Right policy framework needed to make brownfield FDI in pharma work: Sharma

Written by Timsy Jaipuria | New Delhi | Updated: Jul 6 2013, 10:31am hrs
Explaining the need for a long-term strategic approach towards healthcare, commerce and industry minister Anand Sharma told Prime Minister Manmohan Singh in a recent letter that this might be threatened if brownfield FDI in pharmaceutical space is not governed by an appropriate policy framework.

The minister, who presides over the department of industrial policy and promotion (DIPP) that has put its foot down and said all brownfield FDI proposals be put in abeyance till a consensus on the policy is evolved, drew distinction between four categories of FDI in terms of their impact on the drug industry and availability/affordability of medicines.

Sharma said FDI deals in the sector in recent years had different implications for the Indian industry.

Acquisition of Indian firms by global generic firms (like the Matrix Labs-Mylan deal of 2006), the minister noted, have deprived the country of some rare facilities. While deals like Ranbaxy's takeover by Japans Daiichi Sankyo brought new investments, technological know-how and focussed on export-led growth, the domestic market was not ignored, the minister said. Sharma also informed Singh that deals meant just for buying market share or brands for enlarging the size of business in India, like Abbott's takeover of Piramal Healthcare business, have given little benefit to India and resulted in growing outflow of foreign exchange for import of costly finished formulations.

Pharma being a strategic sector for its impact on human life and healthcare requires a futuristic long-term perspective in the interest of the health of a nation, where the majority of the people do not have access to healthcare," Sharma said. The DIPP, which is against any outright takeover of Indian companies by pharma MNCs, feels that MNCs are not making enough capital investments and are just taking over to enhance production for lucrative western markets.

Sharma requested the PM to have a re-look at the FDI policy for pharma, with a view to striking a balance between capital investment needs of the economy and the requirement to maintain drugs at an affordable price range.

Sharma brought to the PM's notice that the data from CMIE shows that forex spending on imports of finished pharma products rose 425% to Rs 8,000 crore between 2005 and 2012, while the import of raw materials rose 219% to Rs 7,300 crore.

The forex outflow on dividend remittances rose 238% to Rs 3,200 crore during the period, the minister said.

Analysts said increased raw materials imports are only a sign of increase in domestic production of finished goods and the Indian pharma industry's exports have also multiplied during the period, helping earn forex.