Maira panel soft on MNC takeovers, say domestic pharma producers

Indian Pharmaceutical Alliance (IPA), an association of leading domestic drug makers, has criticised the observations of the high-level committee headed by Planning Commission member Arun Maira on pharmaceutical takeovers, that foreign acquisitions have not resulted in price increases or reduced the availability of essential medicines.

The association said it was too early to assess the impact of such acquisitions in the Indian health sector. In a letter to Maira dated October 1, it said the committee had ignored the importance of the strategic shift in the business model of foreign multinational companies after they’d acquired leading domestic drug companies.

“Some independent data specific to the acquired companies and the investment in gross fixed assets (1995-2010) submitted by the IPA do not support the conclusions that acquisitions have not led to price increases or that the MNCs are investing more in India to produce more. Leave alone investment, they are not bringing even new technology in the country,” the letter stated.

While favouring the committee’s suggestion to provide more powers to the Competition Commission of India (CCI) to prevent/regulate undesirable acquisitions, IPA said this cannot substitute for a policy that distinguished between favourable foreign direct investment in pharma and undesirable FDI.

“Mere empowering of the CCI to examine every deal will not serve the purpose. Moreover, without a policy, it would be extremely difficult for the CCI to establish dominance to invoke provisions of the Competition Act in a highly fragmented pharmaceutical market, where 50 companies are competing for 80 per cent share of the market.

Yet, collectively, MNCs can acquire a dominant share of the market and change the structure of the domestic industry. Likewise, regulating prices of imported medicines is also a nightmare for the pricing regulatory authority. It just does not have authority and, even if it had, it has no means to go beyond the landed cost. Thus, on both these counts, the proposed course of action is ineffective,” IPA said.