DIPP scheduled to meet on September 27 to discuss the issue.
After drawing severe criticisms from several quarters over its unrealistic poverty line definition, the Planning Commission is now receiving brickbats for favouring multinational pharma companies.
The Department of Industrial Policy and Promotion (DIPP) is up in arms against the Committee headed by Planning Commission member Arun Maira on allowing unrestricted foreign direct investment (FDI) in the country’s pharmaceutical sector.
| TAKEOVER CASES | |||
| Year | Indian company taken over | Foreign company which took over | Country of origin |
| Aug ‘06 | Matrix Lab | Mylan Inc | USA |
| Apr ‘08 | Dabur Pharma | Fresenius Kabi | Singapore |
| Jun ‘08 | Ranbaxy Lab. | Daiichi Sankyo | Japan |
| Jul ‘09 | Shanta Biotech | Sanofi Aventis | France |
| Dec ‘09 | Orchid Chemicals | Hospira | US |
| May ‘10 | Piramal Health Care | Abbot Laboratories | US |
In the upcoming meeting of the committee scheduled for September 27, the department is planning to raise concerns over the issue and make a presentation on how this would sound the death knell for the Indian generics drugs industry.
The committee was formed early this year by the Cabinet Committee on Economic Affairs (CCEA) to look into the issue of creating an investor-friendly environment for promoting fresh investments in the sector and position India as a leading destination for drug research and manufacturing hub. But so far it has met only twice, while mergers have continued to happen. However, Dipp has charged the committee of operating under the "influence of drug cartels and influential MNC lobbies."
Presently, the government permits 100 per cent foreign direct investment (FDI) via automatic route. While the Planning Commission is in favour of continuing the policy, the DIPP and the ministry of health has asked for imposing restrictions on mergers and acquisitions by multi-national companies (MNCs) of domestic drug manufacturers.
“The committee had not yet come out with a single recommendation. It is unnecessarily dragging its feet over the issue. The committee has to see the reality that there was a need to make MNC takeover norms stricter and revise the FDI policy for the drugs and pharmaceuticals sector, by bringing FDI in the sector under the government route,” a senior DIPP official told Business Standard.
Apparently, in the upcoming meeting next week, the committee is now going to bring out a comprehensive report with its recommendations. However, the final call on this issue would be taken by the prime minister next month.
In an effort to alert the prime minister, Commerce and Industry Minister Anand Sharma had written a strongly-worded letter berating the committee’s failure to bring about any tangible results. He said unrestricted acquisition of domestic drugs producers by the MNCs would not only erode the market but will also increase the prices of medicines making in inaccessible to the common man. Indian generics drugs are 35 per cent cheaper compared to international drugs.
“The Indian generic pharma industry has in the recent years posed a major challenge to the MNCs through production and export of low cost high quality medicines as well as patent challenges. Once taken over, the MNC firms could bring a completely different product-mix, which could change the production profile of low-prices generics vis-à-vis branded medicines,” Sharma said in the letter. He also urged the prime minister to balance “both concerns” thereby allowing fresh investments through the automatic route while takeovers would go through the government route in which approvals need to be sought from the Foreign Investment Promotion Board (FIPB) by the companies.
The Department of Economic Affairs under the ministry of finance has also sided with the committee and said that any restrictions on mergers and acquisitions would send out negative messages to global investors and would tantamount to “rollback of the FDI policy”.
The Indian Pharmaceutical Alliance has also shown concerns over decline in the exports of generics drugs from India. Indian pharmaceutical industry is one of the fastest growing segments. It produces 25 per cent of the world’s generics drugs. Indian firms produce nearly 60,000 generic brands in 60 therapeutic categories and between 350 and 400 bulk drugs.
Some of the big-ticket deals that have happened during the period 2006-2010 were acquisition of Matrix Lab by US-based Mylan Inc in August 2006, Japan’s Daiichi Sankyo acquired Ranbaxy Laboratories in June 2008, France-based Sanofi Aventis took over Shanta Biotech in July 2009 and last year in May US-based Abbot Laboratories acquired Piramal Healthcare.
