Foreign investment in pharma to face competition check

October 11th, 2011 - 3:09 pm ICT by IANS  

Manmohan Singh New Delhi, Oct 11 (IANS) India will continue to allow 100 percent foreign direct investment in the pharmaceutical sector but the competition watchdog will keep a check on the flow of overseas funds and mergers and acquisitions in the industry, an official said.

An inter-ministerial group headed by Prime Minister Manmohan Singh Monday evening decided against putting any limit on the FDI in pharmaceutical sector.

However, the investment would not be under automatic route anymore. It will have to be cleared by the Foreign Investment Promotion Board (FIPB) and Competition Commission of India.

In recent years, several Indian drug makers including Ranbaxy Laboratories and Piramal Healthcare have been taken over by multinational firms.

Japan’s Daiichi Sankyo bought majority stake in India’s largest pharmaceutical firm Ranbaxy Laboratories for $4.6 billion in 2008. Piramal Healthcare was recently acquired by an American firm Abbott Laboratories.

India attracted nearly $9 billion foreign direct investment during the last 10 years, almost half of it has come through mergers and acquisitions.

Acquisitions of Indian firms by global giants is likely to make generic drugs costlier, and thus unaffordable to the common people in India, many analysts and a section of government official feel.

There has been differences among the ministers over the issue of overseas investments in pharmaceutical sector, especially in view of the takeover of large Indian firms by multinationals. Health ministry has been demanding that the FDI limit in pharma sector be reduced to 49 percent from the current 100 percent, while the finance ministry was of the view that putting a limit would be a regressive step and send a wrong signal to overseas investors.

The inter-ministerial group, which was attended by Finance Minister Pranab Mukherjee, Health Minister Ghulam Nabi Azad and Commerce and Industry Minister Anand Sharma, among others, tried to strike a “balance between larger public health concerns and strengthening domestic manufacturing capacities”.

“India will continue to allow FDI without any limits under the automatic route for greenfield investments in the pharma sector. This will facilitate addition of manufacturing capacities, technology acquisition and development,” according to official statement released after the meeting.

In case of brownfield investments, FDI will be allowed through the FIPB approval route for a period of upto six months.

“During this period, necessary enabling regulations will be put in place by the Competition Commission of India for effective oversight on mergers and acquisitions to ensure that there is a balance between public health concerns and attracting FDI in the pharma sector,” the statement said.

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