Med-Tech: Is Medical Device Regulation Stifling Innovation?

Earlier this year, the Government came out with a proposal which would address one of the biggest pain-points for the medical devices industry – putting an end to ‘regulatory discrimination’, by providing a clear set of norms governing the medical devices industry. 

As a quick recap, the Government has proposed to regulate all medical devices under the Drugs and Cosmetics Act, 1940 (‘Act’) with effect from December 1, 2019. Currently, the regulation of medical devices is fragmented with certain medical devices being regulated as drugs within the ambit of Act. The fate of manufacturers, as well as importers of such medical devices, is decided by the Government in terms of the power to notify devices (under Section 3 of the Act). A free-run is provided to those dealing in non-‘notified’ medical devices since they fall outside the ambit of the Act. 

While the proposal to comprehensively regulate all medical devices ‘ostensibly’ signals the Government’s step in the right direction, the devil lies in the details – especially for the budding ‘med-tech’ sector of India. The advent of ‘software as medical devices’ (SaMD) is inevitable, especially with the use and complexity of medical devices increasing each day. Broadly, such SaMD is classified as follows: software which on its own is a medical device; software which is integral to a medical device; and software used in the maintenance of medical devices. 

In a hurry to put the Indian regulatory framework at par with international best practices, the Government’s proposal for enlarging the ambit of devices to be regulated as ‘drugs’ already includes ‘…software or an accessory, intended by its manufacturer to be used especially for human beings or animals which does not achieve the primary intended action in or on human body or animals by any pharmacological or immunological or metabolic means, but which may assist in its intended function as drugs.’ 

One of the significant demerits of the proposal lies in the fact that the Government continues to consider such software forming part of medical devices a ‘drug’ as opposed to its own separate category of technology products. As a result, the licensing and registration requirements under the Act would be applicable to SaMDs as well. This is in addition to the licenses required to be obtained under the archaic Indian Wireless Telegraphy Act, 1933 which governs the ability to communicate with other connected devices over wireless networks.

Currently, under the Act, the regulation of medical devices is governed in accordance with the risk-based classification of medical devices - whereby low-risk medical devices are classified as ‘Class A’ medical devices; the devices having low moderate risk are classified as ‘Class B’ medical devices; the devices having moderate risk are classified as ‘Class C’ medical devices; and devices having high risk are classified as ‘Class D’ medical devices. The Indian regulator being the Central Drugs Standard Control Organization (CDSCO) is also yet to issue any guidance on the classification of SaMD under the aforesaid categories. This is concerning, especially considering that by its nature, the use-cases of SaMD extend beyond their traditional hardware-based counterparts. As such, applicants have been left to fend on their own while making the requisite application before the relevant licensing authority.

Globally, innovation is fostered through regulatory ‘sandboxes’ – which allow for live-testing of products on a small-scale under the supervision of the regulator. A key advantage for innovators to enrol in such sandboxes is the ability to operate under an exemption from licensing requirements. As the med-tech industry develops such sandboxes will be crucial for CDSCO to understand the needs of the industry and entailing risks for consumers of such SaMD products.  

The ability of the med-tech sector to attract foreign investment is also contingent upon how the regulator enforces the regulations of SaMD. The enabling provisions for this are already in place, as FDI is permitted in the manufacture of medical devices (both greenfield and brownfield) under the automatic route. The existing FDI policy already defines the term ‘medical devices’ in a manner which expressly includes ‘software’. 

The Indian medical devices market is already estimated to grow to a $50 billion industry by 2025. The framing of a clear regulatory framework along with congenial conditions for licensing, innovation, intellectual property and data protection is much needed and, will certainly add a much-needed fillip to the med-tech industry.

Rupinder Malik

Guest Author The author is a Partner at J. Sagar Associates