The government seems to be at its wits? end when it comes to deciding whether and how the FDI policy for the pharmaceutical sector need to be changed. Major differences persisited between the various ministries on the fine-print of a proposed policy change.
Both the finance ministry and the Planning Commission expert group on the matter has batted for Competition Commission Of India (CCI) as the ultimate watchdog for scrutinizing the mergers and acquisitions (M&As) in the sector which saw a spate of cross-border deals in recent months, potentially undermining the domestic industry. But the health ministry and the department of Industrial policy and promotion (DIPP) want the Foreign Investment Promotion Board (FIPB) to keep a tab on the deals in the pharma sector.
CCI, anyway, is a regulator for all sectors and stating that CCI would look into pharma M&A is superfluous, the DIPP reckons.
According to sources, DIPP and Health Ministry feel the CCI is very new and untried body to act as a filter in pharma sector. However, Arun Maira (member of Planning Commission) told FE: ?The M&A deals in the crucial health sector can not be left to FIPB alone since it does not follow a transparent process. Economies like USA, Japan and Europe also use their respective anti-trust bodies to monitor the pharma sector.? He also said that there is a need for a filter to check drug prices.
Experts said under the present CCI dispensation, the watchdog clearance is required only for the M&As where the parties to the acquisition have assets and turnover above specified thresholds. This may leave out M&A of pharma firms having lower assets or turnovers.
According to Maira, the FIPB route is non-accountable as once the proposal is cleared, not much can be done. On the other hand, through CCI, any M&A deals can be legally challenged even after the clearance, he said.
The Planning Commission expert group, comprising officials from different ministries held exhaustive discussions on changing dynamics of the Indian pharmaceutical industry and prices of generic drugs, following a spate of acquisitions of the domestic firms by foreign companies.
Health ministry had earlier proposed a cap of 49% FDI in pharma (as opposed to the current 100% via automatic route). The DIPP has proposed up to 100% FDI in greenfield through the automatic route and up to 100% in brownfield (existing firms) but subject to an approval by the FIPB. Health ministry has now aligned its views with the DIPP?s proposal, sources said. Interestingly, the finance ministry is opposed to the idea and does not want to roll back the policy of 100% FDI through automatic route.
