Domestic drugmakers urge PMO to not insist on CCI filter for pharma deals

Written by Soma Das | New Delhi | Updated: Jun 12 2012, 08:30am hrs
Top domestic drugmakers have urged the Prime Ministers office (PMO) to not insist on making Competition Commission of India (CCI) the only filter to vet proposed brownfield pharma deals in the country. In a letter sent last week to PMO principal secretary Pulok Chatterji, Indian Pharma Alliance, an industry association of leading Indian pharma companies, has requested the PMO to debate the feasibility of the CCIs mandate and ability to regulate acquisitions from the public health perspective.

This section of domestic industry argues that a competition body cannot be expected to stop a proposed acquisition strictly and solely on the grounds of public health the very reason which prompted the government to conceive of placing filters to vet acquisition proposals in the pharma sector last year.

Not only the Competition Act does not have such a provision, but even if it had, the CCI does not have wherewithal to take a call on the grounds of public health. It is therefore appropriate that the Foreign Investment Promotion Board (FIPB) examines all brownfield investment proposals from the public health perspective and CCI examines it under the provisions of the Competition Act, said an IPA letter addressed to Chatterji. The domestic industrys stated concerns in this regard are similar to what has been echoed by the commerce ministry and the health ministry.

FE had reported last week that the PMO had sent a clear message to the commerce ministry stating that any further deliberations on a suitable process to clear brownfield pharma deals must comply to what has already been decided upon. In essence it meant that whether CCI is the suitable body to vet pharma deals should not form part of future inter-ministerial deliberations on the issue.

Both the health and commerce ministries are clear that the CCI cannot be expected to stop a deal strictly and solely on grounds of public health while the FIPB can be sensitised to perform this task. Second, those supporting the FIPB route also argue that the CCI is a regulatory body with an adjudicatory body the Competition Appellate Tribunal above it and, thus, its decisions are prone to being contested in the tribunal and higher courts, which could translate into inordinate delays in clearance of a deal. This would deter investments in long term.

Meanwhile, admitting that there is a deadlock between various ministries on the issue, the commerce ministry has sought the Prime Ministers intervention to resolve the differences.

Similar differences divided a previous inter-ministerial group headed by planning commission member Arun Maira in 2011. PMO stepped in last year to rule that Mairas suggestion of vetting brownfield deals through the CCI should become the norm, and gave the competition body six months to brace up for its new role. Meanwhile, the FIPB was asked to function as the temporary gatekeeper in case of pharma deals.

Although it has been over seven months now, the FIPB continues to act as the filter for pharma deals as the CCIs new role wouldnt be possible without amending the Competition Act.

The domestic industry has further written to the PMO that the generic drug industry has not flourished in countries like Brazil, Thailand and South Africa where the foreign multinational companies have built a very strong presence.India is an exception. The post-1971 process patent regime and a series of policy measures (pre-2001 FDI policy, drug policy, industrial and import licensing) curbed the dominance of MNCs to promote the growth of the domestic generic industry. Consequently, share of the MNCs in the country which was 85% in 1970 declined to about 15% in 1995, the letter said.However, in the last 15 years....the MNCs have regained their share and now have almost 27% of the domestic market. The pharmaceutical industry is so fragmented that filter of the CCI alone cannot prevent acquisition of even large domestic companies, it added.