Pharmaceuticals & Biotechnology
Medical Devices Rules, 2017
Some of the salient features of the Medical Devices Rules, 2017 (‘MD Rules’) notified by the Ministry of Health and Family Welfare (‘MHFW’) on January 31, 2017, which will come into force from January 1, 2018, are set out below:
i. Definition of Medical Device: The term ‘medical device’ has been defined to mean: “(a) substances used for in vitro diagnosis and surgical dressings, surgical bandages, surgical staples, surgical sutures, ligatures, blood and blood component collection bag with or without anticoagulant covered under sub-clause (i) of clause (b) of Section 3 of the Drugs and Cosmetics Act, 1940 (‘DCA’); (b) substances including mechanical contraceptives (condoms, intrauterine devices, tubal rings), disinfectants and insecticides notified under sub-clause (ii) of clause (b) of Section 3 of the DCA; and (c) devices notified from time to time by the Central Government under sub-clause (iv) of clause (b) of Section 3 of the DCA”;
ii. Classification of medical devices: The MD Rules provide for a risk based classification: (a) low risk as Class A; (b) low moderate risk as Class B; (c) moderate high risk as Class C; and (d) high risk as Class D;
iii. Conformance to the Bureau of Indian Standards or MHFW standards: Where no relevant standards have been laid down, such device should conform to the standards laid down by the International Organisation for Standardisation or the International Electro Technical Commission, or as per any other pharmacopoeial standards. In the absence of the above standards, the device should conform to the validated manufacturer’s standards;
iv. Licensing Mechanism: Licenses for manufacture for sale or for distribution of devices falling under Classes A and B will be granted by the State Licensing Authority, whereas, those falling under Classes C and D and import licenses all classes of medical devices will be granted by the Central Licensing Authority;
v. Term of Licenses: Any new licenses obtained under the MD Rules, whether for manufacture or import, will be valid in perpetuity, unless cancelled or surrendered and provided requisite license retention fees are paid; and
vi. Shelf Life: This will be determined keeping in view the technical parameters and will ordinarily not exceed 60 months from date of manufacture. The MD Rules also contain restrictions on the import of certain medical devices depending on their respective shelf life claim and the percentage of residual shelf-life as on the date of import.
Coronary Stents Brought under Price Control
On February 13, 2017, the National Pharmaceuticals Pricing Authority (‘NPPA’), Ministry of Chemicals and Fertilizers (‘MoCF’) published an order fixing the ceiling prices of coronary stents, by way of a Gazette Notification., pursuant to which the price of bare metal stents has been capped at INR 7,260 (approximately US$ 110) per unit and the price of drug eluting stents (‘DES’) (including metallic DES and Bioresorbable Vascular Scaffold / Biodegradable stents) has been capped at INR 29,600 (approximately US$ 450) per unit, exclusive of value added tax. This has primarily been done by the NPPA as it found that huge and unethical mark-ups were being charged throughout the supply chain of coronary stents resulting in irrational, exorbitant and unaffordable prices of coronary stents in India. Earlier, by way of a notification dated July 19, 2016, the Ministry of Health & Family Welfare had added ‘coronary stents’ to the National List of Essential Medicines, 2015 and subsequently the MoCF, by notification dated December 21, 2016, had amended Schedule I of the Drug Price Control Order, 2013 (‘DPCO 2013’) such that ‘coronary stents’ were classified as ‘scheduled formulations’ under the provisions of the DPCO, 2013.
By an Office Memorandum dated February 20, 2017, the NPPA, MoCF has also fixed a trade margin of 8% on coronary stents, which will apply across the trade channels viz. from manufacturer/importer to the end consumer and will include hospital handling fees. The NPPA has also clarified that the 8% trade margin has been built into the ceiling price of coronary stents.
Knee Implants brought under Price Control
On August 16, 2017, the National Pharmaceuticals Pricing Authority (‘NPPA’), Department of Pharmaceuticals, Ministry of Chemicals and Fertilizers, published an order under Paragraph 19 of the Drugs (Prices Control) Order, 2013 fixing the ceiling price of orthopedic knee implants for primary and revision knee replacement systems (‘Order’). This Order has primarily been passed by the NPPA as it found that the trade margins for orthopedic-knee implants were unjustified, unreasonable and irrationally high leading to exorbitant prices, making such implants less accessible and affordable to a vast section of patients in India.
Pursuant to the Order, the price of primary and revision knee replacement systems has been capped at a range of Rs. 4,090 (approx. US$ 62) to Rs. 38,740 (approx. US$ 600) and Rs. 4,090 (approx. US$ 62) to Rs. 62,770 (approx. US$ 960), respectively per unit, depending on the feature/material and the component of the knee implant. The capped prices are inclusive of trade margins and exclusive of goods and services tax. The ceiling price has to be complied with for a period of one year from the date of the Order, by manufacturers and importers of knee implants, as well as by hospitals/nursing homes/clinics performing orthopedic surgical procedures using knee implants.
Further, the Department of Pharmaceuticals, by its order dated September 18, 2017 has directed companies to inter alia maintain production/import/supply of orthopedic knee implant systems at the same levels prior to August 2017 and submit a weekly report on the implants produced and distributed. The order is valid for a period of six months.
It is important to note that, similar to the above, the NPPA had published an order on February 13, 2017 fixing the ceiling prices of coronary stents. This was discussed in the April 2017 quarterly edition of the Inter Alia ….
 The Drugs (Prices Control) Order, 2013 authorizes the Government (which powers have been delegated to the NPPA), in extraordinary circumstances, if it considers necessary so to do in public interest, to fix the ceiling price or retail price of any drug (including notified medical devices).
Revisions to FDI Policy
The Department of Industrial Policy and Promotion (‘DIPP’) has, by way of Press Note No. 5 dated June 24, 2016 (‘Press Note 5’), introduced the following notable amendments to the FDI Policy:
i. 100% foreign direct investment (‘FDI’) is permitted under the approval route for trading, including through e-commerce, in respect of food products manufactured or produced in India;
ii. In the defence sector, FDI beyond 49% is permitted through the approval route, where the investment results in Indian access to modern technology or for other reasons. The erstwhile condition for such FDI, requiring such investment to result in access to ‘state-of-art’ technology, has been dispensed with;
iii. Foreign investment in the civil aviation sector has been liberalised, whereby: (a) 100% FDI is permitted under the automatic route in brownfield and greenfield airport projects; and (b) FDI has been raised to 100% (with up to 49% under the automatic route and 100% through the automatic route for non-resident Indians (‘NRIs’)) for scheduled air transport services, domestic scheduled passenger airlines and regional air transport services. Foreign airlines continue to be allowed to invest in the capital of Indian companies operating scheduled and non-scheduled air-transport services up to 49%;
iv. FDI in brownfield pharmaceutical projects has been permitted up to 100%, with 74% under the automatic route. However, a non-compete clause is not permitted in transactions, except in certain special circumstances with the prior approval of the Foreign Investment Promotion Board;
v. Local sourcing norms have been relaxed for three years for entities engaged in single brand retail trading of products having ‘state-of-art’ and ‘cutting edge’ technology, and where local sourcing is not possible;
vi. FDI in private security agencies has been raised to 74%, with 49% permitted under automatic route. It is clarified that the terms ‘private security agencies’, ‘private security’, and ‘armoured car service’ will have the same meaning as ascribed to such terms under the Private Security Agencies (Regulation) Act, 2005. Accordingly, private security agencies would include any person (other than any governmental agency) providing private security services including training of private security guards and deployment of armoured cars;
vii. FDI in animal husbandry (including breeding of dogs), pisciculture, aquaculture and apiculture was permitted up to 100% under the automatic route under controlled conditions. The requirement of ‘controlled conditions’ for FDI in these activities has now been removed; and
viii. 100% FDI in broadcasting carriage services, including teleports, direct to home, cable networks, mobile TV and headend-in-the-sky broadcasting services, has been permitted under the automatic route.