The Budget for 1999-2000 has liberalised investment norms in the pharmaceutical sector and automatic approval will begranted for up to 74 per cent FDI in this area. Would this be of significant interest to new entrants like Bristol Meyers Squibb, Novo Nordisk, etc?

That's questionable. The less conservative companies would make more use of the benefits of being a networking firm and have strategic alliances. Because even if you are allowed to sell your own products, you will need your own sales network, establish relationships with the buyers, etc.

My guess would be that relatively more US pharma companies or the more conservative ones who do not want to become networking firms, could take the stance that they want to be here themselves.

How would the entry of private insurance firms facilitate the development of healthcare providers in India?

I'm aware that there is a bill in Parliament to extend opportunities to foreign insurance companies in the Indian market. It is, of course, understandable, that there would be resistance from the domestic perspective. But at the national level, it would be ineverybody's interest that the government advocates allowing every initiative that contributes to establishing very broad (ie. accessible to everyone even in the rural area) and appropriate (various products designed for high/low income earners) health insurance for people. It helps people protect themselves against the cost of illnesses.

Besides, with the inability of governments to provide more funds, they will encourage people to use private healthcare. But you can only do this if you have confidence that people have access to this. And if the intermediary is a health insurance company, then there is such a confidence. Moreover, these insurance companies are good buyers of care. They influence the healthcare providers and can assess the quality of healthcare better than the consumer and at reasonable prices. This will make healthcare providers more businesslike and consumer-oriented.

Do you see the process of consolidation gather momentum here, given India's commitment on the patentsfront?

I definitely believe that there will be big mergers in the future in the pharmaceutical industry. But it is difficult to see whether large Indian companies will look at an Indian or foreign partner, to achieve economies of scale.

Studies by Michael Porter of Harvard University indicate that many US companies have divested acquisitions made earlier and experts argue that most of these companies have dissipated shareholder value. So does this mean that single companies like Pfizer are better off?

I think those conclusions have been made on the basis of big mergers and moreover, we need to distinguish between mergers and acquisitions. A merger is slightly difficult because it is between equals, but an acquisition is relatively easy. In case of the latter, it is clear what the strategy is...who is the boss. In a merger, it is always a process where two cultures need to adapt and if people don't adapt, there can be a lot of struggle.

Another question is whether all mergers are forthe right reasons. If it is merely to increase market share or power, it could be dangerous. For example, in a merger driven by the comfort of strong research and development pipeline...even if this makes sense from the R&D perspective, but does not make sense in other areas, you obviously have to think twice.

A merger by definition should want to combine all segments of the value chain. Currently, however, a more sophisticated approach (with regard to M&A), that is an outcome of a strategy, is being used. So, if the company knows it's competencies, relative weaknesses, how the industry is developing and then fit in the piece of puzzle, it is a different ball game. Corporates are now far cleverer in deciding whether/what to merge/acquire. Besides, now shareholders give less room for managements to think of a merger for wrong reasons.