Consolidated FDI Policy Circular of 2020

Paragraph 5.2.27 PHARMACEUTICALS FDI Cap

Chapter: 5 · Sector Specific Conditions on FDI
Text as on: As issued 15 October 2020; Press Notes since are not applied

5.2.27 PHARMACEUTICALS FDI Cap

Sector/Activity

5.2.27.1 100% Automatic Greenfield 100% Automatic up 5.2.27.2 to 74% Brownfield Government route beyond

74%

5.2.27.3 OTHER CONDITIONS

(i) ‘Non-compete’ clause would not be allowed in automatic or government approval route

except in special circumstances with the approval of the Government.

(ii) The prospective investor and the prospective investee are required to provide a certificate

along with the application for foreign investment as per Annexure-9.

(iii) Government may incorporate appropriate conditions for FDI in brownfield cases, at the time of granting approval.

(iv) FDI in brownfield pharmaceuticals, under both automatic and government approval routes, is further subject to compliance of following conditions:

(a) The production level of National List of Essential Medicines (NLEM) drugs and/or consumables and their supply to the domestic market at the time of induction of FDI, being maintained over the next five years at an absolute quantitative level. The benchmark for this level would be decided with reference to the level of production of NLEM drugs and/or consumables in the three financial years, immediately preceding the year of induction of FDI. Of these, the highest level of production in any of these three years would be taken as the level.

(b) R&D expenses being maintained in value terms for 5 years at an absolute quantitative level at the time of induction of FDI. The benchmark for this level would be decided with reference to the highest level of R&D expenses which has been incurred in any of the three financial years immediately preceding the year of induction of FDI.

(c) The administrative Ministry will be provided complete information pertaining to the transfer of technology, if any, along with induction of foreign investment into the investee company.

(d) The administrative Ministry (s) i.e. Ministry of Health and Family Welfare, Department of Pharmaceuticals or any other regulatory Agency/Development as notified by Central Government from time to time, will monitor the compliance of conditionalities.

NOTE:

i. FDI up to 100%, under the automatic route is permitted for manufacturing of medical devices. The above mentioned conditions will, therefore, not be applicable to greenfield as well as brownfield projects of this industry.

ii. Medical device means -

(a) any instrument, apparatus, appliance, implant, material or other article, whether used alone or in combination, including the software, intended by its manufacturer to be used specially for human beings or animals for one or more of the specific purposes of -

(i) diagnosis, prevention, monitoring, treatment or alleviation of any disease or disorder;

(ii) diagnosis, monitoring, treatment, alleviation or assistance for, any injury or disability;

(iii)investigation, replacement or modification or support of the anatomy or of a physiological process;

(iv) supporting or sustaining life;

(v) disinfection of medical devices;

(vi) control of conception,

(vii) and which does not achieve primary intended action in or on the human body or animals by any pharmacological or immunological or metabolic means, but which may be assisted in its intended function by such means;

(b) an accessory to such an instrument, apparatus, appliance, material or other article;

(c) in-vitro diagnostic device which is a reagent, reagent product, calibrator, control material, kit, instrument, apparatus, equipment or system, whether used alone or in combination thereof intended to be used for examination and providing information for medical or diagnostic purposes by means of examination of specimens derived from the human bodies or animals.

ANNEXURES

5.2.27 PHARMACEUTICALS                                  FDI Cap

Sector/Activity

5.2.27.1    100%    Automatic
Greenfield  100%
                  Automatic up
5.2.27.2              to 74%
Brownfield
                  Government
                  route beyond

74%

5.2.27.3 OTHER CONDITIONS
(i) ‘Non-compete’ clause would not be allowed in automatic or government approval route

except in special circumstances with the approval of the Government.
(ii) The prospective investor and the prospective investee are required to provide a certificate

along with the application for foreign investment as per Annexure-9.

(iii) Government may incorporate appropriate conditions for FDI in brownfield cases, at the
    time of granting approval.

(iv) FDI in brownfield pharmaceuticals, under both automatic and government approval
    routes, is further subject to compliance of following conditions:

(a) The production level of National List of Essential Medicines (NLEM) drugs and/or
      consumables and their supply to the domestic market at the time of induction of FDI,
      being maintained over the next five years at an absolute quantitative level. The
      benchmark for this level would be decided with reference to the level of production of
      NLEM drugs and/or consumables in the three financial years, immediately preceding
      the year of induction of FDI. Of these, the highest level of production in any of these
      three years would be taken as the level.

(b) R&D expenses being maintained in value terms for 5 years at an absolute quantitative
      level at the time of induction of FDI. The benchmark for this level would be decided
      with reference to the highest level of R&D expenses which has been incurred in any of
      the three financial years immediately preceding the year of induction of FDI.

(c) The administrative Ministry will be provided complete information pertaining to the
      transfer of technology, if any, along with induction of foreign investment into the
      investee company.

(d) The administrative Ministry (s) i.e. Ministry of Health and Family Welfare, Department
      of Pharmaceuticals or any other regulatory Agency/Development as notified by Central
      Government from time to time, will monitor the compliance of conditionalities.

NOTE:

i. FDI up to 100%, under the automatic route is permitted for manufacturing of medical
        devices. The above mentioned conditions will, therefore, not be applicable to greenfield
        as well as brownfield projects of this industry.

ii. Medical device means -
           (a) any instrument, apparatus, appliance, implant, material or other article, whether
           used alone or in combination, including the software, intended by its manufacturer
           to be used specially for human beings or animals for one or more of the specific
           purposes of -
           (i) diagnosis, prevention, monitoring, treatment or alleviation of any disease or
                disorder;
           (ii) diagnosis, monitoring, treatment, alleviation or assistance for, any injury or
                disability;
           (iii)investigation, replacement or modification or support of the anatomy or of a
                physiological process;
           (iv) supporting or sustaining life;
           (v) disinfection of medical devices;
           (vi) control of conception,
           (vii) and which does not achieve primary intended action in or on the human body
                or animals by any pharmacological or immunological or metabolic means, but
                which may be assisted in its intended function by such means;
           (b) an accessory to such an instrument, apparatus, appliance, material or other
           article;
           (c) in-vitro diagnostic device which is a reagent, reagent product, calibrator, control
           material, kit, instrument, apparatus, equipment or system, whether used alone or in
           combination thereof intended to be used for examination and providing information
           for medical or diagnostic purposes by means of examination of specimens derived
           from the human bodies or animals.

ANNEXURES