FDI in pharma: DIPP to circulate draft Cabinet note this week

According to sources, in the note, the DIPP has proposed issues like making it mandatory for multi-national firms to invest a particular amount in R&D

The Department of Industrial Policy and Promotion (DIPP) is expected to circulate a draft cabinet note this week proposing major changes in foreign direct investment policy for existing pharma companies to protect domestic generic firms.

“The DIPP has prepared the draft cabinet note for inter-ministerial consultation. It will be circulated most probably on Thursday. The department is waiting for Commerce Minister Anand Sharma's nod,” a top official in the department said.

Sharma is on a three-day visit to Brunei. He will return on Thursday. On August 16, a high level meeting chaired by Prime Minister Manmohan Singh took stock of the situation in the sector and has asked DIPP to start consultation for making changes in the FDI policy to protect generic industry in the wake of increasing acquisitions of homegrown companies by foreign players.

According to sources, in the note, the DIPP has proposed issues like making it mandatory for multi-national firms to invest a particular amount in R&D besides suggesting which all critical verticals in the sector can be retained only with the Indian companies in case of M&As.

“The changes to be brought will prospective in nature. The current policy is not serving its objectives and it needs to be changed in order to ensure affordable drugs to the general public,” the official said.

Multi-national companies (MNCs) which are acquiring domestic firms have spent less than one per cent of their total sales in R&D in India. "They are doing only clinical trials in India and not actual drug development work," the official added.

The draft note, sources said, is also aimed preventing MNCs from changing product mix from generics to branded generics or patented ones after acquiring Indian companies, which could impact the cheapest price generic for the Indian population.

Over 96 per cent of the total FDI in the sector between April 2012 and April 2013 has come into brownfield pharma. During April 2000 and May 2013, India has attracted FDI worth $11.31 billion, which is six per cent of the total foreign inflows.

Sources said there is a feeling in the government circle that with MNCs taking control of Indian firms, there could be reduction in supply of vaccines, injectables, particularly for cancer and active pharmaceutical ingredients.

Earlier this week, a Parliamentary committee had suggested a “blanket ban” on FDI in existing pharmaceutical companies saying the policy in the sensitive sector should be dictated by public good.

It had “strongly” recommended the commerce department to take all measures to stop any further takeover or acquisition of domestic pharma units.

Currently, India permits 100 per cent FDI in pharmaceutical sector through automatic approval route in the new projects, but the foreign investment in the existing pharmaceutical companies are allowed only through FIPB's approval.