An inter-ministerial group mandated to decide on restricting FDI in pharma sector is witnessing a near vertical split among ministries. The group headed by planning commission member Arun Maira has representatives from health ministry, ministry of finance, DIPP, commerce ministry, department of pharmaceuticals, department of biotechnology, CSIR on board and is expected to give its recommendation by september end. Multiple sources from concerned ministries confirm that there is a sharp divide in the stance of the ministries which found expression in the last meeting that took place on Friday.
While half of the panel members from ministry of finance, planning commission and department of pharmaceuticals are favouring status quo, arguing against the need to impose any ceiling on FDI in the pharma sector, the other half ? health ministry, department of industrial policy and promotion (DIPP), ministry of commerce along with department of biotechnology are strongly pitching for selective curbs on FDI in pharma.
The CSIR is also learnt to be rallying behind the health ministry in supporting a cap on FDI in the pharma sector.
This group is not batting for a blanket limit on the FDI in the sector but is recommending that a clear distinction be made between greenfield and brownfield ventures in the pharma sector. They are of the view that 100% FDI should be allowed in the greenfield projects, which can facilitate transfer of technology and capacity creation wherein multinationals keen to enter the Indian market would have to set up manufacturing facilities, and ensure employment generation within the country.
However, they believe that FDI in brownfield ventures should be capped at 49%, if one has to pre-empt the escalation of drug prices in the Indian market in future. They are also proposing that the foreign investment approval in pharma sector which is currently under automatic route should be brought under (Foreign Investment Promotion Board) FIPB route.
The health ministry is concerned that once the management control of pharma firms pass on to big pharmas, the interest and orientation of homegrown pharma firms may undergo a radical shift. ?These very Indian generic drug firms which are today speaking in favour of granting compulsory license, would adopt a different tone once they are owned by MNCs and the business interests of the former converge with the latter. Instead of applying for compulsory licences for patented drugs whereby cheaper alternatives can be made available in the domestic market, these firms would be most interested in holding the prices,? a commerce ministry official said.
?The MNCs are not only attracted to the the Indian pharma market, they are also obviously here because India is one of the biggest source of medicines, has the highest number of US FDA approved drug plants outside of USA. Once they have reins of manufacturing plants here, they would not only be in a position to influence pricing in the Indian markets but also drug prices in the US and other markets. Once the MNCs own the drug manufacturing plants, would you be able to force them not to export drugs beyond a limit, not increase prices, apply for compulsory licence for the sake of public health even if it not in their business interest?? a health ministry official said.
However, ministry of finance and planning commission do not favour such rollback of 100% FDI for the fear of sending a wrong ?anti-reform? signal to the world. Officials at department of pharma which has sided with this group feel, ?Haven?t Indian pharma companies been aggressive in acquiring firms overseas? We must realize that our drift towards such protectionist measures can backfire when other economies decide to retaliate?. This school of thought believes that other policy measures can be taken to allay such fears.
A few industry executives also question the decision to refer the matter to planning commission, considering that DIPP, the nodal department that takes decision on FDI related issues had alsready taken a view, which had reached the Cabinet. ?Does planning commission terms of reference include deliberating on FDI related issues?,? he asked.
Last few years have seen a slew of acquistions of Indian pharma firms by MNCs fuelling concerns about tilting balance of marketshare in favour of latter in future. While Piramal Healthcare acquistion by US-based Abbott and Ranbaxy Labs acquistion by Japan?s Daiichi Sankyo led the pack interms of size of the deal, many others buys such as Matrix Lab by US-based Mylan Inc, Dabur Pharma by Singapore?s Fresenius, Shanta Biotech by France?s Sanofi Aventis, Orchid Chemicals by US-based Hospira followed the government decision taken in 2002 to allow 100% FDI in pharma sector under automatic route.