DIPP floats Cabinet note on 49% FDI in brownfield pharma

The DIPP has moved a proposal for the Cabinet seeking its concurrence for allowing 49 percent FDI in brown field pharma companies. The proposal is to impose additional conditions in the case of acquisitions of Indian pharma companies by foreign entities.

The move comes shortly after the  department was unsuccessful in blocking the Mylan-Strides Arcolab deal, which it felt was not in interest of the health security of the nation. DIPP  wants to block such deals in the future through the proposal .
As per the proposal, DIPP has called for pruning the limit of FDI allowed in "critical" brown field pharma companies to 49 per cent. The department, which comes under Minister Anand Sharma, is also proposing several conditions for any such deals. The conditions include one that says that the R&D or manufacturing unit of an acquired brown field Indian entity cannot be shut after the deal. The second condition is to mandate an investment equal to 25 per cent of the value of the FDI into expanding the existing manufacturing unit, or in a new unit or for R & D - all within three years. Last but not the least - a no-compete clause will have to be incorporated in the shareholders agreement with the Indian company. The government will also define what constitutes a "critical" deal.
According to sources, the  DIPP stance has broad support from other departments like Health and Pharma among others. It is the Finance Ministry, the Planning Commission and even the PMO which is opposed to these views. And that’s the reason that the DIPP is citing public health and affordability to push it case. 
According to DIPP, if unchecked, the takeover of Indian pharma companies by foreign entities will block the potential windfall from the huge number of blockbuster drugs that are going off-patent from 2015. To back its case, DIPP points out that while FDI inflows into greenfield pharma stood at a paltry USD 90 million from April 2012 to June 2013, a whopping USD 2 billion were invested for brown field deals. It is thus the Cabinet that will have to balance the need for attracting investment with the need for affordability and India’s position as a leading generics exporter.