The committee 'strongly' recommended the Commerce Department to take all measures to stop any further takeover or acquisition of domestic pharma units.
"The Committee is, therefore, of the considered opinion that the Government must impose a blanket ban on any FDI in brown field pharma projects," Department Related Parliamentary Standing Committee on Commerce said in its report on 'FDI in Pharmaceutical Sector'.
The panel was chaired BJP member Shanta Kumar.
"This necessity becomes more telling in view of the fact that the pharmaceutical industry is not like any other industry/business. It is one sector of the economy which has to be dictated by public good rather than foreign investments, profit and revenue," it said.
It said FDI in brown field pharma projects would jeopardise the entire health and intellectual property framework of India in terms of access and affordability of medicines.
The Committee was convinced that FDI has failed to bring about any real change in the existing pharma R&D environment as domestic companies are still to gain the competence and capacity to achieve cutting-edge drug innovation by carrying a new compound through all stages of research up to marketing.
"After all these years of FDI in drugs and pharmaceuticals sector, India is still weak in laboratory stage drug discovery," it said adding takeover and acquisitions are adversely impacting the exports.
"...export performance in dollar terms during 2012- 13 has not been satisfactory as compared to the past two years. The targeted figure of USD 24 billion exports would be difficult to achieve by the projected time-line of March, 2014," it said.
It said FDI in brown field pharma has encroached upon India's generics base and adversely affected the industry.
It also said collaboration between foreign and domestic pharma companies has served western markets more than the needs of the local population.
The report said FDI flow into brown field projects has not added fresh capacity in terms of production, distribution network or asset creation to the desired level.
"As a result, significant strides have not been made in creating fresh jobs and transfer of technology...the Department concerned must take desired steps to come up with optimal policy formulation in this regard.," it added.
Further, it feared that these MNCs can change or tweak the product mix and can go from producing generics into branded or even more expensive patented medicines.
"Its direct impact will be on the availability of the cheapest priced generics for Indian population which may decrease substantially," it said.
The panel said it shares the concern that "serial acquisitions of the Indian generic companies by the MNCs (multinational companies) will have significant impact on the competition, price level and availability".
As per the committee, FDI inflows into research and development (R&D) activities in the pharma sector has been "totally unsatisfactory".
"The pharma industry has attraced FDI to the tune of Rs 18,678.11 crore during the last three years, out of which less than three per cent was the total FDI share in pharma R&D during the period," the report said.
Expressing displeasure over greater collaborations of multinational pharma companies with domestic players in the area of clinical trials, the panel said the government should frame guidelines for such trials.
"Such collaboration is being valued more for the patients India can provide as guinea pigs for clinical research rather than for competencies... the government should frame guidelines for safe clinical trials and ensure its strict implementation," it said.
Further, the panel also called for revival and strengthening of public sector pharma companies such as HAL and IDPL.
The report said that a robust public sector would ensure self sufficiency and shield the pharma sector from the adverse effects of market dynamics and investment policies.
Meanwhile, the report said that 61 drug patents owned by foreign companies are to expire soon.
"When a foreign company acquires our domestic company, it exports our generics there and makes a huge profit. But if the same generic is sold at the higher price in India, the Indian public stands to lose and this is an area of concern," it added.
The panel also emphasised that the government should prevent any attempt to sell generics at higher cost.