So, a multinational company with an intent to acquire a domestic drug firm would take a commitment at the outset that it would not cut production of essential drugs and R&D spend in the target company in years following the acquisition. The Competition Act will be amended for this purpose.
This follows a legal opinion obtained by the Prime Ministers Office (PMO) to validate the point that CCIs mandate can be extended to deal with public interest issues.
Currently, the CCI mandate on M&A deals is in recognition of the appreciable adverse impact they can have on the relevant market. Asset/turnover thresholds are prescribed in the Act for this purpose.
At present, the foreign investment promotion board (FIPB) is vetting brownfield pharma deals. An inter-ministerial group had earlier defined the regulatory regime for pharma FDI.
Accordingly, officials in the ministry of corporate affairs are in the final stages of drafting changes in the Competition Act Amendment Bill to enable CCI to take charge of pharma M&A deals in the country. This amendment to the Competition Act is likely to be introduced in the winter session of Parliament.
Infact, CCIs expansion of mandate may include power to vet deals in sectors other than pharma as well. The amendment to the competition Act will now be introduced in the Winter session of Parliament. The move will give powers to the CCI to vet all M&A deals including those in the pharma sector, said a senior government official.
This intervention of the PMO ends the suspense over the decision regarding which agency FIPB or CCI would get the final mandate to vet deals in the pharma sector.
Earlier this year, after much heated disagreements, a finance ministry headed interministerial group zeroed down on conditions that a pharma MNC must adhere to if it has to acquire an Indian drug firm. However, it couldnt agree on whether all brownfield pharma deals should have to be vetted by FIPB or should MNCs acquiring upto 49% stake in a domestic company be allowed through the automatic route. The group left a decision on threshold to the department of industrial policy and promotion (DIPP), which stuck to its earlier position and held that irrespective of the stake a MNC proposes to buy, it should have to route its proposal through FIPB. DIPP after putting in its recommendations sent the report to the PMO to take a final call.
The CCI route was orginally proposed by another IMG on the same issue constituted last year and was headed by Planning Commission member Arun Maira. FE had reported that the PMO may not deviate sharply from that decision taken last year.
Even the Maira-headed IMG had witnessed a near vertical split on the question of what is the best policy to ensure that availability and accessibility to medicines is not threatened by the multiple takeovers of domestic pharma companies by MNCs. Even though this committee concluded that CCI is the right agency to vet pharma deals, a few arms of the panel, including DIPP, were not convinced.