Govt set to tweak pharma FDI rule, may reduce cap from 100 pc

The government has veered around to make major changes in the FDI policy for the pharmaceuticals sector to ensure that management control of existing Indian firms, which produce cheap generic medicines, does not go into the hands of multinational companies.

After a high-level meeting chaired by Prime Minister Manmohan Singh, it has been decided that the commerce and industry ministry would soon start a consultation process to address dangers inherent in the current model of FDI in brownfield pharmaceutical units.

"Today's meeting looked at two dimensions. One is that the proposals which have come under the existing policy, 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 journalists after the meeting.

He further said the proposals already being considered by the Foreign Investment Promotion Board (FIPB) would go through the existing policy and if there are safeguards required it will be discussed as what should be the nature of safeguards so that affordable life saving medicines are available to the people.

The decision marks a major victory for Sharma as he had locked horns with the finance ministry on the issue which favours a more liberal approach. The health ministry on the, other hand, is on the same page as the commerce and industry ministry over the issue.

According to sources, the government may reduce the FDI cap from 100 per cent in the brownfield pharma segment.

A senior official said that the department of industrial policy and promotion (DIPP) will soon start consultations for the proposed changes with the concerned departments, including health and a draft Cabinet note would be moved soon.

The changes to be brought will be prospective in nature, the official said.

The official said that over 96 per cent of FDI between April 2012 and April 2013 has come into brownfield pharma.

Besides, FDI has not led to significant addition to gross assets or jobs or increase in R&D expenditure. It has led to outsourcing, clinical trials to India rather than new investment in R& D for development of new drugs.

About 28 per cent of the market is controlled by pharma MNCs. If another top 3 Indian companies are acquired by MNCs, their share would rise to 41 per cent and on acquisition of the next rung of 8 companies their share will go over 55 per cent.

In the last five years, the share of pharma MNCs has grown from 15 per cent to 25 per cent, the official said.

Courtesy: Mail Today