Supporting the stance of the department of industrial policy and promotion (DIPP) on restricting brownfield foreign direct investment (FDI) in the pharma space, the department of science and technology (DST) has said that no company should make ?inordinate? profits and restrictions are needed as development of a new drug is funded by the government to a large extent.
In its comments on the Cabinet note circulated by the DIPP to regulate FDI in brownfield pharma projects, the department has stated that research on drugs for malaria, leukoderma and tuberculosis, among others is mostly funded by public institutions and hence, MNCs should not be allowed acquisitions in important sectors.
?Multinational pharma companies which acquire domestic firms enjoy the financial clout that our firms don’t. Besides, it is a lesser known fact that the entire research that leads to discovery and development of a new drug is often not completely financed by the pharma companies,? said an official privy to the DST’s comments.
Last month, the Parliamentary committee on commerce had said that the pharma industry has attracted FDI worth R18,678.11 crore during the last three years out of which less than 3% was the total FDI share in pharma R&D during the period. Moreover, in the last five years, the market share of pharma MNCs has grown from 10.5% to nearly 19%.
The Cabinet note seeks to bring down the FDI limit in companies making ‘critical’ drugs to 49% and calls for putting foreign investment in such facilities on the approval route. These ‘critical’ sectors will be determined by the health ministry which is yet to comment on the note. The note also puts medical equipment like implants and surgical sutures under the FDI policy.
At present, everything in the sector is clubbed under pharmaceuticals- be it drugs, medicines, medical equipment and even sutures and are not a part of the FDI policy which defines pharma projects as greenfield and brownfield but the sectoral cap is 100%. While the entry route is automatic for greenfield projects, the second category is of foreign investments in existing projects need a nod from the foreign investment promotion board (FIPB). Almost 98% of pharma FDI proposals are of the brownfield category, with only 2% being greenfield investments.
An overhaul of the current policy is required as the last seven years have seen eight Indian pharma companies getting acquired by foreign majors due to the extensive domestic marketing network of the Indian companies, cheaper operating cost, English-speaking skilled manpower, predictability in business environment, efficient IT infrastructure, sound legal and IPR framework along with broad base of scientists and R&D capabilities.