Multinational pharmaceutical firms keen to buy into existing domestic drug firms would have to take clearance from the Foreign Investment Promotion Board (FIPB), irrespective of the size of the stake they intend to acquire. The case for this has been firmed up by the department of industrial policy and promotion (DIPP), which had been entrusted the task of shaping the final policy on threshold limit by the inter-ministerial group on pharma FDI. This final decision of DIPP was signed by minister of commerce and industry Anand Sharma on Thursday and sent to the Prime Minister?s office for approval. A FIPB meeting scheduled for Friday is expected to consider clearing a slew of FDI proposals in the pharma sector waiting for clearance.
However, multinationals acquiring a stake of 49% or lower in an existing Indian company may be absolved of signing any undertaking while buying the stake. The need to sign an undertaking assuring government that ? the production of essential medicines would not be reduced and investment in R&D would be maintained ? is likely to kick in only when the foreign multinationals acquire a stake of over 50% in a domestic pharma firm. However, a final call on this matter would be taken by FIPB, an official in the know said. DIPP has clearly maintained throughout that FIPB route should be made mandatory for all pharma FDI brownfield proposals. FE had reported last month that the final decision of inter-ministerial group on pharma FDI is in favour of making it mandatory for foreign drug makers to go through the FIPB route if they plan to buy a stake in the existing pharma companies in the country, even though a few ministries in the IMG group were opposed to the idea. This section of ministries, which included the finance ministry were in favour of allowing pharma proposals up to 49% through automatic route but DIPP refused to change its position on the threshold limit and finally prevailed in the matter. The DIPP maintained that if government allows FDI upto 49% through automatic route, it would not be able to check the cases of creeping acquisition.
The cases of pharma FDI proposal which are expected to be considered on Friday include Chennai-based Ordain Health Care Global, Bangalore-based Sutures India, Mumbai-based Arch Pharmalabs. Some of the other proposals concern Singapore-based B Braun, US firm Pfizer Inc among others.
However, a question still hangs over whether the Competition Commission of India would finally take up the task of clearing brownfield proposals in pharma sector. The issue of regulation of pharma FDI in the country has already traversed a circuitous route through multiple inter-departmental and inter-ministerial committees before the Prime minister?s Office (PMO) intervened in the matter October last year.
The PMO agreed with a Arun Maira headed inter-ministerial committee to rule that the government would continue to allow 100% FDI in pharma sector, but with a caveat. The government decided to make an exception for the pharma sector by introducing a distinction between greenfield and brownfield ventures. While 100% FDI in greenfield projects would be allowed through automatic route, FDI in existing (brownfield) ventures in the pharma sector would eventually have to pass through the filter of the competition watchdog.