Foreign Direct Investments (FDI) in Healthcare Sector in India: Lawyers Advice on Foreign Investments in India | | FDI Attorney in Delhi NCR | FDI Attorney in India | India Business Entry

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The healthcare sector mostly comprises of the hospitals, medical devices, medical technology, medical insurance, medical equipment, clinical trials and telemedicine. A non-resident investor outside India can invest in an Indian Company under the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2000. However, the foreign investment flow into India is governed under the Foreign Exchange Management (FEMA) Act, 1999 and the regulations made by Reserve Bank of India (RBI) as well as the Policies issued by the Ministry of Commerce and Industry also govern Foreign Direct Investment (FDI) flow in India.

The following are some of the important authorities and organizations that regulate the healthcare sector in India:
• Ministry of Health and Family Welfare (MoHFW)
• Department of Health and Family Welfare
• Medical Council of India (MCI)
• Ministry of AYUSH
• Indian Medical Association (IMA)
• Foreign Investment Promotion Board (FIPB)

Any Foreign Investor investing in the healthcare sector of India, must keep in mind the necessary guidelines for the same:
1) FDI guidelines in the healthcare sector of India:
a) FDI upto 100% shall be allowed for manufacturing of medical devices under the automatic route, where prior approval of the Foreign Investment Promotion Board (FIPB) is not required.
b) 100% FDI shall be allowed in construction-development of hospitals under the automatic route.
c) 100% FDI shall be allowed in Greenfield Pharmaceuticals under the automatic route and in Brownfield Pharmaceuticals 74% shall be allowed under the automatic route, while beyond 74%, under the Government route.
i. The competent authority for granting approval for foreign investment in Pharmaceuticals is the Department of Pharmaceuticals.
ii. The investor and investee must provide a certificate, along with the application for foreign investment as per Annexure 10 of the FDI Policy.

In order to ensure that the investee Company has complied with all applicable laws, the following compliances must also be necessarily observed:
1) Registration with the State specific Authority as a private medical establishment.
2) Registration under the Shops and Establishment Act, specific to the State.
3) Registration under various Labour Laws.
4) Registration under the Prenatal Diagnostics Techniques (Regulation and Prevention of Misuse) Act, 1994.
5) Registration under various direct and indirect tax legislations.
6) Possession of Drug License
7) License for operating of X-ray machines, CT scan.
8) License for possession of denatured spirit.
9) License to obtain drugs and operate a blood bank from Food and Drug Administration (FDA).
10) Compliance with the Medical Termination of Pregnancy Act, 1971.
11) Fire License ensuring fire safety compliance.
12) Authorization for creation of a facility for generation, collection, transport, storage of bio-medical waste under the Bio-Medical Waste (Management and Handling Rules), 1998.

Certain precautions which the investor may take in order to ensure compliance with the applicable laws are:
The investor must be aware of all the potential issues while investing in the healthcare sector, especially in the hospital sector of India. The above compliance with regards to the licenses and permissions are extremely crucial and proper due diligence must be conducted regarding these approvals.

The investor must also ensure that the necessary compliances with the Medical Termination of Pregnancy Act 1971, Pre-conception and Pre-natal Diagnostic Techniques Act 2003, Biomedical Waste Disposal, Drugs and Cosmetic Acts for pharmacy and Atomic Energy Regulatory Board, are made so that it does not affect the functionality of the hospital.

Despite certain factors which could pose as a challenge for investment flow into India, the rising foreign investments are contributing to a rise in the economy, thus causing expansion and improving the standards of healthcare in India. FDI in the healthcare sector is not only improving the growth of the economy but also proving useful in developing the healthcare sector in India, which is one of the most crucial and essential sectors of the country.

Important Link:
https://dipp.gov.in/sites/default/files/CFPC_2017_FINAL_RELEASED_28.8.17.pdf

Authored By: Adv. Anant Sharma & Sameera Singal