NishithDesai-印度医疗器械行业-监管、法律和税务问题（英）

MUMBAISILICONVALLEYBENGALURUSINGAPORENEWDELHINEWYORKGIFTCITY

Research

MedicalDeviceIndustryinIndia

Regulatory,LegalandTaxIssues

August2024

©NishithDesaiAssociates2024

Research

MedicalDeviceIndustryinIndia

Regulatory,LegalandTaxIssues

August2024

DMSCode:30668.1

©NishithDesaiAssociates2024

Rankedasthe‘MostInnovativeIndianLawFirm’intheprestigiousFTInnovativeLawyersAsiaPacificAwardsformultipleyears.Alsorankedamongstthe‘MostInnovativeAsiaPacificLawFirm’intheseeliteFinancialTimesInnovationrankings.

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©NishithDesaiAssociates2024

MedicalDeviceIndustryinIndia—Regulatory,LegalandTaxIssues

Disclaimer

ThisreportisacopyrightofNishithDesaiAssociates.Noreadershouldactonthebasisofanystatementcontainedhereinwithoutseekingprofessionaladvice.Theauthorsandthefirmexpresslydisclaimalland

anyliabilitytoanypersonwhohasreadthisreport,orotherwise,inrespectofanything,andofconse-quencesofanythingdone,oromittedtobedonebyanysuchpersoninrelianceuponthecontentsofthisreport.

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Acknowledgements

TanyaKukade

tanya.kukade@

VarshaRajesh

varsha.rajesh@

EshikaPhadke

eshika.phadke@

Dr.MilindAntani

Milind.antani@

©NishithDesaiAssociates2024Provideduponrequestonly

Contents

3

ExecutiveSummary1

Introduction

5

IndiaEntryStrategies

6

InvestmentClimateinIndia

7

India’sPost-TRIPSIntellectualPropertyEnvironment

8

LegalandRegulatoryRegime

A.Authorities9

B.LicensesrequiredforImport,Sale,ManufactureandLoan

ofMedicalDevicesundertheMDR10

C.ManufacturingMedicalDevicesinIndia12

D.ImportingMedicalDevicesintoIndia12

E.RegistrationofMedicalDevices12

F.Manufacturing/ImportofanInvestigationalMedicalDeviceand

NewInvitroDiagnosticMedicalDevice13

G.ClinicalInvestigation/ClinicalPerformanceEvaluation13

H.ProductStandards15

I.Labelling15

25

MedicalDeviceRules2017—AnAnalysis

A.Risk-basedClassificationsSystem25

B.SingleWindowClearance26

C.CertaintyandRationalizationofTimelines26

D.PerpetualLicenses27

E.ConsolidationofRegistrationCertificateandImportLicense

intoaSingleLicense27

F.CertaintyonConsequenceofChangeinParticularsContained

intheLicense28

G.Meaningof“ChangeinConstitution”ExplainedandChange

inConstitutionRationalized28

©NishithDesaiAssociates2024Provideduponrequestonly

H.LicenseforSaleofMedicalDevices29

I.MandatoryRecallsonKnowledgeofRisktoSafety30

J.NewThresholdsforResidualShelfLifeofImportedProducts30

K.NewRegulatoryFrameworkforClinicalInvestigation/

ClinicalPerformanceEvaluationofMedicalDevice30

L.DebarmentonAccountofSupplyofMisleadingInformation31

M.MovingtowardsIndependentRegulation31

TaxationRegime32

A.DirectTaxes32

B.IndirectTaxes42

45

AnnexureA

LabellingRequirementsforMedicalDevicestobemarketed

inIndiaunderMDR45

47

AnnexureB

LabellingRequirementsforMedicalDevicesintendedforExport47

48

AnnexureC

ParametersforClassificationofMedicalDevicesandIn-Vitro

DiagnosticMedicalDevices48

57

AnnexureD

©NishithDesaiAssociates2024Provideduponrequestonly

ExecutiveSummary

Indiaiscountedamongthetop20globalmedicaldevicesmarketandisexpectedtogrowataCAGRof16.4%reachUSD50billionby2030.1TheIndianmedicaldevicemarketisdominatedbyimportedproducts,whichcompriseofaround80%oftotalsales.2Thedomesticcompaniesarelargelyinvolvedinmanufacturinglow-endproductsforlocalaswellasinternationalconsumption.Lately,manymultinationalcompanieshaveestablishedlocalpresencebyacquiringestablisheddomesticcompaniesorstartinganewbusiness.

Medicaldevicesplayarolenotonlyinscreening,diagnosingandtreatingpatientsbutalsoinrestoringpatientstonormallivesandinregularlymonitoringhealthindicatorstopreventdiseases.Withtechnologicaladvancements,theroleofmedicaldevicesisnowexpandingtoimprovequalityofcareacrosseachstageofthehealthcaresector.TheIndianmedicaldevicemarketoffersagreatopportunitynotonlyofitssize,butalsobecauseofencouragingpoliciesandregulationsthattheGovernmenthasintroducedtogiveafilliptothemedicaldeviceindustry.Forinstance,inMarch2020,thegovernmentapproved‘Production-LinkedIncentives(PLI)SchemeforMedicalDevices.Earlierin2019,thegovernmentundertooktosetupfourmedicaldevicesparksinAndhraPradesh,Telangana,TamilNaduandKerala.Themedicaldeviceparksareexpectedtoreducemanufacturingcosts,asthesewillbeequippedwiththenecessaryinfrastructure.

TheimportanceofthemedicaldeviceindustrywascatapultedintothepubliceyeduringtheearlystagesoftheCOVID-19pandemic.InMarch2020,whenCOVID-19casesfirststartedincreasinginIndia,therewasacorrespondingsteepincreaseinthedemandofCOVID-19diagnostictestkitsandventilators.TheIndianmedicaldeviceindustrycomprisingofbothdomesticandforeignplayersralliedtogethertobridgethegap.TheIndiangovernmentalsosteppedintoexpediteapprovalsfortestkitsandencouragemanufacturingofventilators.Overthefewpastyears,themedicaldeviceindustryhasbeencrucialinensuringasteadysupplyofdiagnostickitsandventilators.TheriseofdomesticmanufacturingintheseareashasledtothestartofanewchapterforIndia’smedicaldevicecompanies.

MedicaldevicesinIndiaareregulatedundertheMedicalDeviceRules,2017.Therulesareatparwithinternationalnormsandutilizetheconceptof‘risk-based’regulation.Theregulatorylicensesissuedforimport,manufactureorsaleofmedicaldevicesareperpetualinnaturewhichhelpscutdownonunnecessaryandtime-consumingpaperwork.InFebruary2020,theIndianGovernmentalsosignificantlyexpandedthescopeofIndia’smedicaldeviceregulationbywayofanotification.Whentheabove-mentionednotificationcameintoeffectonApril01,2020,allmedicaldeviceswerebroughtunderthepurviewofIndia’smedicaldeviceregulatoryframework,priortothenotification,only29categoriesofmedicaldeviceswereregulatedinIndia.

AspartofensuringeaseofdoingbusinessinIndia,foreigndirectinvestmentinmedicaldevicemanufacturingsectorispermittedwithoutanypriorapprovalfromthegovernment,allowingbusinesstoquicklyscale-upexistingoperationsbyinfusingcapitalorengageintime-sensitivestrategicacquisitions.ThealreadyrobustintellectualpropertyrightsregimeinIndiahasbeenstrengthenedfurtherbyallowingforgrantofpatentandtrademarksformedicaldevices.TheIndianGovernmenthasalsointroducedvariousfiscalmeasurestopromoteresearch,development,manufacturingandimportofmedicaldevices.Forinstance,theGovernmenthasincentivizedscientificresearchanddevelopmentbyprovidingweighteddeductionfortheexpenseincurredonthatfront.Thereisminimalornoimportdutyoncertainmedicaldevices.

1Availableat:

/industry/medical-devices.aspx

,lastaccessedonJanuary25,2023.

2

/industry/medical-devices.aspx

,lastaccessedJanuary25,2023.

©NishithDesaiAssociates2024Provideduponrequestonly1

ExecutiveSummary

However,likeanyothercountry,therearecertainchallengesindoingbusinessofmedicaldevicesinIndiathatmustbeborneinmind.Thefirstandforemostchallengeispricecontrol.TheGovernmentofIndiacontrolspricesofcertainmedicaldevicesbyeitherfixingapriceatwhichtheymaybesoldunderaformulaorbyrestrictingtheabilityofthemarketerofthemedicaldevicetoincreaseitspricebymorethanaprescribedpercentageatanygiventime.Thesecondchallengeisthepresenceofmultipleregulatorswhichmaymakesimpletasks,suchasrectificationofanerroneousdeclarationonthelabel,quiteadrawn-outprocess.Thethirdchallengeispresenceoflawsthatrestrictmanufacturesandimportersofmedicaldevicefrompromotingtheirproductsdirectlytothecustomersincertaincircumstances.Allthesechallenges,andmanymore,aredetailedinthebodyofthisresearchpaper.

OnemustalsonotlosesightofthefactthattheIndianconsumermindsetandlocalbusinesspracticesareuniqueandmustbecarefullystudiedwhiledevelopingabusinessmodel.Certainlaws,suchastheforeignexchangeregulationsandthetaxstatutemustalsobeassessedin-depthbecausetheyaffecttheabilityoftheinvestortoinvestanddrawoutreturnsanddeterminethedegreeofprofitability.

Havingsaidthat,theGovernmentremainsextremelycommittedandsensitivetothedemandsoftheindustry,and,infact,hasear-markedmedicaldeviceindustryasa“sun-shine”sector.ItishopedthatthisresearchpaperwillactasaguidetoeveryonewhoisinterestedindoingbusinessofmedicaldeviceinIndia.

©NishithDesaiAssociates2024Provideduponrequestonly2

MedicalDeviceIndustryinIndia—Regulatory,LegalandTaxIssues

Introduction

TheapproximateUSD11BillionworthIndianmedicaldevicesectorpresentsanexcitingbusinesslandscapeandopportunitiesforbothmulti-nationalanddomesticplayers.Tilltheearly1990s,themedicaldevicesectorwassignificantlydominatedbydomesticplayers.ButafterIndiaopenedupitsmarketsin1991,tableshaveturned.Thetechnologicaladvancementandexpertisethattheglobalmarketleadersofferedhasprovedtobeanadvantage.Today,India’smedicaldevicesectorisdominatedbymulti-nationalcompanies,whichisevidentfromthefactthatabout80%ofthesalesaregeneratedbyimportedmedicaldevices.Thedomesticplayers,ontheotherhand,werequicktoadaptthewindsofchangeandstartedtofocusonlowcostdevices.Overtheyears,manymulti-nationalshavesetupoperationsinIndia.However,thenatureofmajorityoftheoperationsistoonlydistributeimporteddevicesandprovidesupportfunction.Fewmulti-nationalshavestarteddomesticproductiontoo.Somemulti-nationalshavealsoenteredIndiabyacquiringdomesticmanufacturers.Forexample,Netherland-basedRoyalPhilipsElectronics,aleadingmanufacturerofGeneralX-Rayacquired

AlphaX-RayTechnologies,aleadingmanufacturerofcardiovascularX-Raysystems.Thesegmentsofthemedicaldeviceindustryareillustratedbelow:

IndianMedicalDevicesIndustry

ConsumablesandImplants

includingstents,syringes,needs,catheters,suturingmaterials,

bandagesanddressing

InstrumentsandAppliances

includingsurgicaland

non-surgicalequipmentand

otherinstrumentsandsupplies

DiagnosticImaging

includingelectro-diagnostic

apparatus,radiationapparatus,imagingpartsandaccessories

PatientAidsandOthers

includinghearingaids,

prostheticsandorthotics,pacemakersandothers

Source:

DeloitteMedicalDevicesReport

1

1MedicalDevicesMakinginIndia—ALeapforIndianHealthcare,Delloite,availableat:

/in/en/pages/life-sciences-and-

healthcare/articles/medical-devices-making-in-india.html

,lastaccessedonJanuary25,2023.

©NishithDesaiAssociates2024Provideduponrequestonly3

MedicalDeviceIndustryinIndia—Regulatory,LegalandTaxIssues

Introduction

Thesectorisatpresentgrowingataround35.4%CompoundAnnualGrowthRate(“CAGR”)foraplethoraofreasons.2Asignificantpercentageofpurchasersofmedicaldevicesareprivatemedicalinstitutionsandhospitals.DuetoincreasedcompetitioninTierIcities,privateenterpriseshavestartedtofocusonTierIIandTierIIIcities,amarketwhichisuntilnowuntappedinIndia.Asprivateenterprisesexpandinlesserexploredmarkets,thedemandformedicaldeviceswillexpandproportionally.Otherreasonsforstronggrowthprospectsoftheindustryare:

Economicgrowthleadingtohigherdisposableincomes

Increasedpublicspendinginhealthcare

Increasedpenetrationofhealthinsurance

Improvingmedicalinfrastructure

Increasingaffordabilityduetogrowingincome

Increasingnumberofailments

Increasingdemanddueto“Medicaltourism”

ThesectorisalsowitnessingstrongForeignDirectInvestments(“FDI”)inflows,whichreflectstheconfidenceofglobalplayersintheIndianmarket.Asperofficialdata,themedicalandsurgicalequipmentsectorreceivedatotalofINR14,526Crore(approx.USD2.3Billion)betweenApril2000toSeptember2021.3By2025,theIndianmarketformedicalequipmentispredictedtoincreasetoUSD50billion.4

ThemajorplayersinIndianmarketare(innoparticularorder):HindustanSyringes&MedicalDevices,OptoCircuits(India),WiproGEHealthcare,3M,Medtronic,Johnson&Johnson,BectonDickinson,AbbottVascular,Bausch&Lomb,Baxter,ZimmerIndia,EdwardsLifeSciences,St.JudeMedical(nowapartofAbbott),Smith&Nephew,Cochlear,Stryker,Baxter,BostonScientific,BPLHealthcareIndia,SushrutSurgicals,TrivitronDiagnostics,AccurexBiomedical,BioporeSurgicals,EndomedTechnologies,HDMedicalServices(India),EasternMedikit,Harsoriahealthcare,NidhiMeditechSystem,PhilipsMedical,WiproTechnologies,HCLTechnologiesandTexasInstruments.

SomeofthemajorindustryassociationsincludeAdvancedMedicalTechnologyAssociation(ADVAMED),AssociationofIndianMedicalDeviceIndustry(AIMED),MedicalTechnologyAssociationofIndia(MTai),AsiaPacificMedicalTechnologyAssociation(APACMed),NATHEALTH,AssociationofDiagnosticsManufacturersofIndia,AllIndiaPlasticsManufacturers’Association,MedicalDisposablesManufacturersAssociation,SocietyofBiomaterials&ArtificialOrgans,NationalBiomedicalEngineeringSocietyandMedicalSurgicalandHealthcareIndustryTradeAssociation.

AllmultinationalslookingtoinvestintheIndianmedicaldevicesectormuststrategizetheirentryonthebasisofcertainkeyfactorswhichwillinfluenceprofitabilityoftheinvestment.Thesekeyfactorsarelistedanddiscussednext.

2

/industry/medical-devices.aspx

,lastaccessedJanuary25,2023.

3

.in/sites/default/files/FDI_Factsheet_Spetember-21.pdf,

lastaccessedJanuary31,2023.

4

/industry/medical-devices.aspx

,lastaccessedJanuary25,2023.

©NishithDesaiAssociates2024Provideduponrequestonly4

MedicalDeviceIndustryinIndia—Regulatory,LegalandTaxIssues

IndiaEntryStrategies

MultinationalmedicaldevicecompaniesorinvestorsseekingtodobusinesswithIndianmedicaldevicecompaniesneedtoappraiseandstructuretheiractivitiesonthreepillars:

StrategyLawTax

ExchangeControlLaws:Primarily

theForeignExchangeManagementAct,1999andnumerouscirculars,

notificationsandpressnotesissuedunderthesame

CorporateLaws:Primarilythe

CompaniesAct,1956,theCompaniesAct,2013andtheregulations

laiddownbytheSecuritiesand

ExchangesBoardofIndia(“SEBI”)

SectorSpecificLaws:Drugs&

CosmeticsAct,1940,theDrugs

Rules,1945,theMedicalDevice

Rules,2017,thePatentsAct,1970andotherlegislations,regulationsand

guidelinesthataffectthemedicaldevicesindustry

ObservingtheeconomicandpoliticalenvironmentinIndiafromtheperspectiveofthe

investment

Understandingtheabilityof

themultinationalcompany

oraninvestortocarryout

operationsinIndia,thelocation

ofitscustomers,thequalityandlocationofitsworkforce

Tostrategizethebusiness

modelbyidentifyingthecorrectmodalitytodobusinessinIndia

DomesticTaxationLaws:TheIncomeTaxAct,1961;GoodsandServiceTax,customslaw.

InternationalTaxTreaties:Treaties

withfavorablejurisdictionssuchas

Mauritius,Cyprus,SingaporeandtheNetherlands

ThehealthcaresectorinIndiahaslongbeenconservativeaboutforeigninvestmentstatingconcernsofforeigninfluenceoverpublic-focusedsectorsuchashealthcare.However,inrecenttimes,thereisgrowinggovernmentalandpopularsupportforforeigninvestmentinallsectors,includinghealth.

Itisalsoimportanttobefamiliarofthelegalandregulatoryframeworkgoverningmedicaldevices.Themedicaldeviceindustryistightlyregulated,andanynon-compliancemayresultinpenalty,closureofbusiness,aswellascriminalprosecutionofthemanagement(inextremecases).Ifamulti-nationalcompanyisoperatingawhollyownedsubsidiaryinIndia,itmustensurethatthesubsidiaryiscompliantwithIndia’smedicaldeviceregulatoryframeworkandotherproductliabilitylegislationtoavoidanyunpleasantlegalproceedings.Multi-nationalcompaniesshouldalsokeepaneyeontheexchangecontrollawsastheygovernhowprofitsmadebythecompanycanberealizedoutofIndiaandconsiderstructuringinvestmentsthroughfavorabletaxjurisdictions,asitmayleadtosignificanttax-savings.

©NishithDesaiAssociates2024Provideduponrequestonly5

MedicalDeviceIndustryinIndia—Regulatory,LegalandTaxIssues

InvestmentClimateinIndia

ByandlargeFDIisnowpermittedinalmostallthesectorsinIndiawithoutobtainingpriorregulatoryapprovals(i.e.underthe“automaticroute”)barringsomeexceptionalcaseslikedefense,housingandrealestate,printmedia,etc.(referredtoasthe“negativelist”).IftheFDIisnotinaccordancewiththeprescribedguidelinesoriftheactivityfallsunderthenegativelist,priorapprovalhastobeobtainedfromthegovernment(“approvalroute”).

FDIinmanufacturingofmedicaldevicesispermittedtotheextentof100%undertheautomaticroute.ForthelimitedpurposeofFDIPolicy,Medicaldeviceisdefinedasfollows;

Medicaldevicemeans;

a.Anyinstrument,apparatus,appliance,implant,materialorotherarticle,whetherusedaloneorincombination,includingthesoftware,intendedbyitsmanufacturertobeusedspecificallyforhumanbeingsoranimalsforoneormoreofthespecificpurposesof–

i.Diagnosis,prevention,monitoring,treatmentoralleviationofanydiseaseordisorder;ii.Diagnosis,monitoring,treatment,alleviationorassistancefor,anyinjuryordisability;

iii.Investigation,replacementormodificationorsupportoftheanatomyorofaphysiologicalprocess;iv.Supportingorsustaininglife;

v.Disinfectionofmedicaldevices;vi.Controlofconception,

vii.Andwhichdoesnotachieveprimaryintendedactioninoronthehumanbodyoranimalsbyanypharmacologicalorimmunologicalormetabolicmeans,butwhichmaybeassistedinitsintendedfunctionbysuchmeans;

b.Anaccessorytosuchaninstrument,apparatus,appliance,materialorotherarticle;

c.In-Vitrodiagnosticdevicewhichisareagent,reagentproduct,calibrator,controlmaterial,kit,instrument,apparatus,equipmentorsystem,whetherusedaloneorincombinationthereofintendedtobeusedforexaminationandprovidinginformationformedicalordiagnosticpurposesbymeansofexaminationofspecimensderivedfromthehumanbodiesoranimals.1

1DepartmentofIndustrialPolicyandPromotion;PressNote1(2018);January23,2018.

©NishithDesaiAssociates2024Provideduponrequestonly6

India’sPost-TRIPSIntellectualProperty

Environment

InMarch2005,India’spatentlawwasamendedtoincorporateIndia’sobligationsunderWorldTradeOrganization(WTO)regulationsand,specifically,theTradeRelatedAspectsofIntellectualPropertyRightsAgreement(“TRIPS”).PriortotheadoptionofTRIPS,protectionofintellectualpropertyrights(“IPRs”)inIndiawereofconcerntoglobalmedicaldevicecompaniesseekingtoenterIndia.Post-TRIPS,Indiahasawellestablishedstatutory,administrative,andjudicialframeworktosafeguardIPRs.Apatentedinvention(whichincludesmedicaldevices)isnowgiven20yearsofprotectioninIndia.Well-knowninternationaltrademarkssuchasVolvoandWhirlpoolhavebeenprotectedinIndiathroughjudicialdecisionsevenwhentheywerenotregisteredinIndia.

Computersoftwarecompanieshavesuccessfullycurtailedpiracythroughcourtorders.Computerdatabasesandsoftwareprograms,whicharewidelyusedbythemedicaldevicesindustry,havebeenprotectedundercopyright.ComputerprogramshavingtechnicalapplicationtoindustryandcomputerprogramsincombinationwithhardwarecannowbepatentedinIndia.Thoughtradesecretsandknow-howarenotprotectedbyanylegislation,theyareprotectedunderthecommonlawandthroughcontractualobligations.Thecourts,onthegroundofbreachofconfidentiality,accordprotectiontoconfidentialinformationandtradesecrets.

©NishithDesaiAssociates2024Provideduponrequestonly7

LegalandRegulatoryRegime

TheMedicalDeviceRules,2017(“MDR”),issuedundertheDrugsandCosmeticsAct,1940(“DCA”),constitutesIndia’sprimarymedicaldeviceregulatoryframework.TheMDRregulatesthefollowingcategoriesofsubstancesasmedicaldevices–

a.Specificdevicesintendedforinternalorexternaluseinthediagnosis,treatment,mitigationorpreventionofdiseaseordisorderinhumanbeingsoranimalswhicharenotifiedbythegovernmentfromtimetotimeundertheDCA;

b.SpecificsubstancesintendedtoaffectthestructureoranyfunctionofthehumanbodywhicharenotifiedbythegovernmentundertheDCA.Atpresent,thesubstancesnotifiedaremechanicalcontraceptives(e.g.condoms,intra-uterinedevices,tubalrings),insecticidesanddisinfectants;

c.Surgicaldressings,surgicalbandages,surgicalstaples,surgicalsutures,ligatures,bloodandbloodcomponentcollectionbagwithorwithoutanticoagulant;

d.Substancesusedforinvitrodiagnosis.

AtthetimetheMDRcameintoeffectonJanuary1,2018,15medicaldeviceswereregulat