With increasing instances of takeovers of Indian pharma companies by overseas firms, the ministries of commerce & industry and health have batted for a rollback of 100% FDI via automatic route in the brownfield (existing) units. In separate letters to PM Manmohan Singh, they have called for routing of overseas investments in existing pharma firms via the Foreign Investment Promotion Board (FIPB).
This comes despite resistance from the finance ministry and Planning Commission, which feel imposing restrictions on FDI proposals in the pharma sector could send wrong signals to overseas investors. The ministries? moves come at a time when a panel headed by Planning Commission member Arun Maira is set to come out with a report on this vexed issue soon.
However, making a case for the automatic FDI inflow in the existing units, the commerce minister Sharma said: ?FDI into existing companies may be placed under the government approval route while enabling oversight on possible takeovers.” He said that FDI in greenfield pharma units can continue under the 100% automatic route. On its part, the health ministry said: ?The growing trend of acquisition by foreign multinationals could lead to weakening of India?s strengths in generic medicines, escalation of drug prices, short supply of essential medicines in the domestic markets and reduced competition thro-ugh creation of an oligopolistic situation, where a few players would dominate the market.?
Of late, there has been a spate of takeovers of Indian pharma firms by MNCs. Japanese company Daiichi Sankyo’s buying out Ranbaxy Laboratories, Abbot Laboratires of the US taking over Piramal Healthcare, Hospira’s acquisition of Orchid Chemicals, and Fresenius Cabi of Singapore’s takeover of Dabur pharma are a few examples.
Experts say as of now, a total $9 billion FDI has flown into the sector during past 11 years, out of which about 50% has been through the route of mergers and acquisitions. ?Health ministry flagged the issue to us stating the concern over the recent trend of acquisitions of Indian pharma companies by MNC’s, which had potential of seriously affecting government’s efforts making available reasonably priced generic drugs,? said a commerce and industry ministry official.