Foreigners can now own up to 100 percent of existing medical devicemakers in India without first getting government approval, under a carve-out of the country’s foreign direct investment policy for drugs.
The new policy, adopted by the Union Cabinet on Dec. 24, enables companies investing in so-called “brownfield” projects that involve existing facilities to use the same automatic route available for new, or greenfield, investments. Under the old policy, brownfield investments greater than 49 percent required prior approval.
The move brings India’s foreign direct investment policy for devices in line with the pharma sector and aims to spur investment in the $7 billion sector. According to Department of Industrial Policy and Promotion, FDI in medical and surgical appliances accounted for about US $873,000 between April 2000 and October 2014 — a far cry from the roughly $13 million invested in drugs.
Devicemakers Cool to Proposal
The carve-out creates a new category of “medical and dental instruments and supplies,” but does not include a noncompete clause like the one that protects India’s generic drugmakers. According to the Cabinet, that clause isn’t relevant to the device industry, which is mostly import-dependent.
Indian devicemakers reacted coolly to the news. In a Dec. 25 letter to India’s commerce minister, Rajiv Nath, forum coordinator of AIMED, says the trade group supports 100 percent FDI as long as it is restricted to manufacturing and not applied to trading. Granting automatic approval for 100 percent brownfield investments would make India’s devicemakers, most of which generate well below $1 million annually, “easy picking” for multinational companies, he adds.
Rather than expanding FDI, AIMED wants the government to impose a 10 percent import tax on medical devices and reinstate a 4 percent special additional duty, or SAD, to encourage more local manufacturing.
Abby Pratt, vice president of global affairs at AdvaMed, calls the carve-out a “significant step towards creating an appropriate regulatory framework for medical devices” that is separate from drugs. “We are optimistic that the distinction will be taken to the last mile by this government,” she tells IDDM. — Meg Bryant