Ministries oppose PMO view on pharma deal rules

The ministries of finance, commerce and health appear to have locked horns with the Prime Minister’s Office (PMO) over the regulation of cross-border deals for expansion in the pharmaceutical sector.

The Indian Pharmaceutical Alliance (IPA), an association representing the domestic industry, had also recently written to the PMO suggesting joint clearance of brownfield FDI proposals for expansion in pharma by the Foreign Investment Promotion Board (FIPB) and Competition Commission of India (CCI).

The move comes in the wake of PMO’s intervention in the matter following a notification from the Ministry of Finance. On May 29, the Department of Economic Affairs, under the finance ministry, issued a notification forming a special group to streamline the process for approval of foreign direct investment in brownfield pharma via FIPB.

 

According to a source, PMO intervened after the finance ministry’s notification advising the group not to deviate from the earlier decision that CCI will vet norms for clearance of such investment proposals.

“This is what has triggered reactions from various ministries who are opposing the idea of CCI regulating FDI in the sector. The ministries are of the view that CCI cannot handle the public health issues involved in the matter and therefore, such proposals should be cleared through FIPB,” the source said.

The domestic industry is also supporting the view.“The PMO directive not to deviate from the earlier decision to let the CCI vet these acquisitions displays complete lack of understanding of the ground realities,” the IPA said in its letter to Pulok Chatterjee, Principal Secretary to the Prime Minister. “It is therefore appropriate that the FIPB examines all brownfield investment proposals from the public health perspective and CCI examines it under the provisions of the Competition Act”.

Earlier, FDI in pharmaceutical sector used to be automatically cleared by the government, till concerns were raised over a spate of high-profile acquisitions by multinational drug firms. Civil society as well as some part of the domestic industry raised concerns that the automatic route may allow foreign domination of the Indian pharma sector which may end up increasing prices of medicines in the country.

In October 2010, this prompted an inter-ministerial group headed by the prime minister to decide to make the CCI the approving body for foreign investments in the sector.

However, since CCI did not have enough teeth to take a call on the matter, it was decided that CCI would frame guidelines for vetting foreign investments in the sector and meanwhile the FIPB would approve investment proposals for an interim six-month period. While the six-month period ended in April, officials in CCI say that the guidelines are part of the amendment to Competition Act, which is yet to be approved by the government.