The Indian Medical Device Industry: Regulatory, Legal and Tax Overview

M U M BA I S I L I C O N VA L L E Y BA N G A LO RE S I N G A P O RE M U M BA I B KC NEW DELHI MUNICH N E W YO RK
The Indian Medical

Device Industry
Regulatory, Legal and Tax Overview
March 2018
© Copyright 2018 Nishith Desai Associates www.nishithdesai.com

The Indian Medical Device Industry
March 2018
[email protected]
© Nishith Desai Associates 2018

Contents
EXECUTIVE SUMMARY 01
1. INTRODUCTION 02
2. INDIA ENTRY STRATEGIES 04
3. INVESTMENT CLIMATE IN INDIA 05
4. INDIA’S POST-TRIPS INTELLECTUAL PROPERTY ENVIRONMENT 06
5. LEGAL AND REGULATORY REGIME 07
I. Authorities 07
II. Licenses Required for Import, Sale, Manufacture
and Loan of Medical Devices Under the Mdr 10
III. Manufacturing a Notified Medical Device in India 11
IV. Importing a Notified Medical Device into India 11
V. Manufacture/Import of an Investigational Medical Device 12
VI. Clinical Investigation 12
VII. Product Standards 13
VIII. Labeling 13
IX. Quality Management System (Qms) 14
X. Penalties 14
XI. Export – Import Restrictions 15
XII. Advertising and Sales Promotion 15
XIII. Drugs and Magic Remedies (Objectionable Advertisement) Act, 1954 16
XIV. The Competition Act, 2002 16
XV. Patent Protection 16
XVI. Data Exclusivity 18
XVII. Trademarks 18
XVIII. Government Control Over Prices of Medical Devices 19
XIX. Medical Device Rules, 2017 - Salient Features 20
6. TAXATION REGIME 28
I. Direct Taxes 28
II. Indirect Taxes 35
7. CONCLUSION- TWO STEPS FORWARD,ONE STEP BACKWARD? 37
ANNEXURE A 38
List of Notified Medical Devices
ANNEXURE B 39
Labeling Requirements for Notified Medical Devices to be marketed in India under MDR
ANNEXURE C 41
Labeling requirements for Notified Medical Devices intended for export
ANNEXURE D 42
Parameters for classification of medical devices and in vitro diagnostic medical devices

Executive Summary
The medical device industry in India is presently mark in the last two years. The Indian Government
valued at USD 5.2 Billion and is growing at 15.8% has also introduced various fiscal measures to
CAGR.1 Currently, India is counted among the top 20 promote research, development, manufacturing
global medical devices market and is the 4th largest and import of medical devices. For instance, the
medical devices market in Asia after Japan, China Government has incentivized scientific research and
and South Korea2 and is poised to grow to USD 50 development by providing weighted deduction for
billion by 2025 as per some industry estimates.3 the expense incurred on that front. There is minimal
or no import duty on certain medical devices.
The medical device market is dominated by imported
products, which comprise of around 80% of total However, like any other country, there are certain
sales.4 The domestic companies are largely involved challenges in doing business of medical devices
in manufacturing low-end products for local in India that must be borne in mind. The first and
and as well as international consumption. Lately, foremost challenge is price control. The Government
many multinational companies have established of India controls prices of certain medical devices by
local presence by acquiring established domestic either fixing a price at which they may be sold under
companies or starting a new business. a formula or by restricting the ability of the marketer
of the medical device to increase its price by more
The Indian medical device market offers a great
than a prescribed percentage at any given time.
opportunity not only of its size, but also because
The second challenge is the presence of multiple
of encouraging policies and regulations that the
regulators which may make simple tasks, such as
Government has introduced to give a fillip to the
rectification of erroneous declaration on the label,
medical device industry. For instance, the government
quite a tumultuous affair. The third challenge
has overhauled the regulatory framework for
is presence of archaic laws that do not permit
medical device in 2017 and has brought it at par with
manufactures and importers of medical device to
international norms by introducing the concept of
promote their product directly to the customer as
‘risk-based’ regulation. The regulatory licenses issued
cures for certain prescribed conditions and illnesses.
for import, manufacture or sale of medical devices
All these challenges, and many more, are detailed in
have been made perpetual in nature to cut down
the body of this research paper.
on unnecessary and time-consuming paper-work,
in a bid to increase ease of doing business in One must also not lose sight of the fact that the
India. Foreign direct investment in medical device Indian consumer mindset and local business
manufacturing sector is permitted without any practices are unique, and must be carefully studied
prior approval from the government, allowing while developing a business model. Certain laws,
business to quickly scale-up existing operations by such as the foreign exchange regulations and the tax
infusing capital or engage in time-sensitive strategic statute must also be assessed in-depth because they
acquisitions. The already robust intellectual property affect the ability of the investor to invest and draw
rights regime in India has been strengthened further out returns, and determine the degree of profitability.
by tweaking of rules for grant of patent and trade
Having said that, the Government remains extremely
committed and sensitive to the demands of the
1. http://www.makeinindia.com/article/-/v/sector-survey-medical- industry, and, in fact, has ear-marked medical device
devices (last accessed: February 27, 2018).
industry as a “sun-shine” sector. It is hoped that this
2. http://www.makeinindia.com/article/-/v/sector-survey-medical-
devices (last accessed: February 27, 2018). research paper will act as a guide to everyone who is
3. http://www.makeinindia.com/article/-/v/sector-survey-medical- interested in doing business of medical device in India.
devices (last accessed: February 27, 2018).
4. https://timesofindia.indiatimes.com/business/india-business/80-
medical-equipment-imported-doctors-say/articleshow/56081617.
cms (last accessed: February 27, 2018).
1
Provided upon request only
1. Introduction
The approximate USD 5.2 Billion worth Indian started to focus on Tier II and Tier III cities, a market
medical device sector is Asia’s fourth largest market, which is until now untapped in India. As private
and presents an exciting business landscape and enterprises expand in lesser explored markets,
opportunities for both multi-national and domestic the demand for medical devices will expand
players. Till the early 1990s, the medical device sector proportionally. Other reasons for strong growth
was significantly dominated by domestic players. prospects of the industry are:
But after India opened up its markets in 1991, tables
have turned. The technological advancement and §§Economic growth leading to higher disposable
incomes
expertise that the global market leaders offered has
proved to be an advantage. Today, India’s medical
§§Increased Public Spending in Healthcare
device sector is dominated by multi-national
companies, which is evident from the fact that §§Increased Penetration of Health Insurance
about 80% of the sales are generated by imported
medical devices. The domestic players, on the other §§Improving Medical infrastructure
hand, were quick to adapt the winds of change and
§§Increasing affordability due to growing income
started to focus on low cost devices. It will come as
a surprise to many that the domestic players in India §§Increasing number of ailments
export more than 60 percent of their output as Indian
markets are dominated by such imported medical §§Increasing demand due to “Medical tourism”
devices. Over the years, many multi-nationals have
The sector is also witnessing strong Foreign Direct
set up operations in India. However, the nature
Investments (“FDI”) inflows, which reflects the
of majority of the operations is to only distribute
confidence of global players in the Indian market. As
imported devices and provide support function.
per official data, the medical and surgical equipment
Few multi-nationals have started domestic
sector received a total of INR 9712 Crore (approx. USD
production too. Some multi-nationals have also
1.5 Billion) between 2000 and December 2017.5 In 2014
entered India by acquiring domestic manufacturers.
and 2015, the FDI inflow were 133.96 Million and
For example, Netherland-based Royal Philips
160.24 Million respectively.6 The FDI inflows jumped
Electronics, a leading manufacturer of General
by almost 300% in 2016 to USD 439.01 Million.7
X-Ray acquired Alpha X-Ray Technologies, a leading
manufacturer of cardiovascular X-Ray systems. The major players in Indian market are (in no particular
order): Hindustan Syringes & Medical Devices, Opto
The sector is at present growing at around 15.8%
Circuits (India), Wipro GE Healthcare, 3 M, India
Compound Annual Growth Rate (“CAGR”) for
Medtronic, Johnson & Johnson, Becton Dickinson,
a plethora of reasons. A significant percentage of
Abbott Vascular, Bausch & Lomb, Baxter, Zimmer
purchasers of medical devices are private medical
institutions and hospitals. Due to increased
5. Department of Industrial Policy and Promotion, Fact sheet on
competition in Tier I cities, private enterprises have Foreign Direct Investment (FDI) from April, 2000 to December,
2017, available on: http://dipp.nic.in/sites/default/files/
FDI_FactSheet_21February2018.pdf (last accessed: February 27,
2018).
6. Department of Industrial Policy and Promotion, Statement on
sector-wise / year-wise FDI equity inflows from January, 2000 to
September, 2017, available on: http://dipp.nic.in/sites/default/
files/Table%20No%204_oct2017.pdf (last accessed: February 27,
2018).
7. Department of Industrial Policy and Promotion, Statement on
sector-wise / year-wise FDI equity inflows from January, 2000 to
September, 2017, available on: http://dipp.nic.in/sites/default/
files/Table%20No%204_oct2017.pdf (last accessed: February 27,
2018).
2 © Nishith Desai Associates 2018

India, Edwards Life Sciences, St. Jude Medical (now One peculiar feature of the Indian medical device
a part of Abbott), Stryker, Baxter, Boston Scientific, industry is that it is largely unregulated. The Indian
BPL Healthcare India, Sushrut Surgicals, Trivitron government has regulated only a few types of
Diagnostics, Accurex Biomedical, Biopore Surgicals, medical devices. All other types of medical devices
Endomed Technologies, HD Medical Services (India), are unregulated, meaning there is no government
Eastern Medikit, Harsoria health care, Nidhi Meditech oversight on its manufacture, import, distribution
System, Philips Medical, Wipro Technologies, HCL and sale. The Medical Device Rules, 2017, which has
Technologies and Texas Instruments. to come into effect from January 1,2018, is expected
to fill the legislative void that is currently present due
Some of the major industry associations are:
to the absence of a medical device specific legislation
Advanced Medical Technology Association
in India. This aspect is discussed in detail in India
(ADVAMED), Association of Indian Medical Device
under the chapter on Legal and Regulatory Regime.
Industry (AIMED), NATHEALTH, Association of
Diagnostics Manufacturers of India, All India Plastics All multi nationals looking to invest in the Indian
Manufacturers’ Association, Medical Disposables medical device sector must strategize their entry on
Manufacturers Association, Society of Biomaterials & the basis of certain key factors which will influence
Artificial Organs, National Biomedical Engineering profitability of the investment. These key factors are
Society and Medical Surgical and Healthcare listed and discussed next.
Industry Trade Association.
3
2. India Entry Strategies

Multinational medical device companies or To be aware of the legal and regulatory framework
investors seeking to do business with Indian medical is another must. Medical device industry is tightly
device companies need to appraise and structure regulated, and any non-compliance may result in
their activities on three pillars: penalty as well as criminal prosecution of the
Strategy Law Tax

§§ Observing the economic and §§ Exchange Control Laws: Primarily the §§ Domestic Taxation Laws:
political environment in India Foreign Exchange Management Act, 1999 The Income Tax Act, 1961;
from the perspective of the and numerous circulars, notifications and Goods and Service Tax,
investment press notes issued under the same customs, and value added
tax.
§§ Understanding the ability of the §§ Corporate Laws: Primarily the Companies
multinational company or an Act, 1956, the Companies Act, 2013 and §§ International Tax
investor to carry out operations the regulations laid down by the Securities Treaties: Treaties with
in India, the location of its and Exchanges Board of India (“SEBI”) favorable jurisdictions
customers, the quality and such as Mauritius, Cyprus,
location of its workforce §§ Sector Specific Laws: Drugs & Cosmetics Singapore and the
Act, 1940, the Drugs & Cosmetics Rules,
Netherlands
§§To strategize the business 1945, the Medical Device Rules, 2017,
model by identifying the correct the Patents Act, 1970 and other legis-
modality to do business in India lations, regulations and guidelines that
affect the medical devices industry
The sensitive healthcare sector in India has long management in extreme cases. If a multi-national
been conservative about foreign investment over company is operating a wholly owned subsidiary
concerns of foreign influence over health priorities in India, it must be make sure that the subsidiary is
of domestic manufacturers. However, in recent times, compliant with the regulatory framework and other
there is growing governmental and popular support product liability related laws to avoid any unpleasant
for foreign investment in all sectors, including legal proceedings. Multi-national companies should
health. It is, therefore, significant to observe the also keep an eye on the exchange control laws as
political and economic environment of India. they govern how profits made by the company can
be realized out of India. Lastly, for such companies,
It is equally important to understand the business
if the investment is structured through favorable tax
culture and consumer mindset prevalent in India.
jurisdictions, it may lead to significant tax-savings.
Companies that are quick to adapt to it turn out to
be more profitable.

3. Investment Climate in India

By and large FDI is now permitted in almost all the
sectors in India without obtaining prior regulatory iii. Investigation, replacement or
approvals (i.e. under the “automatic route”) barring modification or support of the
some exceptional cases like defense, housing and anatomy or of a physiological process;
real estate, print media, etc. (referred to as the
iv. Supporting or sustaining life;
“negative list”). If the FDI is not in accordance with
the prescribed guidelines or if the activity falls under
v. Disinfection of medical devices;
the negative list, prior approval has to be obtained
from the government (“approval route”). vi. Control of conception,
FDI in manufacturing of medical devices is And which does not achieve primary intended
permitted to the extent of 100% under the action in or on the human body or animals
automatic route. For the limited purpose of by any pharmacological or immunological or
FDI Policy, Medical device is defined as follows; metabolic means, but which may be assisted in
its intended function by such means;
Medical device means;
b. An accessory to such an instrument, apparatus,
a. Any instrument, apparatus, appliance, implant,
appliance, material or other article;
material or other article, whether used alone
or in combination, including the software, c. In-vitro diagnostic device which is a reagent,
intended by its manufacturer to be used reagent product, calibrator, control material,
specifically for human beings or animals for kit, instrument, apparatus, equipment or
one or more of the specific purposes of – system, whether used alone or in combination
thereof intended to be used for examination and
i. Diagnosis, prevention, monitoring,
providing information for medical or diagnostic
treatment or alleviation of any disease or
purposes by means of examination of specimens
disorder;
derived from the human bodies or animals.8
ii. Diagnosis, monitoring, treatment, alleviation

or assistance for, any injury or disability;
8. Department of Industrial Policy and Promotion; Press Note 1

(2018); January 23, 2018
5
4. India’s Post-Trips Intellectual Property

Environment
In March 2005, new patent laws were passed in India Computer software companies have successfully
to comply with World Trade Organization (WTO) curtailed piracy through court orders. Computer
regulations and, specifically, the Trade Related Aspects databases and software programs, which are widely
of Intellectual Property Rights Agreement (“TRIPS”). used by the medical devices industry, have been
Prior to the adoption of TRIPS, protection of intellectual protected under copyright. Computer programs
property rights (“IPRs”) in India were of concern to having technical application to industry and computer
global and medical device companies seeking to enter programs in combination with hardware can be now be
India. Post-TRIPS, India has well-established statutory, patented in India. Though trade secrets and know-how
administrative, and judicial frameworks to safeguard are not protected by any legislation, they are protected
IPRs. A patented invention (including products) is under the common law and through contractual
now given 20 years of protection in India. Well-known obligations. The courts, on the ground of breach of
international trademarks such as Volvo and Whirlpool confidentiality, accord protection to confidential
have been protected in India through judicial decisions information and trade secrets.
even when they were not registered in India.

5. Legal and Regulatory Regime

The Medical Device Rules, 2017 (“MDR”), issued §§It is important to note there that the government
under the Drugs and Cosmetics Act, 1940 (“DCA”), has been selective in regulation of medical devices.
regulate the following categories of substances – In other words, until a device has been notified
by the government under the DCA and MDR, it
a. Specific devices intended for internal or external
will not be regulated by the MDR. This has been
use in the diagnosis, treatment, mitigation or
clarified by the Central Licensing Authority as
prevention of disease or disorder in human
well. However, it will do good to medical device
beings or animals which are notified by the
companies who are in the business of unregulated
government from the time to time under the
devices to remain updated about the list of
DCA. Some categories of devices have already
Notified Medical Devices. The government has the
been notified by the government.
power to notify new devices and substances. Upon
such notification, the said devices and substances
b. Specific substances intended to affect the
will also be regulated by the DCA and the MDR.
structure or any function of the human body
which are notified by the government under
the DCA. At present, the substances notified
I. Authorities
are mechanical contraceptives (eg. condoms,
intra-uterine devices, tubal rings), insecticides
The Central Government and the State Governments
and disinfectants.
are responsible for the enforcement of the Act.
The Central Drugs Standard Control Organization
c. Surgical dressings, surgical bandages, surgical
(“CDSCO”), headed by the Drugs Controller
staples, surgical sutures, ligatures, blood
General of India (“DCGI”) is primarily responsible
and blood component collection bag with or
for coordinating the activities of the State Drugs
without anticoagulant;
Licensing Authorities, formulating policies, and
d. Substances used for in vitro diagnosis. ensuring uniform implementation of the Act
throughout India. The division of responsibilities
The devices mentioned in (a) and (b) which have
under the MDR between the central and state
been notified by the Government and are covered
authorities are captured below:
in Annexure A and are popularly referred to as
“Notified Medical Devices”. However, since the MDR
apply to all substances covered under (a) - (d), for
A. DCGI (Central Licensing
the purpose of this paper, any reference to Notified Authority)
Medical Devices should be read to apply to all
Apart from co-ordination with state licensing
substances covered under (a) – (d).
authorities, the DCGI is responsible for handling
Medical devices are categorized into one of four matters of:
classes under the MDR – on the basis of increasing
a. import of all Classes of medical devices;
risk from Class A to Class D.
b. manufacture of Classes C and D devices;

The DCA and MDR seek to:
c. clinical investigation and approval of

§§Regulate the import, manufacture, distribution
investigational medical devices; and
and sale of Notified Medical Devices.
d. clinical performance evaluation and approval of

§§Ensure the availability of standard quality
new in vitro diagnostic devices.
Notified Medical Devices to the consumer.
7
B. State Drug Controller (State The National Accreditation Body is an entity notified by
Licensing Authority) the Central Government, which fulfils certain criteria
specified by the government from time to time. Until
The State Drug Controller (by whatever name called) is such time a National Accreditation Body is notified,
responsible for handling matters of: the Quality Council of India shall act as the National
Accreditation Body and carry out the functions as
a. manufacture (for sale or distribution)
prescribed under the MDR.
of classes A and B devices;
The National Accreditation Body lays down standards
b. licensing for sale, stocking, exhibition or offer for
and procedures for accreditation, and also assesses
sale or distribution of medical devices of all classes
entities seeking accreditation as a notified body.
The Body is also responsible for carrying out periodic
The MDR has also introduces two new bodies – the
audits of notified bodies, to assess conformance with the
National Accreditation Body and Notified Bodies.
standards prescribed.
A notified body is responsible for carrying out audits
of manufacturing sites of all classes of medical devices,
to verify conformance with the Quality Management
System (discussed later). An entity with the relevant
experience and qualification as prescribed under the
MDR can apply to the Central Licensing Authority for
appointment as a notified body.

Orgazinational structure of the Central Drugs Standard Control Organisation (CDSCO)
Organisation Chart
Central Drugs Standard Control Organisation
Drugs Controller General (I)

(Dr. S.Eswara Reddy)
Head Quarter Zonal Offices Sub-Zonal Offices Port/Airport Offices Laboratories

(New Delhi) (6) (5) (13) (6)
Zonal Offices Sub-Zonal Offices Port Offices Laboratories
North Banglore Ahmedabad CDL, Kolkata

Zone:Ghaziabad Chandigarh Chennai Port CDTL, Mumbai
South Zone: Goa Chennai Airport RDTL, Guwahati
Chennai Jammu Banglore RDTL, Chandigarh
East Zone: Kolkata Indore Hyderabad CDL, Kasauli
West Zone: Goa
Head Quarter Mumbai Kochi *IVRI, Izatnagar
(New Delhi) Hyderabad Zone Delhi *NIB, Noida
Ahmedabad Zone kolkata Port *IPC, Ghaziabad
Kolkata Air Cargo
Mumbai Air Cargo
Mumbai, Nhava
Sheva
Mumbai Custom
House
AYUSH STAFF STAFF STAFF STAFF STAFF

STAFF
JDC(I) DDC(I) ADC(I) ADC(I) Director
DDC(I) ADCI DI DI Dy. Director
DDC (Ayurvada)
ADCI DI TDAs TDAs Sr. Scientific
DDC
DI ADI Supporting Staff Supporting Staff Officer I
(Homeopahty)
ADI TDAs Sr. Scientific
ADC (Ayurvada/
TDAs Supporting Staff officer II
Unani/Sidha)
Supporting Research Officer
Dls (Ayurvada/
Staff Sr.Scientist
Unani/Homeo/
Assistant
Sidha)
Jr. Scientist
Assistant
Supporting Staff
Abbreviations: CDSCO- Central Drugs Standard Control Organisation; CDL- Central Drug Laboratories; CDTL- Central Drugs Testing
Laboratories; RDTL- Regional Drug Testing Laboratories; IVRI- Indian Veterinary Research Institute; NIB- National Institute of
Biologicals; IPC- Indian Pharmacopoeia; JDC(I) Joint Drugs Controller India DDC(I) - Deputy Drugs Controller India ; ADC(I)- Asst.
Drugs Controller India;
*Source: http://www.cdsco.nic.in/forms/list.aspx?lid=2121&Id=0
9
II. Licenses Required or permissions, as the case may be. In specific instances
such as manufacture or import of new Notified Medical
for Import, Sale, Devices (discussed later), both, a permission from the
Manufacture and Loan central drug licensing authority and a license from the
state drug licensing authority is required. The required
of Medical Devices licenses and permissions are described more specifically
in the table below.
Under the MDR
The MDR have prescribed the standard format of the
The regulation of Notified Medical Devices is application forms for relevant licenses for the benefit of
overseen by both, the central government and the the applicants. It has also prescribed the standard form
state governments. Under the applicable regulatory (template) of the licenses that may be issued for the
framework, the functions of manufacture, import, benefit of the regulatory authorities and the applicants.
distribution and sale of medical devices require licenses
License for or Registration Form Application Relevant Rule Licensing Timelines (from
Certificate (template) of form Authority the date of
the License application)
Import of Notified Medical Devices Form MD-15 Form MD-14 Rule 36(1) Central Licensing 9 months
Authority
Import of Notified Medical Devices Form MD-17 Form MD-16 Rule 41(1) Central Licensing 30 days
for clinical investigation Authority
Permission to import new Notified Form MD-29 Form MD-28 Rule 64(2) Central Licensing 90 days
Medical Device for clinical trial or Authority
marketing
Permission to conduct clinical Form MD-25 Form MD-24 Rule 59(5) Central Licensing 90 days
investigation Form MD-23 Form MD-22 Rule 52(1) Authority
Permission to import or Form MD-27 Form MD-26 Rule 63(2) Central Licensing 120 days
manufacture medical device that Authority
does not have a predicate device
Retail sale of Notified Medical Form 21 Form 19 Rule 61(2) State Drug No time period
Devices Licensing Author- prescribed (usually
ity between three to six
months)
Whole sale of Notified Medical Form 21-B Form 19 Rule 61(2) State Drug No time period
Devices Licensing prescribed (usually
Authority between three to six
months)
License to manufacture Notified Form MD-5 Form MD-3 for Rule 20(4) and The State 45 days from the
Medical Devices for Class A or Class A or Class B 20(6) for Class Drug Licensing date of application
Class B A or Class B Authority for
Form MD-7 for classes A and B
Form MD-9 Class C or Class D Rule 25(1) for devices, Central
for Class C or Class C or Class Licensing
Class D D Authority for
Classes C and D
devices
License to manufacture a Notified Form MD-13 Form MD-12 Rule 31(3) Central Licensing 30 days
Medical Device for Clinical Authority
investigation

Loan License (manufacture in Form MD-6 for Class Form MD-4 for Rule 20(4) and The State Drug 45 days
facility owned by third party) A or Class B Class A or Class B Rule 20 (6) Licensing Authority
for Class A or for classes A and
Form MD-10 for Form MD-8 for Class B B devices, Central
Class C or Class D Class C or Class D Licensing Authority
Rule 25(1) for Classes C and D
for Class C or devices
Class D
submitted to the office of the jurisdictional Joint

III. Manufacturing a Director of Foreign Trade, wherein details of Bank
Notified Medical Account Number and Permanent Account Number
have to be furnished
Device in India
Under the Act, the activity of import of Notified
A separate license is required for each manufacturing Medical Devices into India requires an import license
location and for each Notified Medical Device at from the office of the Drugs Controller General
such manufacturing location. of India. An application for grant of a registration
certificate may be made by the foreign manufacturer
The license for manufacturing a Class A or B device is
itself if it has a valid wholesale license for sale or
issued by the State Licensing Authority, while the licens-
distribution of Notified Medical Devices under the
ing to manufacture a Class C or D device is issued by the
MDR or its authorized agent in India, either having
Central Licensing Authority.
a valid license under the MDR to manufacture
for sale of a Notified Medical Device or having a
Under the Act, “manufacturing” includes any process
valid wholesale license for sale or distribution of
(or part) for making, altering, ornamenting, finishing,
Notified Medical Devices in India. Many a times,
packing, labeling, breaking up or otherwise treating
foreign manufacturers do not have an Indian
or adopting any drug with a view to its sale or
subsidiary which has a wholesale license for sale
distribution. However, “manufacturing” does not
or distribution of Notified Medical Devices. Hence,
include dispensing or packing at the retail sale level.
the manufacturers choose to appoint a third party
as an authorized agent to make the application
IV. Importing a Notified for grant of an import license. The authorization
Medical Device into by a manufacturer to its agent in India must be

documented by a power of attorney.
India Other documentation related requirements for
import, which varies based on the class of medical
Importing a medical device into India requires
device intended to be imported, including:
satisfaction of few additional legal requirements
than those indicated above. The import of all
products in India, including medical devices, §§Free Sale Certificate in country of origin issued by
the National Regulatory Authority or equivalent
is governed under the provisions of the Export and
competent authority
Import Policy. Before importing device into India,
the importer is required to obtain Importer and
§§Notarized copy of Quality Management System
Exporter Code (“IEC”) Number from the office of
certificate/Full Quality Assurance certificate/
the Director General of Foreign Trade (“DGFT”).
Production Quality Assurance certificate issued
The IEC Number would be required to be mentioned
by the competent authority, in respect of the
in the documents filed with Customs for clearance of
manufacturing site
imported goods. For obtaining the IEC Number, an
application in the prescribed form has to be
11
§§Copy of latest inspection or audit report carried 1. When the device is an investigational medical
out by Notified Body/National Regulatory device
Authority or other competent authority within
2. When the device is imported from countries
the last three years, if any.
other than Australia, Canada, Japan, EU
Countries or USA, thereby rendering it
V. Manufacture/Import impossible for the importer to produce a free
of an Investigational sale certificate from the national regulatory

authority of one of the said countries. Though
Medical Device the above requirement applies to all classes of
Notified Medical Devices (i.e. Class A, B, C and D),
Under the MDR, an investigational medical device importers of Class A and Class B medical devices
is defined as a device which does not have its need not undertake clinical investigation in
predicate device, or one which after being licensed India. They have an option to submit published
for marketing, claims new intended use or new safety and performance data and a free sale
population or new material or major design change. certificate from the country of origin in lieu of
A predicate device is defined as a device, first time undertaking clinical investigation in India.
and first of its kind, approved for manufacture for
The MDR envisages manufacturer and importers
sale or import by the Central Licensing Authority and
to undertake two types of clinical investigations
has similar intended use, material of construction,
- pilot clinical investigations and pivotal clinical
and design characteristics as the device which is
investigations. Pilot clinical investigation is defined
proposed to be licensed in India.
as those clinical investigations which are used to
The MDR mandates that, in addition to a license to acquire specific essential information about a device
manufacture or import the investigational medical before beginning the pivotal clinical investigation.
device, the interested manufacturer/importer will A pivotal clinical investigation is a definitive study
have to obtain a permission to market the device in in which evidence is gathered to support the safety
India from the Central Licensing Authority. The said and effectiveness evaluation of the medical device
permission will be given by the Central Licensing for its intended use.
Authority only after review of clinical data establishing
The major distinction between the two types of
safety, performance or effectiveness of the device.
investigations is that a pilot clinical investigation
The catch here is that the clinical data has to be is an exploratory study, which may be conducted
generated after undertaking clinical investigation in a few numbers of patients with the disease or
in the manner prescribed by the MDR, which is condition being studied, that gives insight into
discussed in the next paragraphs. the performance and safety of a device but cannot
provide definitive support for specific mechanistic
or therapeutic claims. On the other hand, a pivotal
VI. Clinical Investigation study is a confirmatory study which may be
conducted in large number of patients with disease
Clinical investigation refers to systematic study of
or condition being studied and scope to provide the
an investigational medical device in or on human
effectiveness and adverse effects.
participants to assess its safety, performance or
effectiveness. For investigational medical device developed in
India, both types of clinical investigations are
The MDR make it mandatory to undertake clinical
required to be carried out in India. For investigational
investigation of the Notified Medical Devices in the
medical devices developed and studied in country
following situations:
other than India, pilot clinical Investigation need
not be undertaken in India provided it has already

been undertaken and relevant clinical study data is

VIII. Labeling
submitted to the Central Licensing Authority. After
submission of such data generated outside India to
The labeling of Notified Medical Devices is governed
the Central Licensing Authority, permission may be
by three statutes:
granted to repeat pilot study or to conduct pivotal
clinical investigation. Pivotal clinical investigation is The Medical Devices Rules, 2017
required to be conducted in India before permission
Before a Notified Medical Device is sold or
to market any investigational medical device in India
distributed in India, it must be labeled according to
except in case of a device that is classified under class A.
specifications outlined in the MDR. It is permissible
Of course, the number of study subjects and sites to for importers to print the mandatory declarations on
be involved in the conduct of clinical investigation a label and stick the label to the package.
shall depend on the nature and objective of the
The MDR prescribes the contents of the label such
clinical investigation.
as name of the medical device, the details necessary
for the user to identify the device and its use, name
VII. Product Standards of manufacturer and address of manufacturing
premises where the device has been manufactured,
All medical devices are required to conform to the statement as to the net contents (in terms of weight
following standards, in the same order of relevance: or measure), license number, date of manufacture,
date of expiry (alternatively, its shelf life), applicable
a. A standard notified by central government
storing and handling conditions, warnings and
for the medical device specifically or which
precautions, , the batch number, as well as the
has been laid down by the Bureau of Indian
manufacturing license number under which it is
Standards (“BIS”); or
manufactured (if manufactured in India). Imported
products must display the import license number,
b. Where (a) is absent, to a standard laid down by
name and address of the importer, address of the
International Organisation for Standardisation
actual manufacturing premises and the date of
(“ISO”) or the International Electro Technical
manufacture. Medical devices that are manufactured
Commission (“IEC”), or by any other
for export to other countries are exempted from
pharmacopoeial standards; or
certain labeling requirements and are instead
c. Where both (a) and (b) are absent, to the required to adopt the requirements of the law to
validated manufacturer’s standards. which the device is being exported. The precise
labelling requirements for medical devices under
Further, the Fifth Schedule of the MDR lays down
the MDR have been described in ANNEXURE B
a ‘Quality Management System’ (“QMS”) that is
for devices intended to be marketed in India and
to be followed during the manufacture of medical
ANNEXURE C for devices manufactured in India
devices and in-vitro diagnostics.
and intended to be exported out of India.
It is noteworthy that the Central Government has

All labels may be printed in English.
the power to prohibit the import, manufacture or
sale of any Notified Medical Device. The Central The Legal Metrology (Packaged Commodity)
Government considers banning those medical Rules, 2011
devices which are removed from the markets of two
The Legal Metrology (Packaged Commodity)
or more countries where they were being marketed.
Rules, 2011, notified under the Legal Metrology
Act, 2009, regulates the packaging and labelling of
pre-packed commodities in India.From January 1,
2018, Notified Medical Devices are required to bear
13
additional declarations and particulars on the retail

X. Penalties
package as prescribed under the Legal Metrology
(Packaged Commodity) Rules, 2011. Like the
The Ministry of Health and Family Welfare,
MDR, it is permissible for importers to print the
Government of India (“Ministry”) in the year 2009
mandatory declarations on a label and sticker the
notified an amendment to the Act that attempts to
label to the package.
strengthen the existing law against the menace of
spurious and counterfeit medical devices in India.
The additional declarations are:
This amendment has changed certain provisions

1. Maximum retail price (“MRP”);
of the Act that specifically relate to the offences
2. Common or generic name of the commodity; of manufacture and trade of spurious Notified
Medical Devices.
3. month and year in which the commodity is man-
ufactured or packed or imported; The penalties under the Act were found to be
inadequate to act as a deterrent for persons involved
4. name, address, telephone number, e-mail address
in offences. The penalties have been significantly
of the person who can be or the office which can
enhanced through the amendment for manufacture,
be contacted, in case of consumer complaints;
sale, and distribution, stocking or exhibiting or offering
for sale or distribution of spurious or counterfeit
5. Actual corporate name and complete corporate
Notified Medical Devices to INR 1,000,000 (appx.
registered address of domestic manufacturer or
USD 16,667) or 3 times the value of the notified
importer or packer;
medical device confiscated, whichever is higher and
6. Name of country of origin or manufacture or imprisonment of not less than 10 years which may
assembly extend up to life, for spurious or counterfeit notified
medical device leading to death or grievous hurt.
Drug (Prices Control) Order, 2013
The entire amount of fine that is realized from the
person convicted for the offence is now paid by way
The DPCO 2013 requires all manufacturers and
of compensation, to the person who is the victim of
importers of Notified Medical Devices to declare the
spurious or counterfeit Notified Medical Devices.
MRP on the label.
If the victim has died due the effect of the spurious or
counterfeit Notified Medical Devices, the relative of
IX. Quality Management the victim is entitled to receive the same amount by
System (QMS) way of compensation.
In case the spurious or counterfeit notified medical

The Fifth Schedule to the MDR a QMS for manufacture device does not lead to death or grievous hurt, then
of Notified Medical Devices and in-vitro diagnostics the penalty is a fine of up to INR 300,000 (appx.
in India. Every company manufacturing Notified USD 5000) or 3 times the value of the notified
Medical Devices in India has to comply with the QMS medical device confiscated, whichever is higher
provisions (to the extent applicable) as a condition and imprisonment of not less than 7 years which
of its manufacturing license, else it may lead to may extend up to life.
cancellation or suspension of the manufacturing
The Ministry also has set up a “whistle blower”
license. The QMS is comprehensive, laying down
policy that aims to reward citizens, who provide
requirements such as the documentation required,
information on the trade and source of spurious
management responsibilities, resource management
Notified Medical Devices.
and monitoring.

XI. Export – Import Please note that while the restriction on labeling
applies only to Notified Medical Devices, some of the
Restrictions restriction on advertisement is general in nature and
are applicable to all medical devices. These are dealt
Imports and exports are regulated by the Foreign in detail under the sub-heading of Drugs and Magic
Trade (Development and Regulation) Act, 1992 along Remedies (Objectionable Advertisement) Act, 1954.
with the Customs Act, 1962 and the Export-Import
Apart from the D&C Rules and the Drugs and Magic
Policy (“EXIM Policy”), issued by the Ministry
Remedies (Objectionable Advertisement) Act, 1954,
of Commerce and Industry of the Government of
the Department of Pharmaceuticals, Government
India. The current EXIM policy also known as the
of India also introduced a set of guidelines called
Foreign Trade Policy covers the period 2015 – 2020.
the Uniform Code of Pharmaceutical Marketing
The purpose of the EXIM policy is to develop export
Practices (“UCPMP”). The UCPMP does not have
potential, improve export performance, encourage
the force of law yet, as the guidelines have not
foreign trade and create a favorable balance of
been issued under a parent legislation. While the
payments positions.
name of UCPMP suggests that the guidelines are
applicable only to the interaction of pharmaceutical
XII. Advertising and Sales companies with HCPs, it has been clarified that
Promotion these guidelines are applicable to medical device

companies as well (the government is also reportedly
planning on issuing a Uniform Code for Medical
The MDR does not specifically cover advertising and
Device Marketing Practices9 (“UCMDMP”), which
promotion of Notified Medical Devices and in vitro
will specifically deal with marketing and promotion
diagnostic devices. However, the MDR states that
of medical devices). The UCPMP places restrictions
the Drugs and Cosmetics Rules, 1945 (“D&C Rules”)
on the interaction of pharmaceutical and medical
will continue to apply, so long as there is nothing
device companies with medical practitioners. For
inconsistent in the MDR. Therefore, the provisions of
instance, the UCPMP states that companies should
the D&C Rules with respect to advertising and sales
not sponsor any cost related to the attendance
promotion would apply to Notified Medical Devices
of a healthcare practitioner in a conference,
and in vitro diagnostic devices.
seminar, workshop, etc., where the practitioner is
participating as a delegate. The UCPMP also lays
Advertising medical devices is strictly regulated.
down the information that should be presented to
The D&C Rules prohibits labeling of Notified
healthcare practitioners in promotional materials.
Medical Devices in a manner that may convey
to the intending user that the enclosed device
Recently, the central government reportedly came
may be used for prevention or cure of certain
out with a draft Essential Commodities (Control
ailments and diseases specified in Schedule J of the
of Unethical Practices in the Marketing of Drugs)
D&C Rules. Some examples of such diseases and
Order, 2017 (“Draft Order”), intending to regulate
ailments are: Blindness, Bronchial Asthma, Cataract,
promotion and marketing activities by companies
Growth of New Hair, Deafness, Genetic Disorders,
before healthcare practitioners. The UCPMP and the
Improvement in vision, Myocardial Infarction etc.
Draft Order are discussed in detail here.10
9. Govt to issue uniform code for medical device marketing

practices soon; available at: http://pharmabiz.com/ArticleDetails.
aspx?aid=105501&sid=1; last accessed on:
27 February 2018.
10. http://www.nishithdesai.com/fileadmin/user_upload/pdfs/
Research_Papers/Uniform-Code-for-Pharmaceutical-Marketing-
Practices_Decoded.pdf
15
XIII. Drugs and Mergers and Takeovers in the medical devices sector
have also grown considerably in the past few years.
Magic Remedies The Competition Act prescribes the thresholds under
(Objectionable which combinations shall be examined and states

that any combination which causes or is likely to
Advertisement) Act, cause an appreciable adverse effect on competition
within the relevant market in India shall be void.
1954
This legislation earlier applied only to drugs, XV. Patent Protection
but its application has been extended to medical
devices by the Indian Courts. The Act prohibits The patent regime in India is governed by the Patents
advertisements about diagnosis, cure, mitigation or Act of 1970 (“Patents Act”) and is supported by the
prevention of 54 diseases and listed disorders such Patents Rule, 2003, (“Patents Rules”). The Indian
as rheumatism, diseases and disorders of the optical Patents Act provides for patenting of both, products
system, heart diseases, cancer, diabetes, etc. and well as processes for a span of 20 years.
XIV. The Competition A. Patentability of medical

devices
Act, 2002
The term Invention is defined under the Patents Act
The growth of medical devices industry, though as “a new product or process involving an inventive
protected under several IP laws, raises competition step11 and capable of industrial application.”12 The
law issues (anti-trust). The need to provide protection Patents Act carves out an exception for medical,
to medical device companies for their innovation surgical, curative, etc., processes or other treatments
is well recognized under the Competition Act, 2002 for humans and animals and does not regard them as
(“Competition Act”) however the same is restricted “inventions”, thereby rendering these processes and
by providing specific inclusions under Section 3(5) treatments incapable of being patented. However,
of the Competition Act. Horizontal agreements the carve out does not extend to medical devices.
in the medical devices sector would involve Thus, invention of a medical device (or process) is
agreements entered at same level between medical granted patent in India.
device manufacturers to restrict supply/fix prices
The patent rights with respect to any invention are
whereas vertical agreements are entered between
created only upon grant of the patent by the Patent
players at different levels in the supply chain being
Office following the procedure established by the
manufacturers and hospitals in the form of tie-in
Patents Act and the Patent Rules. India follows
arrangements.
a declarative system with respect to patent rights.
Patents are granted on a “first to file” basis. The
Cartels by industry associations have been
patent application can be made by either (i)
widespread across jurisdictions to set standard
prices for both stockiest and retailers but the same
has often led to restricting prices. Although the
provisions of the Act recognize protection granted
under IP legislations, yet associations formed to
exchange data and information serving purposes 11. Section 2(1) (ja) of the Patents Act: “inventive step means a feature
of an invention that involves technical advance as compared to the
other than protection of the right holders could
existing knowledge or having economic significance or both and that
invite possible competition law violations. makes the invention not obvious to a person skilled in the art.”
12. Section 2(1)(ac) of the Patents Act: “capable of industrial application
in relation to an invention means that the invention is capable of being
made or used in an industry.”

the inventor or (ii) the assignee13 or (iii) legal D. Parallel Imports

representatives14 of the inventor.
Import of patented products in India from a person
authorized by the patentee to sell or distribute the
B. Convention Application product does not amount to an infringement.
India, a member of the Paris Convention, has

published a list of convention countries under E. Enforcement
Section 133 of the Patents Act. The convention
application has to be filed within one year from the India has historically been viewed by the global
date of priority and has to specify the date on which community as a ‘poor patent enforcement’
and the convention country in which the application territory. Two provisions have been introduced
for protection (first application) was made. A priority that are likely to improve the patent enforcement
document must be filed with the application. Since mechanism. The first provision, compliant with
India is a member of the Patent Co-operation Treaty, Article 34 of TRIPS, is Section 104A, which is
a National Phase Application can also be filed in a “reversal of burden of proof” provision applicable
India, within 31 months from the priority date. to process patents. Section 104A is an exception to
the normal rule which requires that a patent holder
Some of the salient features are as follows:
who alleges infringement should provide proof
to any claims or allegations made. As per Section
§§The term of the patent is 20 years from the date
104A, in any ‘process patent’ infringement suits,
of priority;
the defendant will have to prove that he has used
§§In infringement suits in relation to ‘process’ a process different than the ‘patented process’ in
patents, the ‘burden of proof’ is reversed. order to arrive at an identical product produced by
a ‘patented process’. Second, an amendment to
C. Infringement Section 108 of the Act will enable the court to order
seizure, forfeiture or destruction of infringing goods
If a patented invention is made, constructed, used and also materials and implements, used for creation
sold or imported ‘solely’ for uses reasonably related of infringing goods.
to the development and submission of information
required under any law (Indian or foreign) that
F. Rights prior to the Grant
regulates such activities, then such acts do not
amount to an infringement. This provision, known From the date of publication of the application
as the ‘Bolar provision, allows manufacturers to begin until the date of the grant of a patent, the applicant
the research and development process in a timely has the like privileges and rights as if a patent
manner in order to ensure that affordable equivalent for the invention has been granted on the date of
generic medicines can be brought to market publication of the application. However, applicant
immediately upon the expiry of the product patent. is not entitled to institute any proceedings for
infringement until the patent has been granted.
13. Section 2(1) (ab) of the Patents Act: “Assignee includes an assignee
of the assignee and the legal representative of the deceased assignee
and references to the assignee of any person include references to the
assignee of the legal representative or assignee of that person”.
14. Section 2(1) (k) of the Patents Act: “Legal representative means a
person who in law represents the estate of
a deceased person.”
17
G. Secrecy Provisions15 However, the Government may take some more time
to announce its decision on ‘Protection against unfair
Any person resident in India is not allowed to apply
commercial use’ as the Union ministry of health and
for grant of patent for any invention unless either of
the Department Of Pharmaceuticals wants further
the following two conditions is satisfied:
discussions with stakeholders.
§§Obtaining written permission of the Controller

of Patents. The Controller is required to obtain
XVII. Trademarks
consent of the Central Government before granting
such permission for invention relevant for defense
In India, trademarks are protected both under statutory
purpose / atomic energy. The application is to be
and common law. The Trade and Merchandise Marks
disposed of within 3 months. OR
Act, 1940 was India’s first legislation with respect to
trademarks and was later replaced by the Trade and
§§Patent application for the same invention has
Merchandise Marks Act, 1958 (TM Act, 1958). The TM
been first filed in India at least six weeks before
Act was further updated in 1999 to comply with TRIPS
the application outside India and there is no
and is now known as The Trade Marks Act, 1999 (“TM
direction passed under Section 35 for prohibiting
Act 1999”). The TM Act 1999 allows for the registration
/restricting publication/ communication of
of service marks and three-dimensional marks. India
information relating to invention.
follows the Nice Classification of goods and services,
This section is not applicable to an invention for which is incorporated in the Schedule to the Rules
which an application for protection has first been under the TM Act, 1999. Medical devices are covered
filed in a country outside India by a person resident under Class-10.
outside India. However, this provision will apply if
Class 44 covers the services for Medical services,
the first filing is intended to be made in US, since US
veterinary services and cosmetics; and Class 42
applications are required to be filed by the inventors
covers Scientific and technological services and
and not assignees of the inventors.
research and design relating thereto.16
XVI. Data Exclusivity Class 44: Medical services; veterinary services;

hygienic and beauty care for human beings or
animals; agriculture, horticulture and forestry services.
When the Indian Government began the process of
introducing the 2nd Amendment to the Patents Act,
Class 42: Scientific and technological services and
1970 in 2002, multinational companies approached
research and design relating thereto; industrial analysis
the Government with a recommendation to
and research services; design and development of
introduce a data exclusivity provision consistent
computer hardware and software.
with Article 39.3 of TRIPS. However, the Government
had refused to accede to such a request. The TM Act 1999 provides a procedure to search
trademarks. It is a prudent practice that often
Satwant Reddy committee that was formed to study
prevents potential litigation or opposition to
and recommend on Data Exclusivity submitted
conduct the search for conflicting trademarks
its report in 2008. Recent reports suggest that the
(whether registered or pending) before using or
Government has accepted the recommendations on
applying for any trademark.
data exclusivity and may offer ‘protection against
disclosure’ to the pharma/medical device companies.
15. Sections 35 to 43 of the Patents Act; Can you keep a secret? <eco-
times/2005/Can-you-keep-a-secret-Feb-14-2005.htm>, February 16. http://support.dialog.com/techdocs/international_class_codes_
13, 2005 tmarks.pdf

Any registered trademark must fulfill certain The prices of Notified Medical Devices are controlled
conditions. The TM Act 1999 has set forth absolute in the following manner under DPCO 2013:
and relative grounds of refusal of trademark
1. Of “Scheduled Formulations” –
registration. These grounds are akin to the
The National Pharmaceutical Pricing Authority
provisions of the UK Trade Mark Act of 1994.
(“NPPA”) fixes ceiling price for Scheduled
The trademark can be registered even if the mark is
Formulations by using a formula which
proposed to be used in India i.e. even if prior to the
essentially averages the price to retailer of
date of application, no goods have been sold under
Notified Medical Device manufacturers and
the applied trademark. The term of registration and
importers, followed by addition of fixed margin
renewal is 10 years. Foreign companies can license
of 16% to be given to retailers. Pursuant to
trademarks in India under the appropriate license /
fixation of ceiling price (and adjusting the
Registered User Agreement.
same to applicable taxes), no manufacturer or
The concept of “well-known trademark” has been importer is allowed to set MRP (i.e. maximum
recognized under the TM Act 1999. A well-known retail price) higher than the ceiling price.
trademark prohibits registration of a mark which is
2. Of “Non-Scheduled Formulations” -
merely a reproduction or imitation of a well-known
The NPPA does not allows any manufacturers
mark - even if used in connection with different
and importer of Non-Schedule Formulations to
goods or services.
increases the MRP by more than 10% of within
A trademark can be used without registration and a span of 12 months.
can be protected under common law but not under
3. Of any Notified Medical Device in public
the statutory law. Recently Indian courts have
interest - NPPA, in public interest and under
held that copying international names (even if the
extra-ordinary circumstances, can fix prices
product is not made in India) is not permissible.
of any Notified Medical Device, irrespective of
Several international companies are engaged in
whether the device is a Scheduled Formulation
trademark litigation in India, including IBM, Apple,
or Non-Scheduled Formulation. Till date, NPPA
Microsoft, Dunhill, Whirlpool, Sony and Cartier.
has exercised this power twice for medical
devices – in the case of Coronary Stents and Knee
XVIII. Government Control Implant Systems. The use of this power is very
Over Prices of peculiar, because of the following reasons:
Medical Devices a. NPPA fixes price of the Notified Medical

Device on the basis of average cost of
manufacture or average landing cost (i.e.
In India, prices of all Notified Medical Devices
transfer price in case of import). The NPPA
are controlled by a regulation called Drugs
then adds 50-75% margin for manufacturer
Prices Control Order, 2013 (“DPCO 2013”) made
and importers on the average cost as profit
under Essential Commodities Act, 1955 (“ECA”).
margins for the manufacturers and importers.
A schedule to DPCO 2013 contains a list of a few
Notified Medical Devices which the government
b. NPPA fixes the distributor margin of its products.
believes are “essential” for Indian population. As
This means that a manufacturer or importer
of now, it contains condoms, IUDs and coronary
cannot pass a margin greater than what has
stents. These devices are misleadingly referred to as
been decided by the NPPA to its distributor. The
“Scheduled Formulations”. Notified Medical Devices
distributor margin varies from 8-16%.
that are not covered in the schedule as referred to as
“Non-Scheduled Formulations”. c. An importer, other than the marketing
authorization holder in India, is treated as
a distributor.
19
d. The patient invoice must carry details of the could easily survive for 10 years had to be taken off
price charged to the patient, even though the market every 5 years, only to be repackaged and
patient may have opted for the surgery in form re-introduced!
of a “package” and paid lump-sum for it.
The MDR have been drafted with the intention to
The NPPA has recently asked for details of distinguish medical devices from pharmaceuticals
manufacturing and landing cost of other Notified in lien with internationally acceptable norms.
Medical Devices such as intra ocular lens and The Salient features of MDR are described below.
syringes along with the details of the margins offered
to stockists and hospitals. It is entirely possible that
A. Introduction of risk based
the NPPA may fix ceiling prices of one or more of
these devices in time to come.
classifications system
In tune with the global practice, the MDR will
The government agency under DPCO 2013, which
introduce a risked based classification system for
is responsible for controlling the price of drugs, is
regulation of medical devices. The classification
called the NPPA. The DPCO 2013 also provides for
would be as follows:
controlling the prices of non-NLEM drugs in two
other situations:
a. Low (Class A)
b. Low Moderate (Class B)

XIX. Medical Device
Rules, 2017 - Salient c. Moderate High (Class C)
Features d. High (Class D)
The method of classification is described in detail in

In the above paragraphs, it has been said that the
the first schedule of the MDR (first schedule attached
Indian Government have introduced the MDR to
as Annexure D). It is important to note that unlike
regulate Notified Medial Device. However, the
other countries which give liberty to manufacturers/
importance of this development has not been
importers to classify their product for the purpose of
detailed. In order to appreciate this development,
registration, the MDR do not provide this liberty and
one must understand the position of regulation of
the manufacturers/importers will have to follow the
medical devices prior to introduction of MDR.
classification decided by DCGI.17 The classification,
once done, appears to be non-appealable.
Notified Medical Devices, historically, were treated
as “drugs” and for a very long time, the standard that
An example of the difference in regulation on the
were applicable to drugs were extended to Notified
basis of risk-based classification is as follows:
Medical Devices as well. This created several issues.
For instance, the good manufacturing practices The application for license to import Class A or Class
for drugs require the manufacturers to maintain B medical devices from Unregulated Jurisdictions
a quarantine room at the facility to control any (defined below) can be granted on the strength of
untoward incident arising from the pharmaceuticals a free sale certificate and either of published safety
which pose risk to health. The manufacturers and performance data or clinical investigation in
of Notified Medical Devices were also required the country of origin. However, an application for
to maintain the same, even when the devices import of Class C or Class D medical devices from
were made out of inert devices such as Titanium Unregulated Jurisdictions can be granted only after
which cannot pose any risk to health. Similarly, its safety and effectiveness has been established
the maximum shelf-life of drugs (i.e. 5 years) was through clinical investigation in India.
extended unthoughtfully to medical devices. This
resulted in a situation where medical devices that
17. Rule 4(3) of MDR.

Unregulated Jurisdictions are jurisdictions other do not give any scope to the regulators to extend the
than Australia, Canada, Japan, European Union time-line for coming to a decision for any reason
Countries, or the United States of America. whatsoever. For instance, in case of license to
manufacture Class C or Class D medical device, the
Similarly, for applications for grant of license to
scrutiny of the application is required to submitted
manufacture - Class A medical devices do not require
within forty five (45) days of the date of the
prior audit by third party18 or official inspection;
application,21 the inspection of the manufacturing
Class B medical devices require prior audit by third
site is required to be completed before sixty (60) days
party19 but do not require official inspection, and;
from the date of the application,22 the report of the
Class C or Class D medical devices require prior
inspection has to be forwarded to the applicant23
official inspection.20
, and the decision on the application has to be
communicated within forty five (45) days from
Therefore, it is easy to make out Class A medical
date of receipt of the inspection report.24
devices will enjoy least regulation and Class C or Class
D medical devices will have to face most regulation.
Similarly, a decision on application to import
a medical device is required to be communicated
The application for manufacture of Class A or
within 9 months from the date of the application
Class B medical device will be assessed by the State
irrespective of whether the foreign manufacturing
licensing authority whereas the application for
site is inspected or not.25
manufacture of Class C or Class D medical device
will be assessed by DCGI.
The MDR have also introduced the concept of “deemed
approval” in the event of non-communication of
B. Single window clearance a decision, by the relevant authority, in application
for approval to undertake major change in licensed
All applications for import, manufacture, sale or
particulars (the subject of major change in licensed
distribution and clinical investigation, whether to
particulars is discussed later in detail). If the
be assessed by the DCGI or State licensing authority,
appropriate licensing authority i.e. the DCGI or the
will have to be made through a single online portal
State licensing authority is unable to communicate
of the central government. The details of the portal
its decision on the aforesaid application within
will be notified in the near future.
the stipulated timeline, i.e., forty five (45) days for
manufacture, sixty (60) days for import, then such
C. Certainty and rationalization approvals shall be deemed to have been granted.26
of timelines
D. Perpetual licenses
The government has brought certainty of timelines
and has rationalized the time required for obtaining The licenses granted under the MDR shall be
licenses required to market/manufacture medical perpetual, meaning they will continue to be valid
devices. Under the MDR, an applicant can be certain unless they are cancelled. In order to save a license
of the time within which its application will be from getting cancelled, the licensee is required to
decided and can also plan the time within which it pay a prescribed license retention fee every five
can expect an audit or inspection to happen because years. A delay of ninety (90) days past the five years
timelines have been assigned to each regulatory is acceptable provided the licensee pays a prescribed
function. Further, unlike the D&C Rules, the MDR
21. Rule 21(4) of MDR

23. Rule 24 of MDR
18. Rule 20(4)(i). of MDR 24. Rule 25 of MDR
19. Rule 20(5) r/w Rule 20(6)(iii) of MDR 25. Rule 36(1) of MDR
20. Rule 21(1) of MDR. 26. Rule 26(iii); Rule 38(vi) of MDR
21
late fee. However, if the licensee fails to deposit the requires a prior approval from the appropriate
license retention fee within the aforementioned licensing authority (either DCGI or State licensing
time-limit, then the license is deemed to have authority, as the case may be).29 Any minor change
been cancelled. only requires written intimation to the appropriate
licensing authority within a period of thirty days.30
Once a license is cancelled, the licensee will have to
apply afresh for the license. What constitutes major change and minor change
has also been specified.31 For instance, the change
Please note that while the license may be
in name or address of the manufacturer (whether
perpetual, if a licensed manufacturer has stopped
domestic or foreign) or importer is a major change.
manufacturing activity or closed the manufacturing
A change in design which does not affect quality
site for a period of thirty days or more, it is obligated
in respect of its specifications, indication for use,
to inform the appropriate licensing authority.27
performance and stability of the medical device is
a minor change.
E. Consolidation of registration
This clarificatory inclusion in the MDR is greatly
certificate and import welcomed.
license into a single license
At present, the D&C Rules do not specify what
The MDR have done away with the requirement constitutes a major change or a minor change.
of a registration certificate for registration of the That is not all. Whether a change in the
foreign manufacturer, its manufacturing site and the manufacturing or in processing or in testing or
products. The only regulatory requirement to be able in documentation is major or not is left to the
to import and market products in India is to appoint discretion of the licensing authority and triggers
an authorized agent in India and apply for an import the requirement to make a fresh application.32
license through it. The immediate outcome of this The challenges of making a fresh application
change is that the hassle of making two separate are discussed later with the subject of change
applications (registration and import license) has in constitution.
vanished and the timeline for obtaining the import
In fact, at present, it is known that the following
license (of nine months) has become certain.
changes will result in the requirement to obtain
Further, it will not be possible for two different a fresh import license:33
importers to import different products
a. Changes in name and/or address of Indian
manufactured at the same manufacturing site.
agent/ Importer or change in constitution after
Where an importer has been licensed to import
issue of Registration Certificate/ Import License
certain products from a manufacturing site,
all other products manufactured at the same
b. Change in the Indications and/ or Intended use
site are mandatorily required to be licensed to
the same importer.28 c. Change in constitution
Under the MDR, the above changes (excepting

F. Certainty on consequence change in constitution) do not require fresh
of change in particulars application.
contained in the license
29. Rule 26(iii); Rule 38(vi) of MDR
The MDR are clear about the consequences of change
30. Rule 26(iv); Rule 38(vii) of MDR
in the particulars of a license. Any major change
31. Sixth Schedule of MDR
32. Schedule D(I), Para 3.5 of Rules.
27. Rule 26(xii) of MDR 33. See Import and Registration of Medical Devices FAQs published
28. Rule 34(4)(ii) of MDR by CDSCO.

There is one more welcome change. over past seventy-two (72) years but has not
clarified what it means.
Under the D&C Rules, it is prescribed that the
application for registration certificate for import of But worry no more. The MDR state that change in
notified medical devices will be decided within nine constitution of a licensee in relation to37:
months34 and for import license the application is
i. a firm means change from proprietorship to
customarily decided within three months after grant
partnership including Limited Liability
of registration certificate. Thus, on an average, a total
Partnership or vice versa;
time of around one year is spent in obtaining the
import license. Since it is a considerably long span
ii. a company means-
of time, it is possible that certain changes may occur
in the details that were submitted to the licensing a. its conversion from a private to a public company,
authority at the time of making of the application. or from a public to a private company; or
For instance, it is possible for business reasons that
b. any change in the ownership of shares of more
a different manufacturing site is sought to be
than fifty per cent. of the voting capital in the
registered. Ideally, since the application has not
body corporate or in case of a body corporate
been decided, it should be possible for the applicant
not having a share capital, any change in
to revise the application. However, the current
its membership; and where the managing
practice is that in case of such a change, even if the
agent, being a body corporate is a subsidiary of
application has not been decided, a fresh application
another body corporate, includes a change in the
has to be made.35 Apart from loss of money and
constitution of that other body corporate;
resources, this results in loss of valuable time and
sometime delays imminent and time-sensitive
Therefore, it is now clear that at least after enforce-
launch of products. This serious shortcoming
ment of MDR:
appears to have been rectified in the MDR. Such a
change now is required to be informed in writing 1. Change in directors will not result in change in
to the licensing authority.36 Due to this explicit constitution;
requirement, it should not trigger requirement to
2. Change in shareholding by way of sale/
make a fresh application.
investment will not result in change in
constitution; and
G. Meaning of “change
in constitution” finally 3. Change of parent shareholder due to
explained and change in restructuring exercise will not result

in change in constitution.
constitution rationalized
Whether or not the above event constitutes a change
“Change in constitution” could easily be the most
in constitution of the licensee remains an enigma
dreaded event under D&C Rules, even more than
under the D&C Rules at present.
a “serious adverse event”. This is because no one
seems to have any idea about what it means. Let us understand what the practical challenge is if
Having said that, the D&C Rules require that upon the license only remains valid for a period of three
its occurrence the license remains valid for three months due to change in constitution. It has already
months only. The licensing authority itself has been discussed that it takes around a year to obtain
issued several clarifications, FAQs and guidelines an import license under the D&C Rules. It means
that after change in constitution, an importer has
only three months at present to import and stock
34. Rule 27A(1) Proviso of Rules.
35. FAQ No. 51 under Import and Registration of Medical Devices
FAQs published by CDSCO.
36. Rule 34(2) Proviso. of MDR 37. Rule 3(j) of MDR
23
products for domestic market to last for the time hospitals are hesitant to purchase medical devices
when it does not have an import license i.e. at least in large quantities. At the same time, some of the
nine (9) months. This is almost impossible due medical devices are critical and may be required on
to production, logistics, storage and commercial short notice, therefore it is in hospital’s and patients’
considerations. Thus, for many importers today, interest that the hospital maintains a large stock of
a change in constitution means halt of business medical devices. As a solution to this dilemma, the
for close to a year. distributors transfer a sizeable stock of the medical
devices to the hospital through a stock transfer.
However, the government seems to have realized
A stock transfer is not a sale, it is merely transfer of
this pitfall and has made the process surrounding
stock. As and when the hospital requires a medical
change in constitution a breeze under the MDR.
devices, it uses it from the stock. The distributor then
Upon a change in constitution as defined before,
charges the hospital on the basis of its use. All the
a manufacturer licensee has forty five (45) days to
unused stock is later re-transferred to the distributor.
inform the licensing authority and one hundred
The proof of stock-transfer of medical devices by
eighty (180) days to make a fresh application.38 An
distributor to the hospital is a delivery note.
importer does not even have to inform the licensing
authority but simply make a fresh application The D&C Rules requires that any sale or distribution
in the same time-frame.39 After making such an should be recorded by the distributor. A stock
application, the existing license is deemed to be valid transfer is not a sale or distribution, therefore it is
until the fresh application is decided by the licensing not recorded by the distributor. However, the
authority. Thus, there remains nothing to dread presence of stock at the hospital may be interpreted
about change in constitution under the MDR. as an act of distribution. This can lead to unnecessary
investigation against the distributors by the
H. License for sale of medical licensing authority.
devices In order to resolve this complication, the MDR have

permitted supply of implantable medical devices
The MDR do not have separate provisions for sale
against a delivery note (challan).42
of medical devices. The provisions related to sale
of drugs other than homeopathic medicines under
the D&C Rules will apply to medical devices as if it
I. Mandatory recalls on knowl-
was inserted within the MDR.40 All licenses for sale edge of risk to safety
of drugs other than homeopathic medicines issued
The MDR make it mandatory43 for manufacturers
prior to commencement of MDR shall be deemed to
and importers to immediately initiate recall in
be valid for sale of medical devices as well.41
case it has reasons to believe that a medical device
The MDR do, however, address a practical difficulty is likely to pose risk to the health of a user or
faced by many distributors in India. Implantable patient during its use and therefore may be unsafe.
medical devices cannot be self-administered and The recall should aim to withdraw the medical
therefore are seldom bought at retail. They are device in question from both the market as well
stocked by hospitals for clinical use as and when as patients, indicating reasons for its withdrawal.
required. The hospitals sell the medical device to the The manufacturer and importer initiating recall is
patient directly on a unit basis or as part of treatment required to inform the licensing authority about
package. However, considering the medical devices the details of the recall.
are expensive and its demand is difficult to predict,
38. Rule 27 of MDR

39. Rule 39 of MDR
40. Rule 87(1) of MDR 42. Rule 88(1) of MDR
41. Rule 87(2) of MDR 43. Rule 89(1) of MDR

In contrast, the D&C Rules do not obligate the K. New regulatory framework
manufacturer or importer to recall medical devices for clinical investigation of
upon knowledge of risk to user or patients.44 There is
medical device
also no explicit requirement to report the facts leading
to a recall, unless the medical device is “new” and is
The MDR will introduce a new regulatory
required to submit periodic safety update reports and
framework for clinical investigation of medical
have a system of pharmacovigilance in place.45
devices. Some of the interesting provisions of
this framework are:
J. New thresholds for residual
a. A fixed timeline of ninety (90) days has been
shelf life of imported prod- prescribed for the licensing authority to arrive
ucts at a decision on application for permission to
conduct clinical trial;
The D&C Rules prescribe that all imported
products should have a minimum residual shelf life b. After obtaining permission to conduct
of sixty (60) percent on the date of import unless clinical trial, the first subject is required
specific permission is obtained to the contrary.46 to be enrolled within one year;
This becomes an issue for importers of medical
c. New concepts of Pilot Study (i.e. exploratory
devices which have a short claimed shelf life.
study) and Pivotal Study (i.e. confirmatory
The MDR have addressed the issue by relaxing the study) have been introduced with respect to
residual shelf life requirement for medical devices approval of investigation medical device;
with short shelf life.47 Any medical device, whose
d. New concept of “substantial equivalence” to
total shelf life claim is
predicate devices has been introduced with
a. less than ninety (90) days, will be allowed to be respect to approval of medical devices other
imported if it has more than forty (40) per cent than investigational medical devices;
residual shelf-life on the date of import
e. The clinical performance evaluation of In
b. between ninety (90) days and one (1) year, will Vitro Diagnostic Devices is now part of the
be allowed to be imported if it has it has more regulatory framework;
than fifty (50) per cent residual shelf-life on the
f. Any institute, organization, hospital run or
date of import
funded by the Central Government or the State
c. is more than one (1) year, will be allowed to be Government is exempted from payment of fees
imported by the licensing authority if it has for conduct of clinical investigation; and
more than sixty (60) per cent residual shelf-life
g. Academic clinical trials do not require prior
on the date of import.
approval of the licensing authority for its
initiation if the data generated during the study
will not be used for obtaining manufacturing
or import license.
44. Rule 26(v); Rule 74(j); Rule 78(i) of Rules

45. Schedule Y, Para 3(4) of Rules.
46. Rule 31 Proviso of Rules.
47. Rule 47 of MDR
25
These changes should bring lot of comfort to Thus, the MDR will soon be placed before the Indian
stakeholders in the clinical investigation of Parliament. It will be interesting to see whether the
medical devices. Indian Parliament effects any modification to the MDR
or rejects it completely. However, given the political
L. Debarment on account and economic scenario, either event seems unlikely.
of supply of misleading
information N. Next steps for existing
importers, manufacturers
The MDR frown upon submission of misleading and distributors
information along with an application for grant of
any license. It prescribes that any applicant found After the commencement of MDR, all licenses
guilty of submitting misleading, or fake, or fabricated and registrations for medical devices issued
documents, may be debarred by the appropriate under the D&C Rules that are valid on the date of
licensing authority for such period as it may deem commencement, shall be valid at least until July
fit.48 In other words, if any misleading or false 31, 2018 or until the expiry date of the license or
information is found to have been submitted to the registration, whichever is later (“Grace Period”).
licensing authority, then it can debar the applicant Upon expiry of the Grace Period, all existing
from doing business in India. licensees will require a license issued under the MDR.
Therefore, there is no need to rush to adopt to the
The provision appears to be based on the
MDR. However, it is important to start preparing for
jurisprudence of strict liability. It does not matter
the new regulatory regime under MDR.
whether the applicant knew or intended to submit
misleading or false information. This should act It is not clear whether existing licensees could
as a wake-up call to importers, manufacturers, voluntarily surrender their licenses before the expiry
distributors and researchers to ensure that all of the Grace Period in order to obtain a license under
information that is finally submitted by it (or on the MDR. However, such a step by licensees is not
its behalf) is verified prior to submission. advisable. This is because the license fees paid to
obtain the license under D&C Rules is far cheaper
M. Medical Devices Rules, than the license fees prescribed in MDR. By opting to
surrender the license, the licensee would effectively
2017 to be placed before end up forfeiting the license fees already paid and
Parliament incur expense of higher license fees. In case the
decision to surrender is being contemplated for
The Medical Device Rules, 2017 have been notified
taking benefit of the beneficial provisions of MDR
under the Act. The Act requires that every rule made
(eg. change in constitution), then such rationale
under it is laid down before each House of Parliament,
needs to be re-evaluated because the MDR clarify
for a total period of thirty days. If both Houses agree
that the existing license under the Grace Period
to make any modification in the rules or both Houses
shall be deemed to be valid under the corresponding
agree that the rule should not be made, the rule shall
provision of MDR. Therefore, all existing licensees
thereafter have effect only in such modified from or
should be able to derive the benefit of MDR during
be of no effect, as the case may be.
the Grace Period despite transacting on a license
issued under the D&C Rules.

O. An opportunity lost All Notified Medical Devices have been classified

as per their risk profile in Class A, B C or D. The
Though the MDR have introduced a number of
importers, manufacturers and other stakeholders in
business friendly provisions, one cannot help
the medical device industry are expected to take notice
but regret that it was an opportunity lost to bring
of the classification and make application for import,
more change. The fact of the matter is that even
manufacture or sale accordingly. Currently, those
after commencement of the MDR, medical devices
devices that have been classified are considered to be
will continue to be deemed to be drugs, since the
notified medical devices, for the purposes of the MDR.
definition of medical devices is tied to the definition
of drugs under Act. This has repercussions under
other laws, most important of which is the price
Q. Frequently Asked Questions
control legislation – the Drugs (Price Control) for Medical Devices and In
Order, 2013 issued under the Essential Commodities Vitro Devices Published
Act, 1955. The Essential Commodity Act, 1955 has
notified drugs as defined under Act as essential Based on queries received from stakeholders over
commodity. Due to the reference to this definition, various meetings and representations, the CDSCO
medical devices which are deemed to be drugs, are has released Frequently Asked Questions (“FAQs”)
also currently subject to limited price control. Had for medical devices and in vitro diagnostic devices.
the government separated the definition of medical
The FAQ on medical devices can be found here,49
devices form the definition of drug, the tragedy that
and the FAQ on in vitro diagnostic devices can be
inadvertent and unintended price control of medical
found here.50
devices is today would have been avoided.
Having said that, there is no doubt that the fact of

notification of the MDR and the very real possibility
of it coming into effect in 2018 needs to be celebrated!
P. Classification of medical
devices published
The government has published a classification for
medical devices under MDR. The classification is
available here: https://tinyurl.com/y7unrwu2
49. http://www.cdsco.nic.in/writereaddata/lFianl%20draft%20
FAQ%20MDR.pdf
50. http://www.cdsco.nic.in/writereaddata/FAQ_IVD_MDR-2017(1).
pdf
27
6. Taxation Regime
Section 90(2) of the ITA is a beneficial provision
I. Direct Taxes which states that, where the taxpayer is situated in
a country with which India has a double tax
A. General overview avoidance agreement (“Indian Tax Treaty”), the
provisions of the ITA apply only to the extent that
Taxation of income in India is governed by the
they are more beneficial to the taxpayer. Rules under
provisions of the Income Tax Act, 1961 (“ITA”) as
Indian Tax Treaties are generally more beneficial to
amended annually by the Finance Acts. Under the
the taxpayer than those under domestic law (ITA)
ITA, residents are subject to tax in India on their
and hence it is typically advantageous for a non-
worldwide income, whereas non-residents are
resident taxpayer to structure his investments or
taxed only on Indian source income i.e. income
business through a jurisdiction which has signed
that accrues or arises in India, is deemed to accrue
an Indian Tax Treaty.
or arise in India or which is received or is deemed
to be received in India. A company is said to be In recent times, the Indian income tax authorities
resident in India if it is incorporated in India or have been adopting an aggressive approach to
its place of effective management (“POEM”) is transactions where any form of exemption from
located in India.51 In this regard, the Central Board taxation is sought by the taxpayer. Their approach is
of Direct Taxes (“CBDT”) recently released the final even more hostile when the transaction in question
guidelines for determination of POEM. (Please click has an offshore element to it. Hence, it is has become
here to read our hotline on the same). critical to ensure that offshore transactions are
structured in a manner such that legitimate tax
Section 9 of the ITA deems certain income of non-
exemptions are not challenged by the tax department.
residents to be Indian source income. Under section
9(1), “capital gains” are considered to have their Before delving into specific tax issues concerning
source in India and are taxable in India if they arise contract research and manufacturing, set out below
directly or indirectly, through the transfer of a capital is a snap shot of the taxation regime in India. The
asset situated in India. Similarly, the “business tax rates mentioned in this section are exclusive
income” of a non-resident is taxable in India only if of applicable surcharge and education cess, unless
it accrues or arises, directly or indirectly, through or otherwise specified. As per the Finance Act, 2016,
from any business connection in India. the surcharge applicable to income generated by
resident companies for the financial year 2017-2018
The Indian tax rates applicable to non-residents
is 7% where the income exceeds INR 10 Million but
could be up to 40% (all tax rates provided herein are
does not exceed INR 100 Million and 12% where
exclusive of surcharge and cess discussed below) on
the income exceeds INR 100 Million. Additionally,
taxable business income and capital gains.
as per Finance Act, 2016 surcharge applicable to
income generated by companies other than domestic
companies, for the financial year 2017-2018 is 2%
where the income exceeds INR 10 Million but does
51. India introduced the ‘place of effective management (“POEM”)
test for determining the residential status of not exceed INR 100 Million and 5% where the
a company in 2016. Under the POEM test, a company is said to income exceeds INR 100 Million.
be resident in India if it is incorporated in India or; if its place
of effective management is in India. POEM has been defined
to mean the place where key management decisions that are
necessary for the conduct of the business of an entity as a whole
are, in substance made. Until the introduction of POEM, foreign
companies were characterized as being tax resident of India only
on the satisfaction of the ‘control and management’ test, which
required that the foreign company’s control and management
be wholly situated in India.

i. Taxes Applicable to companies iii. Interest, Royalties and Fees for

Technical Services
Resident companies are taxed at the rate of 30%,52
while non-resident companies are taxed at the rate Interest payable to non-residents on loans taken/
of 40%. A minimum alternative tax is payable by debt securities issued in foreign currency are taxable
resident, and in certain circumstances, non-resident at a beneficial rate of 5%.54 However this benefit
companies at the rate of around 18.5%. The corporate has a sunset clause stating that the benefits would
tax rate for domestic companies whose total turnover only be available for loan agreements entered into/
or gross receipts does not exceed INR 500 million bonds issued on or after July 1, 2012 and before July
(approx. USD 7.4 million is 25%. The Finance Bill, 1, 2017. The Budget 2017 has proposed to extend this
2018 (“Finance Bill”) provides that the income of benefit to Rupee Denominated Bonds (“RDB”) and
companies whose turnover in FY 2016-17 does not extend the sunset clause to July 1, 2020. Similarly,
exceed INR 2.5 billion (approx. USD 40 million) is to interest payable to foreign portfolio investors
be taxed at the rate of 25% from FY 2017-18). For the (“FPI”) on investments made by them in RDBs and
remainder of the companies, the corporate tax rates government securities is taxable at the rate of 5%.55
continue to be 30%. Further, the Budget 2017 has proposed to amend
the sunset clause for this benefit as well to state
ii. Dividends this it shall be applicable to bonds issued till July
1, 2020 as opposed July 1, 2017. Interest payable on
Dividends distributed by Indian companies are
majority of other circumstances not covered under
subject to a dividend distribution tax (“DDT”) at
the abovementioned benefits are taxable at a rate
the rate of around 15% (calculated on a gross-up
ranging from 20% to 40%.
basis), payable by the company. However, except as
stated immediately below, no further Indian taxes Also as regards interest payments made by an Indian
are payable by the shareholders on such dividend company to its associated enterprises/related party,56
income once DDT is paid. Accordingly, there should the Budget 2017 has proposed to introduce Thin
be no withholding tax applicable on the payment Capitalization Rules as per which, interest payments
of dividends to a non-resident. exceeding 30% of the Earnings Before Interest, Taxes,
Depreciation and Amortization (“EBITDA”) of the
Further tax at the rate of 10% is levied on dividends
payer of interest shall not be deductible as an expense.
received from a domestic company, by a resident
individual, HUF or firm, where the amount of The withholding tax on royalties and fees for
dividend received exceeds INR 1 million.53 Budget technical services earned by a non-resident is 10%.
2017 proposes to amend this provision by providing These rates are subject to available relief under an
that this additional tax rate of 10% should be applicable tax treaty. In this context, it is important
applicable to dividends received by all resident to note that the definition of royalties and fees for
taxpayers except domestic companies, certain kinds technical services under Indian domestic law is much
of funds, institutions, trusts, educational institutions, wider than the definition under most tax treaties
hospital and medical institution as specified in the signed by India.
ITA. Dividends received from a domestic company
by a non-resident company should continue to iv. Capital Gains
be Indian tax exempt in the hands of the foreign
Gains earned by a resident company from the transfer
company, provided that DDT has been paid by the
of capital assets situated anywhere in the world are
distributing domestic company.
taxable in India. In the case of non-residents, only
54. Section 194LC, Income Tax Act, 1961

52. All tax rates are applicable to Financial Year 2017-18 and are 55. Section 194LD, Income Tax Act, 1961
exclusive of surcharge and education cess 56. Section 92A, Income Tax Act, 1961 defines ‘associated
53. Section 115BBDA, Income Tax Act, 1961 enterprises.’
29
those gains arising out of the transfer of a capital asset and the failure to withhold tax could result in tax,
in India should be taxable.57 The tax treatment of interest and penal consequences.
capital gains depends mainly on whether the gains
are short term or long term. Short term capital gains
B. Incentives Under the ITA
(“STCG”) arise upon the transfer of assets held by
a taxpayer for a period of 36 months or less before The Government of India has taken various policy
the date of transfer (12 months or less in the case of initiatives in order to strengthen scientific research
securities listed on a recognized stock exchange in and development in the various sectors, including the
India, and 24 months in the case of unlisted shares medical device sector. The term “scientific research”
of an Indian company). Long term capital gains has been defined in the ITA to include activities for
(“LTCG”) arise upon the transfer of a capital asset the extension of knowledge in the fields of natural or
held for a period of more than 36 months (12 months applied science. Scientific research can be carried out
in the case of listed securities and 24 months in the either in-house or by contributing to outside agencies
case of unlisted shares of an Indian company). engaged in scientific research. Typically, in the
medical device industry, fiscal incentives are awarded
Listed: STCGs arising from the transfer of a listed
to research and development units towards the
equity share are taxable at the beneficial rate of
development of new technology that adds medical
15%,58 while long term capital gains arising from
benefits and for life-saving medical equipment.
the transfer of listed equity share are tax exempt
under the ITA generally.59 This is applicable to both
i. In-House Research and Development
residents and non-residents.
Companies that have incurred any expenditure on
Unlisted: STCGs arising from transfer of unlisted
scientific research (not being expenditure in the
securities are taxable at slab rates both in the hands
nature of cost of any land or building) on in-house
of residents and non-residents. LTCGs arising out
research and development facility as approved
of unlisted securities are taxable at the rate of (i) 10%
by the Department of Scientific and Industrial
in the hands of a non-resident, (ii) 20% in the hands
Research, are allowed a deduction of 200 percent
of a resident.60
of such expenditure. Expenditure on scientific
research includes expenditure incurred on medical
An Indian company would also be taxed at the rate
device trial, obtaining approval from any regulatory
of around 20% on gains arising to shareholders from
authority under any Central, State or Provincial
distributions made in the course of a buy-back or
Act and filing an application for a patent under the
redemption of shares.
Patents Act, 1970. However, the Finance Bill 2016
proposes to restrict the rate of deduction to 150
v. Withholding Taxes
percent with effect from 01.04.2017 to 31.03.2020.
Further, the deduction shall be restricted to 100
Tax would have to be withheld at the applicable
percent from 01.04.2020 onwards.
rate on all payments made to a non-resident, which
are taxable in India. The obligation to withhold
It should be borne in mind here that no company
tax applies to both residents and non-residents.
would be entitled to the aforementioned deduction
Withholding tax obligations may also arise with
unless it enters into an agreement with the
respect to specific payments made to residents
Department of Scientific and Industrial Research
for co-operation in such research and development
57. Having said that, India has recently introduced a rule to tax non- facility and for audit of the accounts maintained for
residents on the transfer of foreign securities the value of which
are substantially (directly or indirectly) derived from assets that research and development facility.
situated in India.
58. Section 111A, Income Tax Act 1961.
59. Section 10(38), Income Tax Act, 1961.
60. Section 112, Income Tax Act, 1961.

Currently, this deduction is available for expenses opposed to the “business connection” rule contained
incurred prior to March 31, 2017. in the ITA, which has no exhaustive definition in the
ITA and which has been afforded a wide interpretation
ii. Contributions made to other Institutions by Indian courts in the past. Therefore, there may be
for Scientific Research situations where a non-resident is considered to have a
business connection in India, but no PE. As mentioned
The ITA provides for a deduction of 200 percent
earlier, since it is open for the non-resident taxpayer to
of sums paid to any scientific research association
choose to be treated under the more beneficial regime,
(having as its object the undertaking of scientific
a non-resident may rely on the PE rule under the
research), or to any university, college or other
applicable Indian Tax Treaty rather than the business
institution, for the purpose of scientific research
connection rule in the ITA.
approved by the concerned authority. Similar to
the position in respect of an in-house research and The term PE has been succinctly defined by the
development, the Finance Bill 2016 proposes to Andhra Pradesh High Court in the case of CIT v.
restrict the rate of deduction to 150 percent with Visakhapatnam Port Trust,61 as follows:
effect from 01.04.2017 to 31.03.2020. Further, the
“In our opinion, the words permanent establishment
deduction shall be restricted to 100 percent from
postulate the existence of a substantial element of an
01.04.2020 onwards.
enduring or permanent nature of a foreign enterprise
in another country which can be attributed to
iii. Capital Expenditure
a fixed place of business in that country. It should
Under Section 35(1)(iv) read with Section 35(2) of be of such a nature that it would amount to a virtual
the ITA, the whole of any expenditure on scientific projection of the foreign enterprise of one country
research (other than expenditure on acquisition into the soil of another country.”
of any land) being capital in nature, incurred after
The Indian Tax Treaties typically lay down certain
31 March 1967 is allowed as a deduction. Further,
criteria to determine whether a foreign enterprise
under Explanation 1 to Section 35(2) of the ITA,
earning business income from India would be
the aggregate capital expenditure on scientific
construed to have a PE in India. Some of these tests
research incurred three years immediately prior
are discussed below, especially in the context of
to the commencement of business is allowed as
contract research and manufacturing.
a deduction in the year in which the business
is commenced.
i. Fixed Place of Business PE
C. Potential Permanent A foreign enterprise is deemed to have a PE in India if

Establishment Issues the business of foreign enterprise is, wholly or partly,
carried on through a fixed place of business in India.
Under the ITA, business income of a non-resident is
taxable in India (at the rate of 40%) if it accrues or arises, ii. Service PE
directly or indirectly, through or from any ‘business
Further, under some Indian Tax Treaties, a foreign
connection’ in India. Similarly, under the Indian Tax
enterprise may be considered to have a PE in India
Treaties, typically, the business income of a non-resident
due to the presence of its personnel in India, who
is taxable only to the extent that it is attributable to a
render services beyond a specified time period or to
Permanent Establishment (“PE”) of such non-resident
a related enterprise. For instance, under the India-US
in India. The concept of PE under typical Indian Tax
tax treaty, a PE is said to be constituted where there is:
Treaties is expressed as an exhaustive list of factors, as
61. 1983 144 ITR 146 AP
31
“(l) the furnishing of services, other than included D. Issue of taxation as an

services as defined in article 12 (royalties and fees Association of Persons
for included services), within a Contracting State
by an enterprise through employees or other Depending on the manner in which it is structured,
personnel, but only if: a contract research and manufacturing arrangement
could run the risk of being taxed under the ITA as
a. activities of that nature continue within that
a separately taxable unit called an association of
State for a period or periods aggregating to
person (“AOP”). This is a significant issue for the
more than 90 days within any twelve-month
foreign enterprise which outsources these functions,
period; or
given that, if such arrangement is treated as an AOP,
the profits of the foreign enterprise attributable to
b. the services are performed within that State
such AOP, which otherwise would not have been
for a related enterprise (within the meaning of
subjected to tax in India (in the absence of a PE of the
paragraph 1 of article 9 (associated enterprises).”
foreign enterprise in India), would be taxable at the
maximum marginal rate of 40%.
iii. Agency PE
Although there is no definition of AOP under the ITA,
Indian Tax Treaties typically contain a provision
there have been a number of cases in which this issue
whereby an Indian entity may be treated as a PE of
has been discussed. In the case of Commissioner of
a foreign enterprise if the Indian entity, acting on
Income Tax v. Indira Balkrishna,62 the Supreme Court
behalf of the foreign enterprise, has and habitually
has explained the concept of AOP as “an association
exercises an authority to conclude contracts on behalf
of persons must be one in which two or more persons
of the foreign enterprise. Moreover, some Indian Tax
join in a common purpose or a common action, and
Treaties, such as the India-US tax treaty, also contain
as the words occur in a section which imposes a tax
an additional provision whereby an Indian entity
on income, the association must be one the object of
may be regarded as a PE of the foreign enterprise,
which is to produce income, profits or gains.”
if the Indian entity maintains a stock of goods from
which it regularly delivers such goods on behalf of
Further, in the case of Deccan Wine and General
the foreign enterprise and contributes to the sale
Stores,63 the Andhra Pradesh High Court further
of such goods. An agent of independent nature is
examined this concept and observed that “it is,
considered as an exception to the Agency PE rule.
therefore, clear that an association of persons does
not mean any and every combination of persons. It is
In cases of outsourcing by a foreign enterprise to its
only when they associate themselves in an income-
Indian subsidiary, a question arises as to whether
producing activity that they become an association
there is added PE risk for the foreign enterprise as
of persons. They must combine to engage in such
a result of the parent subsidiary relationship of the
an activity; the engagement must be pursuant to
two entities. The answer to this lies in the Indian Tax
the combined will of the persons constituting the
Treaties itself. The principle which is embodied in
association; there must be a meeting of the minds,
typical Indian Tax Treaties is that the existence of
so to speak. In a nutshell, there must be a common
a subsidiary company does not, by itself, constitute
design to produce income. If there is no common
that subsidiary company a PE of its parent company.
design, there is no association. Common interest is
This follows from the principle that, for the purpose
not enough. Production of income is not enough.”
of taxation, such a subsidiary company constitutes
an independent legal entity.
62. [1960] 39 ITR 546 (SC)

63. ([1977] 106 ITR 111 (AP)

Although there is lack of clarity in the Indian law F. Indian Transfer Pricing Issues
on the concept of an AOP, broadly the essential
Where entities are looking to outsource research and
conditions for constituting an AOP may be said to be:
manufacturing functions to an associated enterprise,
§§Two or more persons such as in cases of captive outsourcing, the fees
payable to the service provider should take into
§§Voluntary Combinations account transfer pricing issues.
§§A common purpose or common action with In India, transfer pricing regulations (“TP
object to produce profit or gains.
Regulations”) were introduced on April 1, 2001.
The Indian Income Tax Act, 1961 lays down
§§Combination in Joint Enterprise
provisions that deal with the computation of
§§ Some kind of scheme for common management. income arising from “international transactions”
between “associated enterprises”. The basic rule
E. Structuring Investment into enshrined in the TP Regulations is that any income

arising from an “international transaction” shall
India – Use of Intermediate be computed having regard to the arm’s length
Jurisdictions price (discussed below). The TP Regulations define
“associated enterprise” to include any enterprise
Foreign entities that are looking at incorporating
that participates directly or indirectly or through
subsidiaries in India for outsourcing research and
one or more intermediaries in the management or
manufacturing functions can achieve tax efficiency
control or capital of another enterprise. Enterprises
by use of a tax neutral intermediate jurisdiction
may also be regarded as “associated” as a result of
which has signed an Indian Tax Treaty (“Treaty
circumstances such as interdependence by virtue
Jurisdiction”) rather than directly investing into
of borrowings, guarantees, licensing of trademarks,
the Indian company. The foreign entity can achieve
purchase, sales or where enterprises have “mutual
tax efficiency by incorporating a company (or any
interest” as may be prescribed by the revenue
other entity which is eligible to benefits of the
authorities. Here, “enterprise” is defined broadly and
relevant Indian Tax Treaty) in the Treaty Jurisdiction
covers any entity (including a permanent
which would, in turn, invest into the underlying
establishment) which is or proposes to be engaged
Indian company.
in any activity relating to the provision of goods /
services of any kind, investment activity, dealing
The choice of an appropriate Treaty Jurisdiction,
in securities and extending loans. The term
apart from tax neutrality and a good treaty network,
“international transaction” has been defined as
would depend on factors such as political stability,
a transaction between two or more associated
ease of administration, availability of reliable
enterprises, either or both of which are non-residents.
administrators, favourable exchange controls and
As mentioned earlier, the basic principle is that
legal system, certainty in tax and legal framework
any income arising from such an “international
and ease of winding up operations.
transaction” shall be computed having regard to
Indian Tax Treaties aim to prevent double taxation the “arm’s length price”.
of income and capital gains for a person or entity
resident in another jurisdiction.
33
The Budget 2017 has introduced the concept of interest shall also be payable on the excess
secondary adjustment under the transfer pricing income until the obligation to repatriate such
regulations. amount is discharged. While the rate of interest
is to be calculated in a manner prescribed by the
The Budget had proposed two important changes
government, it should also be determined at
with respect to transfer pricing under the ITA which
an arm’s length price.
will come into effect on April 1, 2018, and will
accordingly apply to assessment year 2018-19. However, Section 92CE will not be applicable where
the amount of primary adjustment made in any
a. International Transaction previous year does not exceed INR 10 million (approx.
USD 150,000), and is made in respect of an assessment
The first amendment introduces Section 92CE which
year commencing on or before the April 1, 2016.
requires a resident taxpayer who has entered into
an international transaction to make a secondary Although secondary adjustments are an
adjustment in the event that a primary adjustment internationally accepted principle and are in line
as per transfer pricing provisions: with OECD’s Transfer Pricing Guidelines, the
implementation of Section 92CE may result in
1. has been made suo moto by the taxpayer
various practical difficulties. For example, the
in his income tax return,
foreign country in which the associated enterprise
is located may have exchange control provisions
2. has been made by the Assessing Officer and
that make it difficult to repatriate the excess money
accepted by the taxpayer,
to India, or it may have adjusted the transaction as
3. has been determined by and advanced pricing per its own transfer pricing provisions and already
agreement, taxed a portion of the funds Indian tax authorities
consider as excess income. The introduction of
4. is made as per safe harbor rules under
these provisions and also those relating to thin
the ITA,
capitalization show the increasing tendencies of
the government to look at international practices in
5. is a result of mutual agreement procedure
molding tax legislation in India.
(“MAP”) under a tax treaty
The provisions further prescribe that where, b. Specified Domestic Transaction

as a result of primary adjustment, there is an increase
The second amendment involves restricting the
in the taxpayer’s total income or a reduction in
scope of specified domestic transactions which are
allowable loss, a secondary adjustment shall have to
subject to transfer pricing by introducing an
be made. The secondary adjustment is intended to
amendment to Section 92BA of the ITA. Currently,
reflect the actual allocation of profits between the
transfer pricing provisions under the ITA are
taxpayer and the associated enterprise. The purpose
applicable to specified domestic transactions where the
of such secondary adjustment is also to eliminate
aggregate of such transactions in the previous year
the imbalance between the taxpayer’s accounts
exceeds INR 200 million (approx. USD 3 million).
and actual profits. The Section prescribes that the
The condition that transfer pricing will be applied
excess money (difference between the arm’s length
in respect of determining the arm’s length nature
price determined in the primary adjustment and the
of expenditure incurred has now been removed.
actual consideration price) shall be deemed to be
This is intended to reduce the compliance burden
an advance made by the taxpayer to its associated
on the following taxpayers who are currently
enterprise, if it is not repatriated to India within
related parties under Section 40A(2)(b).
a prescribed time. Once deemed to be an advance,

i. Arm’s Length Price It is important to note that TP Regulations also

require persons entering into international
Arm’s length price is the price which is applied or
transactions to maintain prescribed documents and
proposed to be applied in a transaction between
information, and to obtain and furnish to the revenue
persons other than associated enterprises, in
authorities an accountant’s report containing
uncontrolled conditions. The OECD Transfer Pricing
prescribed details regarding the international
Guidelines for Multinational Enterprises and Tax
transactions. Stringent penalties have been
Administrations, 2010 (“Guidelines”) provide that
prescribed for non-compliance with the procedural
the application of the arm’s length principle is
requirements and for understatement of profits.
generally based on a comparison of all the relevant
conditions in a controlled transaction with the
conditions in an uncontrolled transaction. Under the
G. Disallowance of Deduction
Guidelines, comparability is achieved when there are of Expenses Incurred in
no differences in the conditions that could materially Unethical Promotion
affect the price or when reasonably accurate
adjustments can be made to eliminate the effects of The Indian Medical Council (Professional Conduct,
any such differences. The analysis of the controlled Etiquette and Ethics) Regulations, 2002 prohibit
transactions with uncontrolled transactions is the the medical practitioners and their professional
very basis of ascertaining whether the controlled associations from taking any Gift, Travel facility,
transactions adhere to the arm’s length standard. Hospitality, Cash or monetary grant from the
The arm’s length price in relation to an international medical device industry. The Central Board of Direct
transaction is to be determined by any of the Taxes has issued instructions45 to the revenue
following methods depending on which is the most department that the claim of any expense incurred
appropriate given the business of the enterprises: in providing above mentioned or similar freebees
in violation of the provisions of Indian Medical
§§Comparable uncontrolled price method; Council (Professional Conduct, Etiquette and Ethics)
Regulations, 2002 shall be inadmissible as expense
§§Resale price method;
because it is an expense prohibited by the law.
§§Cost plus method;
§§Profit split method; II. Indirect Taxes

§§Transactional net margin method; India has a well-developed indirect tax structure
and has recently introduced Goods and Services Tax
A challenge faced by Indian medical device
(“GST”). Prior to the introduction of GST, it used to
companies with respect to transfer pricing is that
be the case that the Central Government levied taxes
the TP Regulations do not specifically deal with
such as central excise, customs duties and service tax
intangibles, or provide a basis of computing the arm’s
and the State Government levied taxes like Value
length price, while dealing with the same. As opposed
Added Tax (Sales tax in states where VAT was not
to transactions involving tangibles, where a pricing
implemented), stamp duty and tax on professions.
situation in controlled transaction can be compared
The GST has brought about a unification of the
with that of an uncontrolled transaction (provided
goods and services tax regime in the country and has
all other conditions are similar or identical), in case
replaced the aforementioned taxes barring certain
of intangibles/intellectual property it is very difficult
duties on import of goods.
to identify comparable given the unique nature of
the intellectual property involved. Hence, it becomes
GST is meant to be a comprehensive tax on the
difficult to find a comparable based on which the
manufacture, import, sale and consumption of
arm’s length price may be ascertained.
goods as well as services, and replaces most major
35
indirect taxes on goods and services. The tax A. Customs Duty

system has taken the form of “Dual GST”, which
Customs duties are levied whenever there is
is concurrently levied by the Central and State
trafficking of goods through an Indian customs
Government. This comprises of:
barrier i.e. levied both for the export and import of
§§Central GST (“CGST”) –levied by the Centre on goods. Export duties are competitively fixed so as to
intra-state supply of goods and services. give advantage to the exporters. Consequently a large
share of customs revenue is contributed by import
§§ State GST (“SGST”) –levied by each state on duty. Customs duty primarily has a ‘Basic Customs
intra-state supply of goods and services in that
Duty’ for all goods imported into India and the rates
state. A state also includes a Union Territory.
of duty for classes of goods arementioned in the
Customs Tariff Act, 1975 (the “Tariff Act”), which is
§§Integrated GST (“IGST”) – to be levied by the
based on the internationally accepted Harmonized
Central Government on inter-State supply of
System of Nomenclature (“HSN”). The general rules
goods and services.
of interpretation with respect to tariff are mentioned
Unlike the previous indirect tax regime, GST is in the Tariff Act. The rates are applied to the
applicable on a single taxable event at each stage, transaction value of goods (for transactions between
i.e., supply. Further, it is a destination based tax, i.e., unrelated parties) as provided under the Customs
it accrues to the State where the goods / services are Act, 1962 (the “Customs Act”) or by notification in
consumed. The GST has been rolled out from July 1, the official gazette.
2017with a tiered rate structure for tax on goods and
services. Depending on the nature of medical devices, Further, the Central Government, if satisfied that
they will fall under the 5%, 12%, 18% and 28% tier circumstances exist which render it necessary to take
as applicable.64 immediate action to provide for the protection of
the interests of any industry, from a sudden upsurge
Interestingly, the GST has not brought about
in the import of goods of a particular class or classes,
significant difference to the duty on import.
may provide for a Safeguard Duty. Safeguard Duty is
The basic customs duty will remain in place along
levied on such goods as a temporary measure and the
with Education cess, Anti-dumping Duty, Safeguard
intention for the same is protection of a particular
Duty, etc.65 However Countervailing Duty (“CVD”)
industry from the sudden rise in import.
and Special Additional Duty (“SAD”) would be
subsumed into the IGST, which would be levied
Under Section 9A of the Tariff Act, the Central
on the imported goods. However, the Research and
Government can impose an Antidumping Duty on
Development Cess on the import of technology
imported articles, if it is exported to India at a value
(levied at 5%) was also abolished earlier in the year.
less than the normal value of that article in other
On the manufacturing front the existing duty regime
jurisdictions. Such duty is not to exceed the margin
will be different for each class and type of medical
of dumping with respect to that article. The law in
device.66 The duty on import of goods is discussed in
India with respect to anti-dumping is based on the
some detail in the section below.
‘Agreement on Anti-Dumping’ pursuant to Article VI
of the General Agreement on Tariffs and Trade, 1994.
64. Notification No.1/2017-Integrated Tax (Rate)

http://www.cbec.gov.in/resources//htdocs-cbec/gst/Notification%20
for%20IGST%20rate%20Schedule-1.pdf (last accessed on
August 1, 2017). The rates mentioned here apply to IGST.
65. Guidance note for importers and exporters http://www.cbec.gov.
in/resources//htdocs-cbec/guidnce-note-imprtrs-exprtrs.pdf (as
last accessed on August 1, 2017)
66. Finance Act, 2017, No 7 of 2017, http://egazette.nic.in/WriteRe-
adData/2017/175141.pdf (as last accessed on August 1, 2017)

7. Conclusion- Two Steps Forward,One Step

Backward?
The Indian medical device industry continues its National Medical Device Policy, which help allay the
upward march of growth and is strongly supported concerns of the industry with respect to government
by India’s robust legal framework. As discussed in policies and instill confidence in the industry to look
the paper, there are certain challenges to do business far ahead and plan its business in the long term.
of medical device in India, but they can be easily
Having said that, there is no denying that despite
overcome.
the odds, the medical devices industry in India
The biggest concern for the industry in 2018 continues to offer unprecedented opportunities to
appears to be lack of certainty in government present and potential investors and stake holders,
policies, especially in relation to price control. now more than ever before.
The government will do well to publish the
37
Annexure A
List of Notified Medical Devices
1. Disposable Hypodermic Syringes It is noteworthy that in addition to the above
medical devices, the following substances are also
2. Disposable Hypodermic Needles
regulated as ‘Drugs’ under Drugs & Cosmetics Act,
1940 & Rules, 1945 there under:-
3. Disposable Perfusion Sets
1. Blood Grouping Sera

4. In vitro Diagnostic Devices for HIV,
HBsAg and HCV
2. Skin Ligatures, Sutures and Staplers
5. Cardiac Stents
3. Intra-uterine devices (Cu-T)
6. Drug Eluting Stents

4. Condoms
7. Catheters
5. Tubal Rings
8. Intra Ocular Lenses

6. Surgical Dressings
9. I.V. Cannulae
7. Umbilical Tapes
10. Bone Cements

8. Blood/ Blood Component Bags
11. Heart Valves.
12. Scalp Vein Set
13. Orthopedic Implants.
14. Internal Prosthetic replacements
15. Ablation Devices

Annexure B
Labeling Requirements for Notified Medical
Devices to be marketed in India under MDR
The following particulars shall be printed in f. to provide, wherever required, an indication
indelible ink on the label, on the shelf pack of the that the device contains medicinal or biological
medical device or on the outer cover of the medical substance;
device and on every outer covering in which the
g. to provide, a distinctive batch number or lot
medical device is packed, namely,-
number preceded by the word “Lot No.” or “Lot”
a. name of the medical device; or “Batch No.” or “B. No.”;
b. the details necessary for the user to identify the h. to indicate, wherever required, any special
device and its use; storage or handling conditions applicable to
the device;
c. the name of manufacturer and address of
manufacturing premises where the device has i. to indicate, if the device is supplied as
been manufactured; a sterile product, its sterile state and the
sterilisation method;
d. the correct statement about the net quantity
in terms of weight, measure, volume, number j. to give, if considered relevant, warnings or
of units, as the case may be, and the number of precautions to draw the attention of the
the devices contained in the package expressed user of medical device;
in metric system;
k. to label the device appropriately, if the device is
e. the month and year of manufacture and expiry intended for single use;
(alternately the label shall bear the shelf life of
l. to overprint on the label of the device, the
the product):
words “Physician’s Sample—Not to be sold”, if
Provided that in case of sterile devices, the a medical device is intended for distribution to
date of sterilization may be given as date of the medical professional as a free sample;
manufacture of the device:
m. to provide, except for imported devices, the
Provided further that where the device is manufacturing licence number by preceding
made up of stable materials such as stainless the words “Manufacturing Licence Number”
steel or titanium, and supplied non-sterile or or “Mfg. Lic. No.” or “M. L”;
in case of medical equipment or instruments
n. to provide on the label, in case of imported
or apparatus, the date of expiry may not be
devices, by way of stickering, where such
necessary.
details are not already printed, the import
Explanation.- For the purposes of this clause, licence number, name and address of the
the date of expiry shall be in terms of the month importer, address of the actual manufacturing
and the year and it shall mean that the medical premises and the date of manufacture:
device is recommended till the last day of the
month and the date of expiry shall be preceded
by the words “Expiry date” or “Shelf Life”;
39
Provided that the label may bear symbols o. in case of small sized medical devices on which
recognised by the Bureau of Indian information cannot be printed legibly, shall
Standards or International Organisation for include the information necessary for product
Standardisation (ISO) in lieu of the text and identification and safety such as information
the device safety is not compromised by covered by clauses (a), (b), (c), (d), (e), (g), (k),
a lack of understanding on the part of the and (m) shall be included.
user, in case the meaning of the symbol
is not obvious to the device user;

Annexure C
Labeling requirements for Notified Medical

Devices intended for export
The labels on packages or container of devices f. internationally recognised symbols in lieu
for export shall be adopted to meet the specific of text, wherever required: Provided that
requirements of law of the country to which the where a device is required by the consignee
device is to be exported, but the following particulars not to be labeled with the name and address
shall appear in a conspicuous manner on the label of manufacturer, the label on the package
of the inner most pack or shelf pack of the medical or container shall bear a code number as
device in which the device is packed and every other approved by the Central Licensing Authority
outer covering in which the container is packed:- and the code number shall bear the name of
the State or Union territory, in abbreviation,
a. name of the device;
followed by the word “Device” and
“manufacturing licence number”:
b. the distinctive batch number or lot number or
serial number preceded by the word “Lot No.” or
i. Provided further that where a device is
“Lot” or “Batch No.” or “B. No.” or “Serial No.”;
required by the consignee not to be labeled
with the code number also, the label on the
c. date of expiry, if any;
packages or container shall bear a special code
d. the name and address of manufacturer and number, as requested by the consignee, and
address of actual premises where the device has approved by the Central Licensing Authority.
been manufactured;
e. licence number preceded by letters “Licence No.

or Lic. No.”;
41
Annexure D
First Schedule
[See rule 4]
Parameters for classification of medical

devices and in vitro diagnostic medical
devices
Part I b. A non-invasive medical device which comes
into contact with injured skin shall be assigned
Parameters for classification of medical devices to Class A, if it is intended to be used as
other than in vitro diagnostic medical devices a mechanical barrier, for compression or
for absorption of exudates only, for wounds
Basic Principles for classification. which have not breached the dermis and can
heal by primary intention;
i. Application of the classification provisions shall
be governed by the intended purpose of the c. Subject to clause (c), a non-invasive medical
device. device which comes into contact with injured
skin shall be assigned to Class B, if it is intended
ii. If the device is intended to be used in
to be used principally with wounds which have
combination with another device, the
breached the dermis, or is principally intended
classification rules shall apply separately to
for the management of the microenvironment
each of the devices. Accessories are classified
of a wound;
in their own right separately from the device
with which they are used. d. a non-invasive medical device which comes
into contact with injured skin shall be assigned
iii.Software, which drives a device or influences the
to Class C, if it is intended to be used principally
use of a device, falls automatically in the same
with wounds which have breached the dermis
class.
and cannot heal by primary intention.
iv. If the device is not intended to be used solely or

ii. Non-invasive medical devices for channeling
principally in a specific part of the body, it must be
or storing substances.
considered and classified on the basis of the most
critical specified use. a. Subject to clauses (b) and (c), a non-invasive
medical device shall be assigned to Class A, if
v. If several rules apply to the same device, based on
it is intended for channeling or storing body
the performance specified for the device by the
liquids or tissues or liquids or gases for the
manufacturer, the strictest rules resulting in the
purpose of eventual infusion, administration or
higher classification shall apply.
introduction into a human body;
1. Parameters for classification of medical devices.

b. A non-invasive medical device referred to
in clause (a) shall be assigned to Class B, if
i. Non-invasive medical devices which come
it is intended to be connected to an active
into contact with injured skin.
medical device which is in Class B, C or D or

for channeling blood or storing or channeling 3. it is intended to be connected to a Class A

other body liquids or storing organs, parts of medical device only.
organs or body tissues:
b. An invasive (body orifice) medical device
Provided, that the circumstances when referred to in clause (a) shall be assigned to
a non-invasive medical device is connected to Class B, if,-
an active medical device include circumstances
1. it is intended for use on the external surface
where the safety and performance of the active
of an eyeball; or
medical device is influenced by the non-
invasive medical device, or vice versa; or
2. it is liable to be absorbed by the mucous
membrane.
c. A non-invasive medical device referred to
in clause (a) shall be assigned to Class C, if it
vi. Invasive (body orifice) medical devices for
is a blood bag that does not incorporate
short term use.
a medicinal product.
a. Subject to clause (b), an invasive (body orifice)
iii. Non-invasive medical devices for modifying
medical device shall be assigned to Class B, if,-
compositions of substances.
1. it is intended for short term use; and
a. Subject to clause (b), a non-invasive medical
device shall be assigned to Class C, if it is 2. it is not intended to be connected to an active
intended for modifying the biological or the medical device; or
chemical composition of blood or other body
3. it is intended to be connected to a Class A
liquids or other liquids intended for infusion
medical device only.
into the body.

b. A non-invasive medical device as referred to
referred to in clause (a) shall be assigned to
in clause (a) shall be assigned to Class B, if
Class A, if,-
the intended modification is carried out by
filtration, centrifuging or any exchange of
1. it is intended for use in an oral cavity as far as
gas or of heat.
the pharynx or in an ear canal up to the ear
drum or in a nasal cavity; and
iv. Other non-invasive medical devices.
2. it is not liable to be absorbed by the mucous

A non-invasive medical device to which
membrane.
sub-paragraphs (i), (ii) and (iii) do not apply
shall be assigned to
vii. Invasive (body orifice) medical devices for
long term use.
Class A, if it does not come into contact with
a person or comes into contact with intact
a. Subject to clause (b), an invasive (body orifice)
skin only.
medical device shall be assigned to Class C, if
it is intended for long term use and, not
v. Invasive (body orifice) medical devices for
intended to be connected to an active medical
transient use.
device or it is to be connected to a Class A
a. Subject to clause (b), an invasive (body orifice) medical device only.
medical device shall be assigned to Class A, if,-
1. it is intended for transient use; and referred to in clause (a) shall be assigned to
Class B, if,-
2. it is not intended to be connected to an active
medical device; or
43
1. it is intended for use in an oral cavity as far as g. A transient use surgically invasive medical
the pharynx or in an ear canal up to the ear device shall be assigned to Class D, if it is
drum or in a nasal cavity; and intended to be used specifically in direct
contact with the central nervous system or for
2. it is not liable to be absorbed by the mucous
the diagnosis, monitoring or correction of
membrane.
a defect of the heart or of the central circulatory
system through direct contact with these parts
viii. Invasive (body orifice) medical devices for
of the body.
connection to active medical devices.
x. Surgically invasive medical devices for short

An invasive (body orifice) medical device shall
term use.
be assigned to Class B, regardless of the duration
of its use, if it is intended to be connected to an
a. Subject to clause (b), (d) and (e), a surgically
active medical device which is in Class B, C or D.
invasive medical device intended for short
term use shall be assigned to Class B.
ix. Surgically invasive medical devices for
transient use.
b. Subject to clause (c), a short term use surgically
invasive medical device shall be assigned to
a. Subject to clauses (b) to (g), a surgically
Class C, if it is intended to undergo a chemical
invasive medical device intended for transient
change in the body.
use shall be assigned to Class B.
c. A short term use surgically invasive medical

b. Subject to clauses (c) to (g), a transient use
device referred to in clause (b) shall be assigned
surgically invasive medical device shall be
to Class B, if it is intended to be placed into
assigned to Class A, if it is a reusable surgical
any tooth.
instrument.
d. A short term use surgically invasive medical

c. A transient use surgically invasive medical
device shall be assigned to Class C, if it is
device shall be assigned to the same class as the
intended for the administration of any
active medical device to which it is intended to
medicinal product or the supply of energy
be connected.
in the form of ionising radiation.
d. A transient use surgically invasive medical
e. A short term use surgically invasive medical
device shall be assigned to Class C, if it is
device shall be assigned to Class D, if it is
intended for the supply of energy in the form
intended to have a biological effect or to be
of ionising radiation.
wholly or mainly absorbed by the human body
e. A transient use surgically invasive medical or to be used specifically in direct contact with
device shall be assigned to Class C, if it is the central nervous system or for the diagnosis,
intended to have a biological effect or to be monitoring or correction of a defect of the heart
wholly or mainly absorbed by the human body. or of the central circulatory system through
direct contact with these parts of the body.
f. A transient use surgically invasive medical
device shall be assigned to Class C, if it is xi. Implantable medical devices and surgically
intended for the administration of any invasive medical devices for long term use.
medicinal product by means of a delivery
a. Subject to clauses (b), (c) and (d), an
system and such administration is done in
implantable medical device or a surgically
a manner that is potentially hazardous.
invasive medical device intended for long
term use shall be assigned to Class C.

b. A long term use medical device shall be xiii. Active diagnostic medical devices.
assigned to Class B, if it is intended to be placed
a. Subject to clauses (b) and (c), an active
into any tooth.
diagnostic medical device shall be assigned to
c. A long term use medical device shall be Class B, if it is intended,-
assigned to Class D, if it is intended,-
1. to be used to supply energy which will be
1. to be used in direct contact with the heart, absorbed by the human body;
the central circulatory system or the central
2. to be used to capture any image of the in vivo
nervous system;
distribution of radiopharmaceuticals; or
2. to be life supporting or life sustaining;
3. for the direct diagnosis or monitoring of vital
3. to be an active medical device; physiological processes.
4. to be wholly or mainly absorbed by the b. An active diagnostic medical device referred to

human body; in sub-clause (1) of clause (a) shall be assigned
to Class A, if it is intended to be used solely to
5. for the administration of any medicinal
illuminate a patient’s body with light in the
product; or
visible or near infrared spectrum.
6. to be a breast implant.
c. An active diagnostic medical device referred to
in clause (a) shall be assigned to Class C, if it is
d. Subject to clause (b), a long term use medical
intended specifically for,-
device shall be assigned to Class D, if it is
intended to undergo chemical change in
1. the monitoring of vital physiological
the body.
parameters, where the nature of any variation
is such that it could result in immediate
xii. Active therapeutic medical devices for
danger to the patient (such as any variation in
administering or exchanging energy.
cardiac performance, respiration or activity of
a. Subject to clause (b), an active therapeutic the central nervous system); or
medical device shall be assigned to Class B, if it
2. diagnosing in a clinical situation where the
is intended for the administration or exchange
patient is in immediate danger.
of energy to or with a human body.
d. An active diagnostic medical device shall be

b. An active therapeutic medical device referred
assigned to Class C, if it is intended for the
to in (a) shall be assigned to Class C, if the
emission of ionising radiation and to be used in
administration or exchange of energy may be
diagnostic or interventional radiology.
done in a potentially hazardous way (such as
through the emission of ionizing radiation),
e. An active diagnostic medical device shall be
taking into account the nature, density and site
assigned to Class C, if it is intended for the
of application of the energy and the type
control or monitoring, or to be used to directly
of technology involved.
influence the performance, of any active
diagnostic medical device referred to in clause (d).
c. An active therapeutic medical device shall
be assigned to Class C, if it is intended for the
control or monitoring, or to be used to directly
influence the performance, of a Class C active
therapeutic device.
45
f. Subject to clause (g), an active medical device 1. cells, tissues or derivatives of cells or tissues,
shall be assigned to Class B, if it is intended or any combination thereof, of animal
for the administration, or removal of, any or human origin, which are or have been
medicinal product, body liquid or other rendered non-viable; or
substance to or from a human body. 2. cells, tissues or derivatives of cells or tissues,
or any combination thereof, of microbial or
g. An active medical device referred to in clause (f)
recombinant origin.
shall be assigned to Class C, if the administration
or removal of the medicinal product, body liquid b. A medical device referred to in clause (a) shall
or other substance is done in a manner that is be assigned to Class A, if it is manufactured
potentially hazardous, taking into account, from or incorporates non-viable animal tissues,
or their derivatives, that come in contact with
1. the nature of the medicinal product, body
intact skin only.
liquid or substance;
xvii. Medical devices for sterilization or
2. the part of the body concerned; and
disinfection.
3. the mode and route of the administration or

a. Subject to clause (b), a medical device shall be
removal.
assigned to Class C, if it is intended to be used
specifically for,-
xiv. Other active medical devices.
1. the sterilization of any other medical device;

An active medical device to which provisions of
sub-paragraphs (xii) and (xiii) do not apply shall be
2. the end-point disinfection of any other
assigned to Class A.
medical device; or
xv. Medical devices incorporating medicinal

3. the disinfection, cleaning, rinsing or
products.
hydration of contact lenses.
a. Subject to clause (b), a medical device shall

b. A medical device shall be assigned to Class B, if
be assigned to Class D, if it incorporates as an
it is intended for the disinfection of any other
integral part a substance which,-
medical device before the latter is sterilized
or undergoes end-point disinfection:
1. if used separately, may be considered to be
a medicinal product; and
Provided, that “end-point disinfection” means the
disinfection of a medical device immediately before
2. is liable to act on a human body with an
its use by or on a patient.
action ancillary to that of the medical device.
xviii.Medical devices for contraceptive use.

b. A medical device referred to in clause (a) shall
be assigned to Class B, if the incorporated
a. Subject to clause (b), a medical device intended
substance is a medicinal product exempted
to be used for contraception or the prevention
from the licensing requirements of the Drugs
of the transmission of any sexually transmitted
and Cosmetics Act, 1940 (23 of 1940) and the
disease shall be assigned to Class C.
rules made thereunder.
b. A medical device referred to in clause (a) shall
xvi. Medical devices incorporating animal or
be assigned to Class D, if it is an implantable
human cells, tissues or derivatives.
medical device or an invasive medical device
intended for long term use.
a. Subject to clause (b), a medical device shall be
assigned to Class D, if it is manufactured from
or incorporates,-

Part II i. In vitro diagnostic medical devices for

detecting transmissible agents, etc.:
Parameters for classification for in vitro
a. An in vitro diagnostic medical device shall be
diagnostic medical devices
assigned to Class D, if it is intended to be used
for detecting the presence of, or exposure to,
1. Basic principles for classification of in vitro
a transmissible agent that,-
diagnostic medical devices:
1. is in any blood, blood component, blood

a. Application of the classification provisions
derivative, cell, tissue or organ, in order to
shall be governed by the intended purpose of
assess the suitability of the blood, blood
the devices.
component, blood derivative, cell, tissue or
b. If the device is intended to be used in organ, as the case may be, for transfusion or
combination with another device, the transplantation; or
classification rules shall apply separately to
2. causes a life-threatening disease with
each of the devices. Accessories are classified
a high risk of propagation.
in their own right separately from the device
with which they are used.
b. An in vitro diagnostic medical device shall be
assigned to Class C, if it is intended for use in,-
c. Software, which drives a device or influences
the use of a device, falls automatically in the
1. detecting the presence of, or exposure to,
same class.
a sexually transmitted agent;
d. Standalone software, which are not

2. detecting the presence in cerebrospinal fluid
incorporated into the medical device itself
or blood of an infectious agent with a risk of
and provide an analysis based on the results
limited propagation
from the analyser, shall be classified in to the
(for example, Cryptococcus neoformans or
same category that of the in vitro diagnostic
Neisseria meningitidis);
medical device where it controls or influences
the intended output of a separate in vitro 3. detecting the presence of an infectious agent,
diagnostic medical device. where there is a significant risk that an
erroneous result will cause death or severe
e. Subject to the clause (c) and (d), software that
disability to the individual or foetus being
is not incorporated in an in vitro diagnostic
tested (for example, a diagnostic assay for
medical device, shall be classified using
Chlamydia pneumoniae, Cytomegalovirus or
the classification provisions as specified in
Methicillin-resistant Staphylococcus aureus);
paragraph 2.
4. pre-natal screening of women in order to
f. Calibrators intended to be used with
determine their immune status towards
a reagent should be treated in the same class as
transmissible agents such as immune status
the in vitro diagnostic medical device reagent.
tests for Rubella or Toxoplasmosis;
g. If several rules apply to the same device, based

5. determining infective disease status or
on the performance specified for the device by
immune status, where there is a risk that an
the manufacturer, the stringent rules resulting
erroneous result will lead to a patient
in the higher classification shall apply.
management decision resulting in an
imminent life-threatening situation
2. The parameters for classification of in vitro
for the patient being tested (for example,
diagnostic medical devices as follows:-
Cytomegalovirus, Enterovirus or Herpes
simplex virus in transplant patients);
47
6. screening for disease stages, for the selection a. An in vitro diagnostic medical device shall be
of patients for selective therapy and assigned to Class B, if sub-paragraphs (i) to (v)
management, or in the diagnosis of cancer; of paragraph 2 do not apply to it; or
ii. In vitro diagnostic medical devices for self- b. It is a substance or device used for the assessment
testing: of the performance of an analytical procedure
or a part thereof, without a quantitative or
a. Subject to clause (b), an in vitro diagnostic
qualitative assigned value.
medical device shall be assigned to Class C,
if it is intended to be used for self-testing. 1. human genetic testing, such as the testing for
cystic fibrosis or Huntington’s disease;
b. An in vitro diagnostic medical device referred to
in clause (a) shall be assigned to Class B, if it is 2. monitoring levels of medicinal products,
intended to be used to obtain,- substances or biological components, where
there is a risk that an erroneous result will
1. test results that are not for the determination
lead to a patient management decision
of a medically-critical status; or
resulting in an immediate life-threatening
situation for the patient being tested (for
2. preliminary test results which require
example, cardiac markers, cyclosporin or
confirmation by appropriate laboratory tests.
prothrombin time testing);
iii. In vitro diagnostic medical devices for
3. management of patients suffering from
near-patient testing:
a life-threatening infectious disease such
An in vitro diagnostic medical device shall as viral load of Human immunodeficiency
be assigned to Class C, if it is to be used for virus or Hepatitis C virus, or genotyping
near-patient testing in a blood gas analysis and sub-typing Hepatitis C virus or Human
or a blood glucose determination. immunodeficiency virus);or
Illustration: Anticoagulant monitoring, diabetes 4. screening for congenital disorders in the foetus
management, and testing for C-reactive protein such as Down’s syndrome or spina bifida.
and Helicobacter pylori.
vi. In vitro diagnostic medical devices for blood
iv. In vitro diagnostic medical devices used in in grouping or tissue typing:
vitro diagnostic procedures:
a. Subject to clause (b), an in vitro diagnostic
An in vitro diagnostic medical device shall be medical device shall be assigned to Class C,
assigned to Class A: if it is intended to be used for blood grouping
or tissue typing to ensure the immunological
1. if it is a reagent or an article which possesses
compatibility of any blood, blood component,
any specific characteristic that is intended by
blood derivative, cell, tissue or organ that is
its product owner to make it suitable for an in
intended for transfusion or transplantation, as
vitro diagnostic procedure related to a specific
the case may be.
examination;
b. An in vitro diagnostic medical device referred
2. an instrument intended specifically to be used
to in clause (a) shall be assigned to Class D, if
for an in vitro diagnostic procedure; or
it is intended to be used for blood grouping or
tissue typing according to the ABO system, the,
3. a specimen receptacle.
the Duffy system, the Kell system, the Kidd
v. Other in vitro diagnostic medical devices: system, the rhesus system (for example, HLA,
Anti-Duffy, Anti-Kidd).

About NDA
Nishith Desai Associates (NDA) is a research based international law firm with offices in Mumbai, Bangalore,
Palo Alto (Silicon Valley), Singapore, New Delhi, Munich and New York. We provide strategic legal, regulatory,
and tax advice coupled with industry expertise in an integrated manner.
As a firm of specialists, we work with select clients in select verticals on very complex and innovative
transactions and disputes.
Our forte includes innovation and strategic advice in futuristic areas of law such as those relating to Bitcoins
(block chain), Internet of Things (IOT), Aviation, Artificial Intelligence, Privatization of Outer Space, Drones,
Robotics, Virtual Reality, Med-Tech, Ed-Tech and Medical Devices and Nanotechnology.
We specialize in Globalization, International Tax, Fund Formation, Corporate & M&A, Private Equity &
Venture Capital, Intellectual Property, International Litigation and Dispute Resolution; Employment and
HR, Intellectual Property, International Commercial Law and Private Client. Our industry expertise spans
Automobile, Funds, Financial Services, IT and Telecom, Pharma and Healthcare, Media and Entertainment, Real
Estate, Infrastructure and Education. Our key clientele comprises of marquee Fortune 500 corporations.
Our ability to innovate is endorsed through the numerous accolades gained over the years. We are happy to say,
we are consistently, ranked amongst the world’s Most Innovative Law Firms. We have recently unveiled, a state-
of-the-art campus ‘Imaginarium Aligunjan- at Alibaug near Mumbai’. This is meant to be a platform for unifying,
developing and distilling ideas and thought. It seeks to be a bridge that connects the futuristic advancements of
diverse disciplines. It offers a space, both virtually and literally, for integration and synthesis of knowhow and
innovation from various streams. In doing so, we will co-create solutions to the diverse and complex problems
confounding the world today. Ultimately, AliGunjan will be a private place for public good – an instrument of
change for a better world.
NDA was ranked the ‘Most Innovative Asia Pacific Law Firm in 2016’ by the Financial Times - RSG Consulting
Group in its prestigious FT Innovative Lawyers Asia-Pacific 2016 Awards. While this recognition marks NDA’s
ingress as an innovator among the globe’s best law firms, NDA has previously won the award for the ‘Most
Innovative Indian Law Firm’ four years in a row from 2017-2017.
As a research-centric firm, we strongly believe in constant knowledge expansion enabled through our dynamic
Knowledge Management (‘KM’) and Continuing Education (‘CE’) programs. Our constant output through
Webinars, Nishith.TV and ‘Hotlines’ also serves as effective platforms for cross pollination of ideas and latest
trends.
Our trust-based, non-hierarchical, democratically managed organization that leverages research and knowledge
to deliver premium services, high value, and a unique employer proposition has been developed into a global
case study and published by John Wiley & Sons, USA in a feature titled ‘Management by Trust in a Democratic
Enterprise: A Law Firm Shapes Organizational Behaviour to Create Competitive Advantage’ in the September
2009 issue of Global Business and Organizational Excellence (GBOE).
A brief below chronicles our firm’s global acclaim for its achievements and prowess through the years.
§§I DEX Legal Awards: In 2015, NDA won the “M&A Deal of the year”, “Best Dispute Management lawyer”,
“Best Use of Innovation and Technology in a law firm” and “Best Dispute Management Firm”. Nishith Desai
was also recognized as the ‘Managing Partner of the Year’ in 2014.
51
§§Merger Market: has recognized NDA as the fastest growing M&A law firm in India for the year 2015.
§§Legal 500 has ranked us in Tier 1 for Investment Funds, Tax and Technology-Media-Telecom (TMT)
practices (2011, 2012, 2013, 2014, 2017, 2018). We have also been ranked in Tier 1 for Dispute Resolution,
Labour & Employment and Investment Funds (2018)
§§International Financial Law Review (a Euromoney publication) in its IFLR1000, has placed Nishith Desai
Associates in Tier 1 for Private Equity (2014, 2017, 2018). For three consecutive years, IFLR recognized us as
the Indian “Firm of the Year” (2010-2013) and has placed us in Tier 1 category in 2018 for our Technology -
Media - Telecom (TMT) practice
§§C
hambers and Partners has ranked us #1 for Tax and Technology-Media-Telecom (2013, 2014, 2015, 2017,
2018); #1 in Employment Law (2015, 2017, 2018); #1 in Private Equity (2013, 2017); #1 for Tax, TMT and Real
Estate – FDI (2011); and #1 in Labour and Employment (2018)
§§India Business Law Journal (IBLJ) has awarded Nishith Desai Associates for Private Equity, Structured
Finance & Securitization, TMT, and Taxation in 2015 & 2014; for Employment Law in 2015
§§L
egal Era recognized Nishith Desai Associates as the Best Tax Law Firm of the Year (2013).

Please see the last page of this paper for the most recent research papers by our experts.
Disclaimer
This report is a copyright of Nishith Desai Associates. No reader should act on the basis of any statement
contained herein without seeking professional advice. The authors and the firm expressly disclaim all and any
liability to any person who has read this report, or otherwise, in respect of anything, and of consequences of
anything done, or omitted to be done by any such person in reliance upon the contents of this report.
Contact
For any help or assistance please email us on [email protected] or
visit us at www.nishithdesai.com
53
The following research papers and much more are available on our Knowledge Site: www.nishithdesai.com
Fund Structuring Social Impact The Curious Case

and Operations Investing in India of the Indian
Gaming Laws
March 2018 May 2017 February 2018
Corporate Social Incorporation of Outbound

Responsibility & Company/LLP in Acquisitions by
Social Business India India-Inc
Models in India
May 2017 April 2017 September 2014
Internet of Things Doing Business in Private Equity

India and Private Debt
Investments in
India
January 2017 June 2016 June 2015
NDA Insights
TITLE TYPE DATE
Blackstone’s Boldest Bet in India M&A Lab January 2017
Foreign Investment Into Indian Special Situation Assets M&A Lab November 2016
Recent Learnings from Deal Making in India M&A Lab June 2016
ING Vysya - Kotak Bank : Rising M&As in Banking Sector M&A Lab January 2016
Cairn – Vedanta : ‘Fair’ or Socializing Vedanta’s Debt? M&A Lab January 2016
Reliance – Pipavav : Anil Ambani scoops Pipavav Defence M&A Lab January 2016
Sun Pharma – Ranbaxy: A Panacea for Ranbaxy’s ills? M&A Lab January 2015
Reliance – Network18: Reliance tunes into Network18! M&A Lab January 2015
Thomas Cook – Sterling Holiday: Let’s Holiday Together! M&A Lab January 2015
Jet Etihad Jet Gets a Co-Pilot M&A Lab May 2014
Apollo’s Bumpy Ride in Pursuit of Cooper M&A Lab May 2014
Diageo-USL- ‘King of Good Times; Hands over Crown Jewel to Diageo M&A Lab May 2014
Copyright Amendment Bill 2012 receives Indian Parliament’s assent IP Lab September 2013
Public M&A’s in India: Takeover Code Dissected M&A Lab August 2013
File Foreign Application Prosecution History With Indian Patent Office IP Lab April 2013
Warburg - Future Capital - Deal Dissected M&A Lab January 2013
Real Financing - Onshore and Offshore Debt Funding Realty in India Realty Check May 2012

Research @ NDA
Research is the DNA of NDA. In early 1980s, our firm emerged from an extensive, and then pioneering,
research by Nishith M. Desai on the taxation of cross-border transactions. The research book written by him
provided the foundation for our international tax practice. Since then, we have relied upon research to be the
cornerstone of our practice development. Today, research is fully ingrained
in the firm’s culture.
Research has offered us the way to create thought leadership in various areas of law and public policy. Through
research, we discover new thinking, approaches, skills, reflections on jurisprudence,
and ultimately deliver superior value to our clients.
Over the years, we have produced some outstanding research papers, reports and articles. Almost on
a daily basis, we analyze and offer our perspective on latest legal developments through our “Hotlines”. These
Hotlines provide immediate awareness and quick reference, and have been eagerly received.
We also provide expanded commentary on issues through detailed articles for publication in newspapers and
periodicals for dissemination to wider audience. Our NDA Insights dissect and analyze a published, distinctive
legal transaction using multiple lenses and offer various perspectives, including some even overlooked by the
executors of the transaction.
We regularly write extensive research papers and disseminate them through our website. Although we invest
heavily in terms of associates’ time and expenses in our research activities, we are happy
to provide unlimited access to our research to our clients and the community for greater good.
Our research has also contributed to public policy discourse, helped state and central governments
in drafting statutes, and provided regulators with a much needed comparative base for rule making.
Our ThinkTank discourses on Taxation of eCommerce, Arbitration, and Direct Tax Code have been widely
acknowledged.
As we continue to grow through our research-based approach, we are now in the second phase
of establishing a four-acre, state-of-the-art research center, just a 45-minute ferry ride from Mumbai
but in the middle of verdant hills of reclusive Alibaug-Raigadh district. The center will become the hub for
research activities involving our own associates as well as legal and tax researchers from world over.
It will also provide the platform to internationally renowned professionals to share their expertise
and experience with our associates and select clients.
We would love to hear from you about any suggestions you may have on our research reports.
Please feel free to contact us at

[email protected]
55
M U M BA I S I L I C O N VA L L E Y BA NG A LO RE
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S I NG A P O RE M U M BA I B KC N E W DE L HI
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80539 Munich, Germany New York, NY 10152
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© Copyright 2018 Nishith Desai Associates www.nishithdesai.com

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M U M BA I S I L I C O N VA L L E Y BA N G A LO RE S I N G A P O RE M U M BA I B KC NEW DELHI MUNICH N E W YO RK

The Indian Medical

© Copyright 2018 Nishith Desai Associates www.nishithdesai.com

© Nishith Desai Associates 2018

2. INDIA ENTRY STRATEGIES 04

3. INVESTMENT CLIMATE IN INDIA 05

4. INDIA’S POST-TRIPS INTELLECTUAL PROPERTY ENVIRONMENT 06

5. LEGAL AND REGULATORY REGIME 07

7. CONCLUSION- TWO STEPS FORWARD,ONE STEP BACKWARD? 37

© Nishith Desai Associates 2018

2 © Nishith Desai Associates 2018

2. India Entry Strategies

Strategy Law Tax

4 © Nishith Desai Associates 2018

3. Investment Climate in India

ii. Diagnosis, monitoring, treatment, alleviation

8. Department of Industrial Policy and Promotion; Press Note 1

4. India’s Post-Trips Intellectual Property

6 © Nishith Desai Associates 2018

5. Legal and Regulatory Regime

b. manufacture of Classes C and D devices;

c. clinical investigation and approval of

d. clinical performance evaluation and approval of

8 © Nishith Desai Associates 2018

Orgazinational structure of the Central Drugs Standard Control Organisation (CDSCO)

Drugs Controller General (I)

Head Quarter Zonal Offices Sub-Zonal Offices Port/Airport Offices Laboratories

Zonal Offices Sub-Zonal Offices Port Offices Laboratories

North Banglore Ahmedabad CDL, Kolkata

AYUSH STAFF STAFF STAFF STAFF STAFF

10 © Nishith Desai Associates 2018

submitted to the office of the jurisdictional Joint

Medical Device into by a manufacturer to its agent in India must be

of an Investigational sale certificate from the national regulatory

12 © Nishith Desai Associates 2018

been undertaken and relevant clinical study data is

It is noteworthy that the Central Government has

additional declarations and particulars on the retail

This amendment has changed certain provisions

System (QMS) way of compensation.

In case the spurious or counterfeit notified medical

14 © Nishith Desai Associates 2018

Promotion these guidelines are applicable to medical device

9. Govt to issue uniform code for medical device marketing

(Objectionable which combinations shall be examined and states

XIV. The Competition A. Patentability of medical

16 © Nishith Desai Associates 2018

the inventor or (ii) the assignee13 or (iii) legal D. Parallel Imports

India, a member of the Paris Convention, has

§§Obtaining written permission of the Controller

XVI. Data Exclusivity Class 44: Medical services; veterinary services;

18 © Nishith Desai Associates 2018

Over Prices of peculiar, because of the following reasons:

Medical Devices a. NPPA fixes price of the Notified Medical

b. Low Moderate (Class B)

Features d. High (Class D)

The method of classification is described in detail in

20 © Nishith Desai Associates 2018

21. Rule 21(4) of MDR