Recently, FDI in Brownfield (existing units) pharma sector has been permitted upto 74% under automatic route; and FDI beyond 74% and upto 100% is allowed under Government approval route. The move is aimed at attracting required capital, international best practices and latest technologies in the sector. Further, 100% FDI under automatic route is permitted for Greenfield (new plant) pharma sector. The Commerce and Industry Ministry has also commissioned a study to assess the impact of foreign direct investment in pharmaceutical companies amid concerns over mergers and acquisitions of domestic drug manufacturers.
But will it really help? Whether government be able to fulfill its wish? What has been the experience of FDI in medical sector? In January 2015 government opened up 100 per cent FDI for Medical devices. Did it help to meet the country’s medical devices’ demand which include sutures, stents, implants etc?
SMEpost.com caught up with Dr. Jitendar Sharma, head of Health Technology Department under Ministry of Health & Family Welfare, Govt. of India who is also CEO of Andhra Med Tech Zone (AMTZ), for a candid chat on what has been impact so far 100 % FDI in Medical devices?
Here are the excerpts….
Q: What is the impact of 100% FDI in medical devices through the automatic route?
A: Foreign direct investment is an important source of capital. While FDI through FIPB route leads to capital influx through government approval process, 100% FDI via direct route simplifies investment process. While process is simple, it is also necessary to keep FDI’s purpose simplified. The role of the government is that of a benefactor for process simplification, capital promotion and economic solidification. However, its policies affect medical devices manufacturing industry. While FDI via direct route is growing, it remains to be seen whether such investments would lead to Greenfield investments or Brownfield takes over, mergers & acquisitions. While the former is certainly encouraging the R & D, the latter could lead to domestic industry wipe outs. The path of FDI therefore requires constant monitoring and policy corrections, as and when required.
Q: Has it really boosted the SMEs?
A: SMEs are always in a financial crunch, an easy funding from FDI can boost the industry by some less intense financial infusion. However, such boosts need to be well managed by smooth integration of SME specific fiscal policies such as 25% capital subsidy among others.
Q: About 60 to 70% of the country’s medical devices’ demand, which include sutures, implants and surgical instruments, is met through imports. So why is India lagging behind in medical device sector?
A: Medical device manufacturing in India lacks a thrust due to absence of scientific facilities that are capital intensive in nature. While such facilities remain beyond the ambit of small to moderate manufacturing units due to sheer capital crunch, efforts to create such facilities have been negligible.
A special mention should go AMTZ – Andhra Pradesh Med Tech Zone, a one of its kind initiative in the Country and even Asia, where the Government is creating conducive environments for the manufacturers of medical devices by providing them with developed lands and constructed units with in-house shared High-tech Common manufacturing, testing and QA facilities of the best in the world standards. This facility as in AMTZ would drastically bring down the manufacturing cost of the medical devices – up to 70-75 per cent in certain cases – and hence the products manufactured in India would be of the ‘Best Quality and the least price’. This AMTZ once developed can easily churn out an approximate turnover of more than 30,000 Crore annually.
The perspective of the buyers is also changing very fast. We Indians now find it a matter of pride to use indigenous products over the imported ones. Medical Devices are no exception to this.
The Med–Tech Start-ups are now being very much supported and are being brought into the main arena where they fight with their aggressive pace, passion and Technological uniqueness with the Giants.
India is very soon going to be the “Hot Spot” for Medical Device Innovation, Research & Development, Manufacturing and Exports. The Government is soon trying to match the pace with the industry in easing out the laws and properly defining the regulatory aspects.
Q: Earlier, there was no separate policy for medical devices, which were covered under pharmaceuticals. The pharma policy imposed stiff foreign investment conditions, including mandatory government approvals in case of Brownfield investment or stake acquisition in existing Indian companies. But now both sector are separated and have different policy regarding FDI. So will it make any impact even if they don’t work together?
A: The Medical Device Industry once separated from the pharma sector gets a fresh air to breathe. The new open space with an open FDI option will certainly provide the very much required financial thrust that the medical device manufacturers need, as this is a highly capital intensive sector to stay ahead in the race. This however, needs to balance in a way that FDI flows into Greenfield projects and core R & D activities. The apt mega projects like the AMTZ – Visakhapatnam, will really provide the immensely required boost so that medical devices manufactured in India will be as good as a device made in Germany, USA or anywhere else.
Q: Being CEO of AMTZ, what has been your experience so far working with the SMEs? What has been the learning from the same?
A: As an innovator in the Medical Technology space, I feel the times to come in India are very bright for the Medical Device sector. The Government is doing a lot and has great plans for the future. But what is need is a smart execution. The Manufacturers are more than happy to “Make in India.” The Health ministry hosts a Healthcare Innovation Portal with various incubators and support agencies to nurture the innovations in health care. In the very near future, India is going to become a favorite destination for the best quality medical device manufacturing. The efforts into creating AMTZ bring us the peep into practical requirements of Indian Medical Devices manufacturing sector, in particular the SME segment.
I personally feel that for any med-tech Innovator, this is the time to be in this sector and these efforts truly indicate Medical Devices as the sun rise sector of our country.