Maira committee favours no change in pharma FDI policy

A high-level committee headed by Planning Commission member Arun Maira today recommended giving more teeth to the Competition Commission of India (CCI) in allowing mergers and acquisitions (M&A) in the pharmaceutical sector and not changing the foreign direct investment (FDI) rules.

The panel is of the view that the present FDI policy governing the pharma sector should not change, even as the necessary gate keeping should be done by CCI that has the provision to check such activities, Maira said. “There is no need to follow the government route when we have more updated and more sophisticated policy instruments under the CCI,” he told Business Standard.

The report would be presented to the Prime Minister and Deputy Chief of Plan panel Montek Singh Ahluwalia. The PM is scheduled to meet all stakeholders on the issue on October 10 to take a final view on the matter.

The committee under Maira was created on June 30 by the Cabinet Committee on Economic Affairs to look into the issue of creating an investor-friendly environment for promoting fresh investments in the sector and position India a leading destination for drug research and manufacturing hub.

“FDI policy in pharma should not be changed at all. It should remain the way it is. However, a proper gate-keeping is a must as it is a sensitive sector and the concerns raised by other ministries can be addressed by proper provisioning,” Maira said.

“We will now be presenting the report to the PM and the deputy chairman of the Planning Commission, after which a confirmed view on this issue is going to be taken.”

Currently, the government permits 100 per cent FDI via automatic route. However, the ministry of health had raised serious concerns on the impact of the series of takeovers that have been taking place since 2006 on the domestic drugs industry.

The concerns were also shared by the ministry of commerce and industry which wrote a letter to the PM suggesting imposition of certain restrictions in case of pharma M&As. It wants to allow the M&As through the government route unlike now.

The period from 2006 to 2010 saw some significant M&A deals that changed the face of Indian pharma industry. Some of them were the acquisition of Matrix Lab by US-based Mylan Inc in August 2006, Japan’s Daiichi Sankyo acquired Ranbaxy Laboratories in June 2008, France-based Sanofi Aventis took over Shanta Biotech in July 2009 and last year, in May, US-based Abbot Laboratories acquired Piramal Healthcare.