Govt to review FDI policy in pharma sector on Monday

Government will take up on Monday the issue of tightening FDI in existing pharmaceutical companies in the wake of concerns over multinationals taking over domestic drug makers.

 

"The Cabinet will review the FDI policy in pharmaceutical sector on Monday," an official said.

 

The Department of Industrial Policy and Promotion (DIPP) has proposed to reduce FDI cap from 100% to 49% in the "rare or critical pharma verticals."

 

It has also proposed to incorporate conditions for foreign firms like mandatory investment in R&D and non-compete clause in the shareholders pact.

 

As per the proposal, sources said, the foreign company would not be allowed to close down the existing R&D centre and would have to mandatorily invest upto 25% of the FDI in the new unit or R & D facility.

 

The total investment, as per the condition proposed, would have to incurred within 3 years of the acquisition.

 

Sources said that 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.

 

"MNCs which are acquiring domestic firms have spent less than one% of their total sales in R&D in India. They are doing only clinical trials in India and not actual drug development work," another source said.

 

A Parliamentary committee had recently suggested a blanket ban on FDI in pharma, saying the policy in the sensitive sector should be dictated by public good.

 

In 2008, Japanese firm Daiichi Sankyo had bought out the country's largest drug maker Ranbaxy for $4.6 billion.

 

US-based Abbot Laboratories had acquired Piramal Health Care's domestic business for $3.7 billion. Another US company Mylan bought Matrix Lab while Dabur Pharma was acquired by Singapore's Fresenius. France's Sanofi Aventis purchased Shanta Biotech and some businesses of Orchid Chemicals was bought by US-based Hospira.

 

Over 96% of the total FDI in the sector between April 2012 and April 2013 has come into brownfield pharma.

 

Global firms are accusing India that its pharma policy is not in compliance with the international standards.

 

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