Pharma, Medical Devices and Life Sciences in India
Foreign entry into Indian pharma, medical devices and life sciences: greenfield 100% vs brownfield 74% FDI, the deal-reshaping conditions, NPPA price control.
How a foreign investor's entry route into Indian pharma, medical devices and life sciences is set at the sub-sector level - and why the brownfield conditions reshape the deal, not just the filing.
There is no single "FDI route for pharma" in India. The route is fixed at the sub-sector level, and the same rupee can be 100% automatic, capped-then-conditional, or condition-laden depending on what you are buying. The decisive split is between greenfield and brownfield drug manufacturing. Building a new pharmaceutical plant is 100% automatic. Buying into an existing Indian drug company - a brownfield investment - is 74% automatic, and beyond 74% it needs government approval; and either way the brownfield route carries standing conditions that travel with the deal: production of essential (NLEM) medicines must be maintained for five years, research-and-development spend must be maintained for five years, and non-compete clauses are barred save in approved cases. Those conditions are contractual and operational - they reshape the share-purchase agreement, the seller's covenants and any earn-out, not merely the RBI form. Medical-device manufacturing is 100% automatic (greenfield and brownfield, carved out in 2015), and hospitals and healthcare services are 100% automatic. The permission to invest is the easy part; in pharma the structuring decision is where the value and the risk sit.
So the first question is not "can I invest" but "which corner of the sector am I entering" - a multinational building a greenfield plant, a private-equity buyer or strategic consolidator acquiring an existing drug maker, a device or med-tech manufacturer, a hospital or diagnostics operator, or a research-services (CRO/CDMO) business - because the route, the conditions and the binding regulator are different in each.
At a glance
- The FDI route is sub-sector-specific, not "pharma". State it precisely for the target you are actually buying.
- Greenfield pharma manufacturing: 100% automatic. Brownfield (existing Indian drug company): 74% automatic, beyond 74% government route - processed by the Department of Pharmaceuticals via the Foreign Investment Facilitation Portal.
- Brownfield carries standing conditions that bind the deal for five years: NLEM-medicine production maintained, R&D spend maintained, and non-compete clauses barred save in approved cases - so they belong in the SPA, not the filing.
- Medical devices: 100% automatic (greenfield and brownfield, carved out in 2015). Hospitals and healthcare services: 100% automatic. The friction moves from entry to product and establishment regulation.
- NPPA price control under DPCO 2013 is a permanent investment feature, not a compliance line: ceiling prices apply to essential (NLEM) medicines and constrain gross margin on a defined, periodically expanded product set.
- A central CDSCO registration is not a state manufacturing licence - both are typically needed to operate.
- Press Note 3 applies on beneficial ownership wherever a land-border (notably Chinese) connection is plausible; a UAE or other intermediate holding company does not cure it. Press Note 2 of 2026 now allows a non-controlling stake of up to 10% on the automatic route; above that, or with control, prior approval applies.
Why pharma and healthcare is a live entry sector
India is one of the larger pharmaceutical-manufacturing bases globally and a substantial generics and contract-manufacturing supplier, which is what draws foreign capital across both the manufacturing and the services sides of the sector. On deal activity, Grant Thornton Bharat reported pharma and healthcare as a top and rising deal-volume sector through 2025, with quarterly deal counts and values both up over the year (Grant Thornton Bharat, Pharma & Healthcare Dealtracker, 2025). On the inflow side, the Department of Pharmaceuticals reported that brownfield FDI proposals were approved under the government route in 2024-25 - confirming that the approval route is actively used, which is a fact, not a target or a forecast. Keep the two timebases distinct: deal counts and values are reported by calendar quarter (Grant Thornton Bharat); FDI inflow figures are reported by financial year (DPIIT / Department of Pharmaceuticals). They are not interchangeable, and blending them produces a number that means nothing.
Which part of the sector are you entering?
Identify the target first, because the FDI route, the standing conditions and the binding regulator all follow from the sub-sector - not from the word "pharma".
The pattern to take away: pair every "brownfield 74%" with "greenfield 100%", and never let "devices and hospitals are 100% automatic" generalise back onto drug manufacturing. And note the scope of this page: it is the products-and-FDI-route decoder for pharma, devices and life sciences; the provider side - hospitals, clinics and diagnostics, their licensing, valuation, doctor retention and the active hospital M&A market - is covered on our dedicated page, Hospitals & Healthcare Delivery in India (hospitals healthcare delivery).
| Sub-sector | Typical investor | Key legal issue |
|---|---|---|
| Greenfield pharma manufacturing (new plant) | MNC pharma; UAE/GCC group; CDMO | 100% automatic. Exposure is downstream - NPPA/DPCO price control, CDSCO plus state manufacturing licences, product approvals |
| Brownfield pharma (buy into an existing Indian drug company) | Private equity; strategic; consolidator | 74% automatic; beyond 74% government route (Department of Pharmaceuticals via the Facilitation Portal). Conditions travel: NLEM production five years, R&D spend five years, non-compete barred save approved cases - rewrites the SPA |
| Medical-device manufacturing (incl. in-vitro diagnostics) | Devices MNC; med-tech; contract manufacturer | 100% automatic, greenfield and brownfield (carved out 2015). The real issue is risk class A/B/C/D and CDSCO under the Medical Device Rules 2017 |
| Hospitals and healthcare services | Hospital operator; PE platform; family office | 100% automatic. Friction is state clinical-establishment regulation, land/real-estate and professional licensing |
| Diagnostics and pathology | Diagnostics chain; PE roll-up | Healthcare services - 100% automatic. State/NABL lab registration, patient-data (DPDP) obligations, clean title |
| Biotech / CRO / CDMO / API | Life-sciences MNC; research-services group | Manufacturing follows the pharma rules (greenfield 100% / brownfield 74%); a services-only CRO is 100% automatic. The line that bites is "manufacturing vs services" classification, plus the clinical-trial rules (NDCT 2019) |
| Listed-company entry (open offer / QIP) | FPI; strategic listed stake | The sub-sector FDI route, the SEBI Takeover Code and pricing all bite together |
Brownfield versus greenfield is a structuring decision, not a routing footnote
The most common error a foreign buyer makes is to treat the brownfield conditions as a box on the RBI filing. They are not. They are operational covenants that bind the target - and, through it, the buyer - for five years, and they have to be priced and drafted into the deal before signing. Three conditions travel with a brownfield acquisition of an existing Indian pharmaceutical company. NLEM production is maintained for five years: production of the National List of Essential Medicines lines the target already makes must be kept up, in practice benchmarked to an absolute quantitative level set against the preceding three financial years - a buyer planning to rationalise a low-margin essential-medicine line may find it cannot, for five years. R&D spend is maintained for five years: the target's research-and-development outlay cannot simply be cut to lift near-term margin. And non-compete clauses are barred, save in approved special cases - the one that surprises buyers most, because a clean-control acquisition with a standard non-compete on the selling promoter, ordinary in most M&A, may be un-implementable here, which changes how you protect the goodwill you are paying for and how you think about the seller re-entering the market. In practice that means the five-year NLEM-production and R&D-maintenance obligations and the non-compete bar belong in the diligence request list, the SPA covenants and seller and management undertakings, the post-closing reporting, and the valuation model - not in a footnote. A term sheet drafted for a clean buyout elsewhere will not survive contact with the brownfield regime. This is the natural hand-off to inbound transaction advisory, where the conditions are diligenced and drafted into the agreement (see transaction advisory india inbound).
NPPA and DPCO price control is a permanent investment feature
Price control is not a compliance line item; it is a structural feature of the margin you are buying. Under the Drugs (Prices Control) Order 2013, the National Pharmaceutical Pricing Authority fixes ceiling prices for medicines on the National List of Essential Medicines (Schedule I of the DPCO). Overcharging above the ceiling is recoverable, with interest and penalty. Even outside the essential-medicines list, the NPPA caps the annual price increase on non-scheduled formulations (broadly 10%), so price oversight is not confined to NLEM lines. The reach is concrete and it expands: the NPPA fixes and annually revises ceiling prices for the scheduled formulations under the NLEM - the 2026 annual revision covered 907 scheduled formulations (NPPA, March 2026) - and the controlled set is periodically reviewed and widened; confirm the current count and date for any specific assessment. That defines a product set on which gross margin is capped. For a brownfield buyer the two features compound: the price ceiling caps the margin on essential-medicine lines, and the brownfield condition obliges the buyer to keep producing those very lines. This has to be modelled into the valuation before the deal, not discovered after it. Greenfield builders are equally exposed on any NLEM products they manufacture, even though their entry route is clean.
What changes the valuation
On a pharma or healthcare target the FDI route is rarely what moves the price; the operating reality is. Diligence and the model should price the NLEM and price-control exposure (which lines are scheduled, and the five-year production lock on a brownfield deal), the product registrations and plant or establishment licences and whether they transfer cleanly, the GMP and inspection history - any warning letters, import alerts or pending inspections - the distribution and trade-margin structure, and, for hospitals and diagnostics, the establishment approvals, professional staffing and reimbursement model. These are the value drivers a buyer underwrites; the route is the gate, not the price.
Medical devices: the friendlier door - but the friction moves
Medical devices and hospitals are the more open sub-sectors on paper, and they are genuinely so on the FDI route; the work simply moves from "can the money come in" to "can a licensed, compliant operating entity be stood up and scaled". Medical devices are 100% automatic, greenfield and brownfield: devices were carved out of the pharma FDI conditions in 2015, so a device manufacturer does not carry the brownfield NLEM, R&D and non-compete conditions. The substantive question is regulatory classification - under the Medical Device Rules 2017, devices fall into risk classes A, B, C and D, and the licensing pathway (central or state, registration or manufacturing licence) follows the class; CDSCO has been tightening this, so a buyer should confirm the device's risk class against the official classification before assuming a licence is straightforward. Hospitals, diagnostics and healthcare services are also 100% automatic, but that is the provider side - operating, building or acquiring care - and its depth (clinical-establishment licensing, the operating gate, valuation, doctor retention and the active hospital M&A market) now has its own page; see Hospitals & Healthcare Delivery in India (hospitals healthcare delivery).
Incentives and the API-localisation opportunity
Two incentive threads are worth weighing alongside the route. India runs production-linked incentive schemes across the sector - a bulk-drugs scheme aimed at key starting materials, intermediates and active pharmaceutical ingredients, a broader pharmaceuticals PLI, and a medical-devices PLI - administered through the Department of Pharmaceuticals and layered with state incentives. The strategic driver behind the API scheme is concentration risk: India is the world's generic-medicine workhorse but still imports a large share of its active ingredients from China, for several molecules well above 70%, so an API or intermediates project is as much a China-plus-one supply-security play as a margin one. The honest caveat is that Chinese producers have repeatedly cut prices on targeted molecules and Indian environmental-compliance costs are higher, so a new API plant has to be modelled on realistic, not assumed, economics. For a foreign manufacturer the incentive, the localisation thesis and the cost reality are weighed together, not in isolation.
The regulators - and why one approval is never the whole picture
Pharma and healthcare sit under a split, two-layer regulatory architecture, and the most expensive misunderstanding is to treat a central approval as the end of the matter. CDSCO (the Central Drugs Standard Control Organisation) is the central regulator under the Drugs and Cosmetics Act 1940, covering new drugs, imports, higher-risk medical devices and clinical trials. State Drug Controllers issue manufacturing and sale licences - and a central CDSCO registration is not a state manufacturing licence; both are typically required, and treating the central approval as sufficient is a common and costly slip. NPPA under the DPCO 2013 runs essential-medicine price control, as above. The Medical Device Rules 2017 set the risk-class A-D framework for devices and in-vitro diagnostics, and the New Drugs and Clinical Trials Rules 2019 govern clinical trials, bioavailability and bioequivalence studies and ethics-committee registration, with statutory timelines. Clinical-establishment and state hospital regulation applies to hospitals, clinics and diagnostics. On the entry side, the Department for Promotion of Industry and Internal Trade owns the Consolidated FDI Policy and is the nodal point for government-route cases, while the Department of Pharmaceuticals processes beyond-74% brownfield proposals through the Foreign Investment Facilitation Portal (the FIPB having been abolished in 2017). One forward flag: the Drugs, Medical Devices and Cosmetics Bill 2023, which would replace the 1940 Act and regulate devices as a distinct category, is proposed - a draft under inter-ministerial consultation, not enacted as of June 2026, and contested by parts of the domestic device industry. Plan against the operative law: the Drugs and Cosmetics Act 1940 and the Medical Device Rules 2017.
Which healthcare entry are you actually making?
The sub-sector table reads off the law; this reads off the deal you are doing. Most entrants are one of these, and the gating work differs in each:
- Building a new pharma plant: the greenfield route is clean (100% automatic); the work is plant and state manufacturing licences, the CDSCO interface, land and incentives, and the NPPA exposure on any NLEM lines.
- Buying an Indian drug company: the brownfield route, the FDI conditions written into the SPA, the non-compete limits, the price-control exposure, and the CCI and FEMA timing on the deal.
- Entering medical devices: 100% automatic FDI, but device classification, registration, the import or manufacture licence and QMS obligations drive the timeline.
- Hospital or diagnostics entry: open FDI, but the operating depth - licensing, valuation, the deal and the hospital M&A market - is covered on our dedicated page, Hospitals & Healthcare Delivery in India (hospitals healthcare delivery).
- CRO/CDMO entry: settle IP ownership, data, client contracts and liability, and the tax and transfer-pricing position before building capacity.
How a foreign company enters
The usual vehicle is an Indian private limited company, foreign-owned, capitalised by equity instruments priced and reported under FEMA. From there the route is the sub-sector decision. Greenfield manufacturing: incorporate, invest under the 100% automatic route, then turn to the operating build - CDSCO plus state manufacturing licences, product approvals, and the NPPA/DPCO exposure on any NLEM lines. Brownfield acquisition: acquire the existing company up to 74% under the automatic route, or take government approval (Department of Pharmaceuticals via the Facilitation Portal) for more, with the standing conditions diligenced and drafted into the SPA from the outset. Devices: invest under the 100% automatic route, with the gating work in risk classification and CDSCO/state licensing under the MDR 2017. Hospitals and healthcare services: invest under the 100% automatic route, with the gating work in state clinical-establishment registration, land, and professional licensing. The mechanics of incorporation, instruments and reporting sit on india business setup and fema advisory, and the entity and JV mechanics on india structuring and the India Manufacturing insights cluster.
Legal workstreams for a pharma or healthcare entry
A foreign entry into this sector typically runs these workstreams in parallel:
- FDI-route confirmation at the sub-sector level - greenfield 100% / brownfield 74%-then-approval / devices 100% / hospitals 100% - against the current DPIIT policy;
- government-approval filing where it applies - beyond-74% brownfield, via the Department of Pharmaceuticals and the Facilitation Portal;
- Press Note 3 / beneficial-ownership screening - checked on the ultimate ownership, not just the immediate investor, against the Press Note 2 of 2026 position (a non-controlling stake up to 10% on the automatic route; above that, or with control, prior approval);
- brownfield-condition diligence and drafting - NLEM-production, R&D-spend and non-compete conditions built into seller covenants, earn-out and the SPA (with inbound transaction advisory);
- the licensing pathway - CDSCO central registration and state manufacturing/sale licences; device risk-class licensing under MDR 2017; NDCT 2019 obligations where trials are involved, and the Digital Personal Data Protection Act for clinical-trial and patient data;
- NPPA/DPCO pricing exposure - mapped onto the target's or the plant's NLEM lines and modelled into valuation;
- operating-establishment compliance - state clinical-establishment registration, land/real-estate position, professional and lab licensing for healthcare and diagnostics;
- FEMA pricing and reporting, and the tax, withholding, transfer-pricing and treaty position (see the corridor and india tax).
The India-UAE corridor
For a UAE or wider GCC group, the same sub-sector routes apply - there is no separate, easier door for a Gulf investor. A UAE company building or buying into Indian pharma, devices or healthcare assesses three things together: the FEMA route and conditions for the chosen sub-sector, the India-UAE Double Taxation Avoidance Agreement and the way it shapes withholding and repatriation, and the substance of the UAE holding entity. Crucially, an intermediate UAE holding company does not cure a Press Note 3 issue - that test runs on beneficial ownership regardless of where the holding sits (subject now to the Press Note 2 of 2026 carve-out for non-controlling stakes up to 10%). The treaty and structuring detail belong on india tax and fema advisory; this page flags the corridor once and links down.
Where this goes wrong
- Treating "FDI in pharma" as one route. The route is sub-sector-specific; the same investment can be 100% automatic, 74%-then-approval, or condition-laden. State it for the actual target.
- Over-generalising from "100% automatic". Devices and hospitals being 100% automatic does not mean drug manufacturing is - pair the two every time.
- Drafting the brownfield deal as a clean buyout. A standard non-compete on the seller, a planned cut to a low-margin essential-medicine line, or a trimmed R&D budget may each be barred for five years. The conditions reshape the SPA.
- Reading NPPA price control as a compliance footnote. Ceiling prices on essential medicines cap gross margin on a defined, expanding product set - and bind the brownfield buyer to keep producing those lines. Model it into valuation before the deal.
- Assuming a central CDSCO approval is enough to manufacture. It is not a state manufacturing licence; both are typically needed.
- Treating the devices/hospital green light as the finish line. The friction simply moves to risk classification, establishment registration, staffing, land and professional licensing.
- Missing Press Note 3 on beneficial ownership - it applies regardless of sub-sector or route, eased by Press Note 2 of 2026 only for non-controlling stakes up to 10%, and a UAE or other intermediate holding company does not cure it above that; and structuring against the 2023 Bill, which is a draft, not enacted (the 1940 Act and MDR 2017 are operative).
How ATB Corporate helps
ATB advises foreign investors entering Indian pharma, medical devices and healthcare on the question that decides the deal: which sub-sector route applies, what conditions travel with it, and how those conditions have to be built into the structure and the agreement. We confirm the FDI route at the sub-sector level, screen beneficial ownership for Press Note 3, run the government-approval filing where a brownfield investment exceeds 74%, diligence and draft the brownfield conditions into the share-purchase agreement, map NPPA/DPCO pricing and the CDSCO-plus-state licensing pathway onto the target, and coordinate the FEMA, tax and treaty position for a corridor investor - drawing on our India and UAE practices on both sides of the transaction.
Pharma, Healthcare & Life Sciences — Answered
It is set at the sub-sector level. Greenfield drug manufacturing is 100% automatic. Brownfield investment - buying into an existing Indian drug company - is 74% automatic, and beyond 74% it needs government approval, with standing conditions attached. Medical devices and hospitals are separately 100% automatic.
Three travel with the deal for five years: production of the target's existing NLEM (essential-medicine) lines must be maintained, R&D spend must be maintained, and non-compete clauses are barred save in approved special cases. They are operational covenants that have to be drafted into the share-purchase agreement, not treated as a filing formality.
Yes - 100% automatic, for both greenfield and brownfield, since devices were carved out of the pharma conditions in 2015. The substantive work is the device's risk class (A-D) and CDSCO licensing under the Medical Device Rules 2017, not the FDI route.
100% automatic. The constraints are not on entry but on operation: state clinical-establishment registration, land, professional staffing, biomedical-waste and pharmacy rules, and the reimbursement model. The provider-side depth - licensing, valuation, doctor retention and the hospital M&A market - is covered on the dedicated Hospitals & Healthcare Delivery in India page (hospitals healthcare delivery).
No. Up to 74% is automatic; only beyond 74% does it need government approval, which the Department of Pharmaceuticals processes through the Foreign Investment Facilitation Portal (the FIPB having been abolished in 2017). The standing conditions apply either way.
Under the DPCO 2013, the NPPA fixes ceiling prices for essential (NLEM) medicines and revises them annually (the 2026 revision covered 907 scheduled formulations; NPPA, March 2026); overcharging is recoverable with interest and penalty. It caps gross margin on a defined, periodically widened product set and should be modelled into valuation before the deal.
Two licences are needed: a central CDSCO registration (covering new drugs, imports and higher-risk devices) and a state Drug Controller manufacturing or sale licence. A central registration is not a state licence; devices are additionally licensed by risk class under the MDR 2017.
The New Drugs and Clinical Trials Rules 2019, administered through CDSCO, covering trial approvals, bioavailability and bioequivalence studies, ethics-committee registration and statutory timelines.
Yes, through the same sub-sector routes - there is no separate Gulf door. Assess the FEMA route and conditions, the India-UAE tax-treaty position, and the UAE entity's substance together. An intermediate UAE holding company does not cure a Press Note 3 beneficial-ownership issue above the 10% non-controlling threshold.
The Drugs, Medical Devices and Cosmetics Bill 2023 would replace the 1940 Act and regulate devices distinctly, but it is a draft under inter-ministerial consultation, not enacted as of June 2026. Structure against the operative law: the Drugs and Cosmetics Act 1940 and the Medical Device Rules 2017.
Yes. India runs production-linked incentive schemes for bulk drugs and active pharmaceutical ingredients, for pharmaceuticals, and for medical devices, administered by the Department of Pharmaceuticals and layered with state incentives; the scheme amounts and eligibility should be confirmed against current notifications. An API or intermediates project is also a China-plus-one supply-security play, since India still imports a large share of its active ingredients - for several molecules well above 70% - from China.
In Indian pharma and healthcare, the sub-sector route decides the deal: the conditions travelling with a brownfield acquisition, the price-control exposure and the licensing path belong in the structure.
Licensing, approvals and any tax treatment are decided by the authorities on the facts. Talk to our team when you are ready.
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