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FDI in Pharmaceutical Sector in India

Sectoral Caps - FDI in Pharmaceuticals

Sector/Activity
% of Equity/ FDI Cap
Entry Route
1. Greenfield
100%
Automatic
2. Brownfield
100%
Automatic upto 74%
Government route beyond 74%

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 Foreign Investment Promotion Board.
(ii) The prospective investor and the prospective investee are required to provide a certificate along with the FIPB application as per Annexure-10. (annex-10 is given at the bottom)
(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.

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-
(aa)diagnosis, prevention, monitoring, treatment or alleviation of any disease or disorder;
(ab) diagnosis, monitoring, treatment, alleviation of, or assistance for, any injury or handicap;
(ac) investigation, replacement or modification or support of the anatomy or of a physiological process;
(ad) supporting or sustaining life;
(ae) disinfection of medical devices;
(af) control of conception,
and which does not achieve its 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. a device which is 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 in vitro examination of specimens derived from the human body or animals.
iii. The definition of medical device at Note (ii) above would be subject to the amendment in Drugs and Cosmetics Act.


Annexure - 10
Certificate to be Furnished by the Prospective Investor as well as the Prospective Recipient Entity

It is certified that the following is the complete list of all inter-se agreements, including the shareholders agreement, entered into between foreign investor(s) and investee brownfield pharmaceutical entity
1. ………………
2. ……………….
3. ……………….
(copies of all agreements to be enclosed)
It is also certified that none of the inter-se agreements, including the shareholders agreement, entered into between foreign investor(s) and investee brownfield pharmaceutical entity contain any non-compete clause in any form whatsoever.
It is further certified that there are no other contracts/agreements between the foreign investor(s) and investee brownfield pharma entity other than those listed above.
The foreign investor(s) and investee brownfield pharma entity undertake to submit to the FIPB any inter-se agreements that may be entered into between them subsequent to the submission and consideration of this application.


Notes:
(1) FDI policy for Pharmaceutical Sector in India is prescribed in the Clause 5.2.27 of the Consolidated FDI Policy Circular of 2016 (D/o IPP F. No. 5(1)/2016-FC-1 Dated the June 07, 2016) issued by Department of Industrial Policy & Promotion, Ministry of Commerce & Industry, Government of India.
(2) Clause 5.2.27 was modified by Press Note No. 5 of 2016 Series(File No. 5/4/2016-FC-I dated 24th June 2016) issued by DIPP - link
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