India: The Medical Devices Rules – An Analysis

Last Updated: 11 September 2017
Article by Bhavik Narsana and Minhaz Lokhandwala

Most Read Contributor in India, October 2017

The healthcare industry in India has seen an impressive growth trajectory in the past few years and the Indian medical devices market has been the sunrise segment in the healthcare space. The medical devices market is currently valued at around USD 10 billion and has been growing at a compounded annual growth rate of 15%. As per market estimates, the industry is expected to reach close to USD 25 billion by 2025.

Many international companies in the medical devices field are already using India as a manufacturing base by either setting up facilities of their own or by acquiring domestic manufacturers. Some examples include Medtech's facility in Delhi, Midmark's manufacturing facility in Gujarat and Biocon's facility in Karnataka. As per data available with the Indian Government, the medical and surgical equipment sector received approximately USD 1,452 million between 2000 and 2016. In 2013 alone, the FDI inflow was around USD 138 million and in 2015, FDI inflow was close to USD 153 million.

As for the consumer base, India is one of the largest markets for medical devices in the world. There are over 800 medical devices manufacturers in India (of which close to 65% of companies have turnover of over INR 10 crore (USD 1.5 million) and 2% companies with a turnover of more than INR 500 crore (USD 73 million). However, despite this, the medical device market is dominated by imported products, which com­prise of around 70% of total sales. The domestic companies are largely involved in manufacturing consumables and low-end products for local and as well as inter­national consumption.

The Government has, over the past few years, taken measures to promote research, development and manu­facturing of medical devices in India; some of which are permitting 100% FDI in the medical devices sector and correction of the inverted duty structure for certain medical devices. An inverted duty structure impacts the domestic industry adversely as inputs and raw materials are taxed at a higher rate than import duty on finished products. In addition, the country is in the process of setting up three Med Tech Parks. These parks are expected to come up in Andhra Pradesh, Maharashtra and Gujarat. The major purpose of these Med Tech Parks will be to reduce the cost of production or manufacturing, as these parks will have in-house common manufacturing facilities and also for consolidated raw material procurement.

Another step taken by the Government, and this time with a view to bring about clarity in the regulatory framework, is the introduction of the Medical Devices Rules, 2017 ("Devices Rules"). The Devices Rules were notified under the Drugs and Cosmetics Act, 1940 ("Drugs Act") on 31 January 2017 and are proposed to come into effect on and from 1 January 2018. This is the first legislation in India dealing specifically with medical devices. Until now, few categories of medical devices notified under the Drugs Act were regulated as drugs under the Drugs and Cosmetics Rules, 1945 ("Drugs Rules"). The stringent regulations governing drugs under the Drugs Rules would apply to these medical devices as well. Whilst the definition of medical devices under the Devices Rules is still linked with the definition of 'drug' under the Drugs Act, a separate set of rules have now been prescribed for regulating medical devices.

This Article seeks to provide a general overview of the Devices Rules and its impact on the medical devices industry in India.

Transformation from the Drugs Rules

As mentioned above, medical devices are currently governed by the Drugs Rules. At present, the Indian govern­ment regulates 22 categories of medical devices which are notified under the Drugs Act. All other types of medical devices are unregulated i.e. there is no government oversight on its man­ufacture, import, distribution and sale. It is contemplated that a number of medical devices would be brought within the fold of the Devices Rules, upon it coming into effect.

While ideally, on the Devices Rules coming into effect, the notified medical devices should be governed only by the Devices Rules and provisions of the Drugs Rules should not be applicable, there is presently no express clarification on this. The Devices Rules do, however, provide that the same will override the Drug Rules in case of a contradiction.

Risk Based Classification

The Devices Rules have been framed on the lines of the guidelines formulated by the International Medical Device Regulators Forum (a successor to the Global Harmonization Task Force) ("GHTF Guidelines"). International Medical Device Regulators Forum is a partnership between medical devices regulatory authorities of various countries (such as the United States, members of the European Union, Australia and Canada) with a view to achieve harmonisation in medical device regulatory practices. The Devices Rules, therefore, ensure that the Indian norms governing medical devices are in vogue with those followed globally.

In consonance with the GHTF Guidelines, medical devices have been classified under the Devices Rules into 4 categories based on associated risks; with Class A devices being lowest in terms of risk and Class D devices being the highest. The categories of medical devices falling under each class are, however, yet to be notified.

It is likely that prior to 1 January 2018, a new set of medical devices would be notified to which the Devices Rules would apply, and that the classification of these medical devices is likely to follow the risk based classification which is suggested under the GHTF Guidelines, examples of which are as follows:

Class A – examination gloves; enema devices, bandages; cotton wool etc.

Class B – syringes and sets for infusion pumps; anaesthesia breathing circuits etc.

Class C – haemodializers; urethral stent; contact lenses, removable dental prosthesis etc.

Class D - spinal needles, angioplasty balloon catheters, dedicated disposable cardiovascular surgical instruments etc.

Even the guidelines (set out in a schedule to the Devices Rules) which are to be followed for categorization of the medical devices are largely inspired by the GHTF Guidelines. The primary difference though between the GHTF Guidelines and Devices Rules in this regard is that under the GHTF Guidelines (followed by the largest medical device manufacturing markets including the USA, Japan, China and members of the European Union), it is the manufacturer which is given the task of categorizing the medical devices based on the guidelines set out therein; whereas under the Devices Rules, the Central Licensing Authority has retained the authority to categorize the medical devices. The classification, once done, appears to be non-appealable.

Licensing and no need of renewal

Licenses are required for manufacture, import, distribution and sale of medical devices. For an import license, a license for manufacture or distribution is a prerequisite. The licenses would be issued to the manufacturers and importers in perpetuity until they are surrendered or cancelled (as against for a defined renewable term, which has been the norm thus far). The renewal fee, however, needs to be paid every 5 years.

Under the Devices Rules, medical devices are regulated by both, the Central Government and the State Governments. Applications for manufacture of Class A and Class B medical devices are to be presented to the State Licensing Authority whereas those for manufacture of Class C and Class D medical devices and for import of medical devices are to be presented to the Central Licensing Authority. The requirements for obtaining licenses for Class A and Class B Medical Devices are much lesser than Class C and Class D Medical Devices. All applications, whether to be assessed by the Central or State Licensing Authority, will have to be made through a single online portal of the Central Government.

Unlike the Drugs Rules, two or more importers cannot obtain a license for the same manufacturing site unless an application for import is made through the same authorized agent.

Timelines for Licenses

The Devices Rules have rationalized the timelines required for obtaining licenses. Also, unlike the Drugs Rules, the Devices Rules do not give any scope to the regulators to extend the timelines for coming to a decision. For instance, in case of license to manufacture Class C or Class D medical device, the scrutiny report of the application is required to submitted within 45 days of the date of the application, the inspection of the man­ufacturing site is required to be completed before 60 days from the date of the application and the report of the inspection has to be forwarded to the applicant and the decision on the application has to be commu­nicated within 45 days from receipt of the inspection report.

Similarly, a decision on application to import a med­ical device is required to be communicated within 9 months from the date of the application, irrespec­tive of whether the foreign manufacturing site is inspected or not. Also, the requirement under the Drugs Rules of obtaining a registration certificate before the import license is granted, has now been done away with.

In another relaxation on the process for import licenses, the Government has done away with the requirement of obtaining a registration certificate for registration of the foreign manufacturer, its manufacturing site and the products. The only requirement is to appoint an authorized agent in India and apply for an import license through it. Therefore, two separate licenses (registration and import license) need not be obtained anymore by an importer to be eligible to import medical devices.

Shelf Life Restrictions

The shelf life of a medical device manufactured in India cannot be for more than 60 months unless a justification to the contrary is presented. While this was the case under the Drugs Rules as well, the Devices Rules has eased the residual shelf life requirement for imported devices. Under the Drugs Rules, all imported devices should have had a minimum shelf life of 60% from the date of import. Under the Devices Rules, a medical device which has a shelf life (i) of less than 90 days may be imported with residual shelf life of 40% or more; and (ii) between 90 days and 1 year, may be imported with residual shelf life of 50% or more. For medical devices with a shelf life of more than 1 year, the Devices Rules require a residual shelf life of 60%, as mandated under the Drugs Rules.

However, the Association of Indian Medical Devices Industry has, in its comments on the Devices Rules, bemoaned the move from the Government to reduce the residual shelf life requirements in case of an imported device, claiming that the same would be detrimental to the Indian manufacturers.

Clinical trials

Under the Devices Rules, permissions for conducting clinical trials are required for (i) new in vitro diagnostic medical devices (that have not been approved for manufacture for sale or for import), (ii) medical devices which do not have its predicate device; or (iii) medical devices which claim new intended use, new material, major design change or are intended for a new population.

Under the Drug Rules, the regulatory framework for clinical trials was specific for drugs / fixed dose combinations. Until the introduction of the Devices Rules, there was no medical device specific regulatory framework for clinical trials in India. The Government has recognized this, and has tweaked clinical trial regulatory framework to suit medical devices under the Devices Rules.

Under the Devices Rules, no prior permission is required for conducting an academic clinical study, provided the same is approved by the Ethics Committee. The requirements prescribed for clinical trials under the Devices Rules are less cumbersome as compared to the Drugs Rules. For example, as against the four phases of clinical trials prescribed under the Drugs Rules, the Devices Rules prescribe merely two phases – the pilot clinical investigation and the pivotal clinical investigation. Though, if the Licensing Authorities so require, a post-marketing clinical investigation may also have to be undertaken after receipt of the marketing approval for the device.

Further, for an import license, clinical investigation would not be required if a free sale certificate has been issued by a competent authority in respect of such medical devices imported from Australia, Canada, Japan, members of the European Union or the United States.

A few years ago, India did witness a drastic increase in the conduct of clinical trials due to the benefits India was offering such as large treatment population, trained medical experts, low costs etc. However, in the recent past, there have been a few regulatory issues coupled with increased media scrutiny which has led to a decline in the number of clinical trials. By easing the clinical trial requirements under the Devices Rules, the Government has expressed its intention of promoting conduct of clinical trials by global manufacturers in India.

Quality management systems

The manufacturer is required to follow the prescribed guidelines for, amongst others, design and development, packaging and servicing of medical devices. To keep a check on the manufacturers' responsibilities, the Devices Rules have introduced a framework wherein certain "Notified Bodies" (accredited by the National Accreditation Board for Certification Bodies) will undertake verification and assessment of the quality management of medical devices.

Labelling

Before a medical device is sold or distrib­uted in India, it must be labelled according to speci­fications outlined in the Devices Rules as well as The Legal Metrology (Packaged Commodities) Rules, 2011 (which have been made applicable to medical devices with effect from 1 January 2018). The Devices Rules prescribe the contents of the label such as name of the medical device, month and year of manufacture and expiry, the manufacturing license number etc. Medical devices that are manufactured for export to other countries are exempted from cer­tain labelling requirements and are instead required to adopt the requirements of the law of the jurisdiction to which the device is being exported.

Change in Constitution

Akin to several other legislations which mandate the requirement of obtaining licenses, the Devices Rules provide for consequences on change in constitution of the license holder. Under the Devices Rules, the license holder is required to make an application to the Central or State Licensing Authority, as the case maybe, for obtaining a fresh license on change in constitution of the license holder.

However, unlike most other legislations, the Devices Rules define what actions would constitute a change in constitution. Under the Devices Rules, change in constitution of (a) a firm means change from proprietorship to partnership including limited liability partnership or vice versa; and (b) a company means (i) its conversion from a private to a public company, or from a public to a private company; (ii) any change in the ownership of shares of more than 50% of the voting capital in the body corporate; (iii) in case of a body corporate not having a share capital, any change in its membership; or (iv) where the managing agent, being a body corporate is a subsidiary of another body corporate, a change in the constitution of that other body corporate.

Clarity on what actions would constitute change in constitution would particularly be helpful in transactions involving investments in the share capital of a license holder. Often, a view is taken by transaction advisors that any change in shareholding or change in directorships of the license holder pursuant to an investment may be construed by the licensing authorities as a change in constitution, resulting in either an application being made to, or a clarification being sought from, the licensing authorities. This invariably delays the investment by a couple of months at the least. Clarity on the meaning of change in constitution would go a long way in reducing the time and costs on transactions in the medical devices industry.

Conclusion

With the introduction of the Devices Rules, it is expected that more medical devices would now be brought under the regulatory scanner as compared to the 22 categories of devices regulated under the Drugs Rules. While the compliances would increase for the previously unregulated devices, it does bring more clarity on the regulatory environment. By establishing a common minimum standard in accordance with global norms, the newly formulated Device Rules will create a level playing field for the industry. Though, given that deadline for effecting of the Devices Rules is fast approaching, the Government should bring clarity on the classification of medical devices sooner than later to enable the manufacturers to make necessary arrangements / modifications in their premises to comply with the requirements of the Devices Rules.

It is also a welcome step for domestic manufacturers which rely primarily on exports as most foreign jurisdictions require regulatory certification from the country in which the device is manufactured for permitting the import of such device. As many devices were not regulated under the Drugs Rules, it was difficult for exporters to obtain such regulatory certification.

Although the Government has framed special rules for regulating medical devices and made the compliances less cumbersome (specially with respect to the application for licenses), the medical devices would continue to be deemed as drugs since the definition of medical devices is tied to the definition of drugs under the Act. Most counties, including the USA, Japan, China and members of the European Union, regulate medical devices and drugs separately. As a result of medical devices continuing be construed as 'drugs' under the Drugs Act, the pricing regulations which are applicable to drugs under the Drugs Price Control Order, 2013 shall continue to apply to medical devices. Similarly, norms applicable to advertisement of drugs (including under the Drugs and Magic Remedies Act, 1954) shall apply to medical devices. Further, the Essential Commodities Act, 1955 has categorized drugs as essential commodities, mandating certain compliances prescribed therein. These compliances apply equally to the notified medical devices.

As one of the fastest growing medical devices markets in the world, the Government can further take several measures to create a conducive environment to consolidate the growth of the medical devices sector. For instance, the Government could work toward creating an autonomous body to oversee the regulatory framework for medical devices, as is the case in many jurisdictions, along with a dedicated registry that tracks individual instances where a particular device has failed or led to detrimental consequences on life or property. Lastly, as an important measure to encourage compliance to safety standards among stakeholders in the industry, the Government may provide incentive schemes for the industry to adopt safety norms through cross subsidies in procurement policies.

The content of this document do not necessarily reflect the views/position of Khaitan & Co but remain solely those of the author(s). For any further queries or follow up please contact Khaitan & Co at legalalerts@khaitanco.com

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