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This article is written by Sanjana Dwivedi from UPES- School of Law.

Introduction

India’s medical device market according to the recent data, is US$6 Billion approximately and is considered as Asia’s 4th biggest sector/market. The market is considered to be providing and giving lavishing business opportunities for multi-national and for local investors as well. In the 1990s, medical technologies were mainly composed of local investors or domestic businessmen. Certainly, after India started getting exposure to new markets in 1991, it changed the whole scenario. The development of devices seemed to be given an advantage to the global markets. 

In today’s scenario, Indian medical services and technology market is suppressed by international organisations which can be proved by the data, which say that 80% of the market is working on imported goods. On the other hand, the local investors try to focus on initiating low budget technologies so they could meet the demands. It is shocking to see that still more than 60% of medical technologies India’s market is being exported just because the market is in the hands of multinational companies. Many international companies have now set their roots in the Indian market. The motive of these companies is just to promote imported goods. Some international companies have put their hands on domestic or local investors and created advanced technologies like Netherland-based Royal Philips Electronics, developer of General X-Ray and Alpha X-Ray Technologies, developer of cardiovascular X-Ray systems. 

Compound Annual Growth Rate (CAGR) shows that the medical device market’s strength has increased by 15.8%, and there are many reasons for it. The buyers of medical devices are of good percentage and generally private institutions or hospitals. Thus, the massive competition in developed cities has made companies focus on under-developing cities. So that local investors could explore the remote areas and grow the demand for medical technologies, this will lead to growth. Some other justifications can be, firstly, economics is leading towards increased disposable income—secondly, the increment of public investment in medical safety. Thirdly, increased spreading of medical insurance. Fourthly, development of infrastructure. Fifthly, the increment of growing income which is leading to affordability. Lastly, demands have increased due to ‘Health care tourism.’

According to the data of Foreign Direct Investment (FDI), the inflow of Indian market has increased, which shows the dominance of global investors. According to stats, there has been a receiving of RS. 9,712 crore by the medical technology market in 2000-2017. The FDI inflow in 2014 & 2015 was 133.96 Million and 160.24 Million, accordingly. It is further noticed that FDI inflow in 2016 increased by 300%, i.e., $439.01 Million. In 2020, it has increased to RS. 13,048.80 Crore( approx. $ 2,129.50).

Earlier there has been a loophole in the Indian medical industry as many of the devices had no regulation to follow. There was no government ruling or any instructions about the devices. Then, The Medical Device Rule, 2017 came into force to overcome the loopholes of legislative procedure. 

Statutory provisions and laws

Under the Drugs and Cosmetics Act, 1940, The Medical Device Rule, 2017 was issued. This was to manage or regulate certain categories of situations like as follows:

  1. The devices used for internal and external use for diagnosis, mitigation, treatment or prevention of the disorder in humans as well as animals which the government has been notifying and specifying under the DCA. Certain categories have already been recognized. 
  2. Certain substances/devices which used to affect the function or structure of humans, those as well have been recognised by the government under the DCA. Such substances can be intrauterine, condoms, disinfectants, insecticides, etc., 
  3. Substances used in surgeries like surgical (dressing, bandages, staples, sutures, ligatures), blood and blood components bags. 
  4. Devices used in vitro diagnosis.

In these categories, devices/substances mentioned under (1) & (2) are those who have been recognised by the government and mentioned in Annexure A naming “Notified Medical Devices”. Although, the categories mentioned above come under the ambit of MDR. 

Medical technologies are divided into different sections on the basis of growing risk under MDR. However, MDR & DCA have several purposes mentioned below:

  1. To maintain the export-import, distribution, manufacturing and market of notified medical devices.
  2. To maintain the allocation of devices mentioned in MDR to consumers.
  3. To maintain or regulate the medical equipment under the Indian market.

However, it is thought that the government seems to be very selective about recognising the devices. Concisely, if a device has not been rectified by the government through DCA then it will not be regulated by MDR. The clarification of this has been made by the Central Licensing Authority. The government contains the power to release the notification about new medical technologies, and those will further be regulated under DCA and MDR. 

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Governing authorities

The state and central governments are answerable for enforcement of the Act. The CDSCO which stands for Central Drugs Standard Control Organization is led by the DCGI which stands for Drugs Controller General of India is permanently answerable for the acts of state drug licensing authorities, implementation of policies and affirming uniformity in the whole of India. The division of accountability is mentioned below:

DCGI (Central Licensing Authority)

The DCGI has certain other duties to perform other than cooperation with state authorities, which is mentioned below:

  1. Investigation and consent of investigational medical technologies,
  2. Manufacturing of class (1) & (2) which mentioned above,
  3. Manages imports of all substances/devices mentioned above,
  4. Acceptance of new devices in vitro diagnosis and evaluation of their performance.

State Drug Controller (State Licensing Authority)

The Drug controlling state authority is accountable for two other matters, mentioned below:

  • Manufacturing of substances mentioned under (1) & (2)
  • Providing license for sales, offers of sale, open market or allocation of medical devices by private organizations.

Manufacturing of substances mentioned under (1) & (2)

The business person or investor is required to acquire a separate license for different manufacturing locations and for different manufacturing products in that location. The manufacturing license for substance (1) & (2) and substance (3) & (4) will be provided by state and central, respectively. According to the act, “ ‘manufacturing’ consists of any process for making, altering, finishing, packing, labelling, breaking up or otherwise treating or adopting any drug with a view to its sale or allocation.” It does not include the packaging at the selling stage.

Providing license for sales, offers of sale, open market or allocation of medical devices by private organizations

The provisions of NMD are consented by the central government as well as the state. The functions of manufacture, importing, distributive functions and other medical equipment required permissions or say licenses. But in special cases like importing and manufacturing of new NMD, there is a need for a license from central as well as state, from their licensing authority. The MDR had mentioned the proper formats in which the application can be made by applicants for licenses. It has also mentioned the application form for regulatory bodies. 

Imports of a medical device in India 

Now the big question is how the imports work in India. Imports of medical equipment are more complicated than other provisions of licensing and permissions mentioned above, and there are some additional steps to it. The importing of all goods be it medical, or others are completely controlled by the import and export policy. Now if a business person wants to import goods in India, then he/she needs to get an Importer and Exporter code number by the Director-General of Foreign Trade (DGFT). The number will be printed on the documents attached with goods for clearance. For this number, an application will be given to the Joint Director of Foreign Trade of that particular jurisdiction. Details of the bank are mandatory. 

The imports of NMD in India, as mentioned above, require an import license or permission from DCGI. The foreign manufacturer will be making an application for itself for a registration certificate if he/she is having a wholesale license for any purchase or distribution of NMD or if he/she is an agent authorized in India then they should have valid permission. When the condition comes where the foreign manufacturer does not have a valid Indian whole license, then they tend to contact the third party to make the sale. 

Now there is one other condition to manufacturers in India which is that their authorisation must be by a power of attorney. The leftover documents required for import, which distinguishes with the class of medical technology tends to import, includes:

  1. Certificate of free sale by the country’s national regulatory authority.
  2. Certified copy of quality management system issued by authority of the state for the manufacturing site.

Laws related to trademarks

The next important concept is trademarked, now when it comes to trademarks, then Indian Trademark law is being protected under both statutory and common law. India’s first legislation related to trademarks was the Trade and Merchandise Marks Act, 1940. This particular act was repealed further and came with changes as the Trade and Merchandise Marks, Act, 1958. The act then again was considered by legislation in 1999 to do certain changes and came with compliance of TRIPS, and then it evolved as the Trade and Merchandise Act, 1999. It initiated the registration of three-dimensional marks and service marks.

In India, there is a quite reliable classification of goods and services. The schedule in the rules incorporated in TM act, 1999 contains the classification. Class 10 is covering all the medical devices, whereas the medical & veterinary services and cosmetics are defined under class-44. The scientific and technological related programs and research is covered under class-42. There is a procedure in the act which allows the searching of a trademark.  In this manner, a person can reliably search the conflicting trademarks before applying it. It was known as the concept of “well-known trademark”.

The trademark which has been registered is expected to fulfil some conditions. The act is having provisions/grounds through which either absolutely or relatively a trademark can be refused. The provisions of TM Act, 1999 certainly go hand in hand with UK Trademark act, 1994. The trademark is applicable if no products had been sold under applied trademark yet. Every ten years, the applicant should go through the renewal process. Foreign manufacturers, as mentioned above, can apply for a trademark with a permitted license from the authority. 

The concept of a well-known trademark is initiated to prohibit or stop the application of a mark that is hardly a reproductive or a copy of an already existing trademark. The trademark which is used without registration is protected under common law but not under any statutory provisions. In the case of Milmet Oftho Industries v. Allergan Inc, and many other cases the court said that imitation of international names is not acceptable even if the goods are different. Certain companies like IBM, Apple, Microsoft had gone through trademark laws.

Control of government over the pricing of NMD

An order called Drug prices control order, 2013, which lies under essential commodities act, 1955 controls all the regulations or prices of NMD. There is a list in DPCO of certain NMD that are listed as essentials for our country. Till date, the list is containing condoms, IUDs and stents (coronary). The device having recognition is known as ‘scheduled formulation’, and those who are not yet recognised are known as ‘non-scheduled formulations’. The national pharmaceutical pricing authority is there to control the prices of these goods. The NPPA uses the following ways for controlled pricing:

  1. NPPA determines the cost of NMD, which is the average manufacturing and lending cost. The margin of profit of manufacturers and importers is to be marked around 50-75% by NPPA.
  2. If the margin had already been fixed by NPPA, then the manufacturer cannot surpass the limit to the retailers. The margin goes for 8-16% for the retailer.  Because the NPPA determines the pricing.
  3. If the request has been made to treat an importer, as a distributor, to market authority holders in India, then that can also be done. 
  4. The patients are supposed to carry the charge/invoice of their medical treatment even if they had paid a few amounts or paid from some ‘insurance’.

Salient features of Medical Device Rule, 2017

Earlier in this article, we have talked about how in India have implemented the Medical Device Rule, to maintain NMD. Although not more of the population knows about the development. To understand the role of the implementation made by the legislature, we need to understand the history of medical technologies before MDR. Earlier NMD was only all about the ‘drugs’. This application had certain issues to it. 

In practicality, the manufacturers are supposed to have a vacuum kind of room to prevent or to control the side effects of several chemicals or pharmaceuticals, which can be considered as a danger to health. NMD also implements the same to safeguard the health of every manufacturer. That procedure is mandatory, irrespective of the fact that the chemicals used are totally safe for health and are not risky in anyways. The MDR itself defines the age of the drug as five years. Now, what happens if a drug’s age is ten years? So, that drug as well needs to go for an assurance check and will be fetched off from the markets in 5 years. This resulted in great benefits as every drug a consumer is taking is well checked and furnished from above. To make the difference between medical technologies and drugs/pharmaceuticals, the MDR was created. Certain classes are mentioned as follows:

  1. Low (Class A) 
  2. Low Moderate (Class B) 
  3. Moderate-High (Class C) 
  4. High (Class D) 

The first schedule of Medical Device Rule, 2017 mentions the four different types of classes. However, in other countries, the manufacturers and importers have the freedom to make a distinction of products on their own end just to register themselves. But in India, the situation is another way around; herein, importers are supposed to go with the classifications made by Drugs Controller General of India (DCGI).  

There can be many examples to the above situation but to mention one, as follows: So, the medical device category of Class A & B can be imported, on the free sale certificate irrespective of the fact that either they have certified safety or performing data or just a clinical investigation of origin country, from unregulated jurisdiction. In the case of Class C & D, the import can only be done after justifying the safety and productiveness by clinical investigation in India.

Conclusion

The Indian legal system is being massive support to the Indian medical device market repeatedly. We have already seen the laws and principles guarding the medical market and how vast, exhaustive they are. Although the difficulties of doing medical business in India can be outright by the percentage of growth, it is having. The main concern in 2020 can only be certain policies of government and control of pricing.  The NMD policy can gain the confidence of the business persons in the market to fulfil a long term goal of ‘Make in India’. However, the medical market of India is giving greater exposure to business persons, investors and stakeholder, a lot than before, irrespective of the odds. 

References


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