the brownfield category, with only 2% being greenfield investments.

The changes are part of the new policy that the DIPP has been directed to make by PM Manmohan Singh and will touch upon crucial issues of R&D spends, capacity creation and technology transfer for future acquisitions.

Currently, a drug company accepting FDI has to maintain the quantitative level of essential medicines produced at the time of induction of foreign investment for a period of five years. The level is defined as the highest annual production level of the medicines in any of the three years preceding the induction of foreign investment.

Besides, there is another condition pertaining to research and development which states that expenses incurred by the Indian company, on a yearly basis, at the highest level in the three preceding years to induction of foreign investment will be maintained in value terms annually over the next five years, following the induction of FDI.

According to officials, most of the research done by global pharma players is around clinical trials which is not actual research.

Clinical trials are sets of tests in drug development that prove the therapeutic effect of a particular drug under probe. The note will also propose stringent conditions for verticals like vaccines, injectibles as well as oncological injectibles and active pharmaceutical ingredients.