FIPB may defer FDI in pharma sector

The finance ministry may defer 10 proposals for FDI in pharmaceutical sector that are listed to be taken up at the FIPB (Foreign Investment Promotion Board) meeting on Friday, as the government is yet to review foreign investment policy in existing Indian drug companies.

Sources said, "FDI in existing pharma companies and other related proposals would be deferred by the FIPB meeting scheduled for tomorrow," as the current policy has not been reviewed after the DIPP (department of industrial policy and promotion) raised concerns over the increasing number of takeovers of Indian firms by foreign drug makers.

The 10 applications for FDI in pharma sector which are listed for Friday's FIPB meeting include proposals of US-based Mylan Laboratories, Mumbai-based Ferring Therapeutics and Hyderabad-based Verdant Life Sciences.

The DIPP has raised concerns over a spate of acquisitions of domestic pharma firms by multinationals. It has sought the intervention of the Prime Minister's Office (PMO) on this matter.

Earlier, the department had asked the (FIPB) not to take decision on any pharma related proposal.

Government sources said that on an average about 25-percent of the FIPB agenda is related with pharma sector.

The continuing acquisitions of Indian pharma firms by foreign companies would pose serious problems in availability of life-saving drugs to consumers in near future, sources added.

FDI policy in the sector has already been discussed at the PMO's level in December last year. Accordingly, all foreign investments in existing domestic pharma firms was allowed only after clearance by the FIPB.

With no let-up in multinationals seeking nod to acquire stake in Indian pharma firms despite government putting norms to check it, the DIPP has raised concerns stating the FDI policy in the sector needs a relook again at the PMO level.

India allows 100 percent FDI in pharma sector through automatic approval route in case of new projects, but foreign investment in the existing pharma companies are allowed only through FIPB's approval.

In 2008, Japanese firm Daiichi Sankyo had bought out the country's largest drug maker Ranbaxy for USD 4.6 billion. US-based Abbot Laboratories had acquired Piramal Health Care's domestic business for USD 3.7 billion.

Since April 2000, FDI of USD 10.3 billion has come into the pharmaceutical sector, nearly 5 percent of the total foreign inflows the country has received.

The current policy says that "the government may incorporate appropriate conditions for FDI in brownfield cases, at the time of granting approval".