FDI Drying Up

The pharma sector is no longer a priority sector for foreign direct investment (FDI) in India. FDI in the sector witnessed a sharp fall of 73 per cent during the last financial year, down to just $266 million this year from $1.01 billion a year ago. That was not the case until a few years ago as multinational drug companies were competing with each other to sign a big deal in India. That led to mega deals like Daiichi Sankyo acquiring Ranbaxy and Abbott paying record prices for Piramal's formulation business.

Analysts say deals have dried up as MNCs no longer view India as a safe haven to invest, despite its potential. Over the last couple of years, the Indian government brought almost all essential medicines sold in the Rs 130,000 crore Indian market under price control and banned several combination drugs. Many manufacturing plants of leading Indian companies were issued warnings by the US Food and Drug Administration (FDA) for compromising manufacturing standards. Concern on India's intellectual property rules is another worry area. The government should bring in attractive policy initiatives to bring back investments to India's pharmaceutical sector.