New Delhi, Aug. 16: The government plans to tighten foreign direct investment norms for existing pharma companies, including reducing the 100 per cent cap, following the recent acquisitions of homegrown firms by global players.
After a high-level meeting today, chaired by Prime Minister Manmohan Singh, it was decided that the commerce ministry would start a consultation process to address the “dangers inherent” in the current model of FDI for existing pharma units.
Commerce minister Anand Sharma said the government would try to ensure the supply of critical medicines at all costs and have safeguards, while clearing FDI proposals.
“There are some concerns, particularly with regard to oncology, injectibles and vaccines, where we see there is a critical need which must be met at all cost and that the policy will ensure,” commerce and industry minister Anand Sharma told reporters here.
In 2002, the government had allowed foreign drug companies to own 100 per cent in Indian entities. However, concerns have been raised in the backdrop of a series of foreign buyouts of local drug makers.
Among the high profile takeovers are the $3.6-billion buyout of India’s largest drug firm Ranbaxy Laboratories by Japan’s Daiichi Sankyo; French giant Sanofi-Aventis SA buying a majority stake in Shanta Biotech and US-based Abbott Laboratories’ $3.72-billion takeover of Piramal Healthcare Ltd’s domestic drug formulation business.
There are fears that MNC companies buying out local firms would jack up the prices of generic drugs not only in India but also in many developing countries; they may also price new medicines researched by these Indian firms at exorbitantly high levels.
“The department of industrial policy and promotion will soon start consultations for the proposed changes with the concerned departments, including health. It will soon move the draft cabinet note,” an official said.
One such proposal is to reduce the FDI cap from 100 per cent in the sector, an official said.
Other measures being considered include ensuring continued supply of cheap drugs in the domestic market and mandating foreign investors to keep producing generic medicines manufactured by the local company being acquired at the existing level for five years, the official added.
The changes will be prospective in nature, the official said, adding the current policy was not serving its objectives and it needs to be changed in order to ensure affordable drugs to the general public.
About 28 per cent of the market is controlled by pharma multinationals. If they acquire 3 more top companies, their share will rise to 41 per cent. Acquisition of the next rung of 8 companies will see their share rise to over 55 per cent, industry sources said.
According to PricewaterhouseCoopers, the country’s pharma sector is expected to grow to $74 billion by 2020 from $11 billion in 2011.