FDI in pharma: Final call likely on Jul 24

While the the Department of Economic Affairs (DEA) has mooted capping FDI in the sector to 49% in existing units, the Department of Industrial Policy and Promotion (DIPP) has favoured 100% but to be routed through Foreign Investment Promotion Board (FIPB).

"The group is meeting tomorrow. Most likely it will be the final and last meeting. On July 27, the FIPB would take up some proposals, so before that we would like to finalise the things," a DIPP official said.

Among other issues, the meeting would also consider views of departments of pharma, health, DIPP and DEA over imposition of specific conditions on foreign investors.

According to sources, the health ministry is insisting that multinational firms keen on brownfield acquisitions should seek its approval if the company decided to reduce or stop manufacturing of essential drugs in the acquired entity.

Besides, the ministry wants MNCs which have acquired Indian firms to not to cut production of generic medicines under any circumstances and also to first make these drugs available for domestic consumption before exporting.

Differences between various departments had led to delay in finalising a policy related to mergers and acquisitions in the pharma sector, following which the PMO has intervened and sought a report on the matter. The group is headed by Shanktikanta Das, additional secretary in DEA and includes representatives of DIPP, Health, External Affairs, and Overseas Indian Affairs.

In October 2011, a ministerial group headed by Prime Minister Manmohan Singh had put foreign investment in brownfield pharma on approval route, changing the 10-year old policy of automatic clearance to address the health ministry's concerns after a series of acquisitions.

Under the new rules, for any merger or acquisition, the overseas investor will have to seek permission from the Foreign Investment Promotion Board (FIPB). After six months, it will be the monopoly watchdog Competition Commission of India (CCI) which will vet such deals.

Issues were also raised over the competency of CCI to handle such deals. Some big acquisitions include Ranbaxy Laboratories buy-out by Daiichi Sankyo of Japan, Shanta Biotech by Sanofi Aventis of France and Piramal Health Care's health unit by Abbott Laboratories of the US.

The affordability factor has so far been the hallmark of the Indian generic drugs all over the world, on the back of robust growth of the homegrown players. The policy of allowing 100% FDI in Greenfield units, marketing and R&D facilities remains unchanged.