PMO may discuss feasibility of CCI route for pharma FDI soon

Written by Soma Das | Timsy Jaipuria | New Delhi | Updated: Sep 20 2012, 08:32am hrs
The Prime Minister may soon summon a meeting of the finance, commerce, health and chemicals and fertiliser ministries to draw up the final policy contours of brownfield pharma FDI proposals.

The move comes after an intense disagreement over the threshold limit (in terms of stake that a multinational proposes to acquire in the target company) for Foreign Investment Promotion Board (FIPB) clearance.

The issue divided the inter-ministerial group (IMG) headed by Shaktikanta Das, additional secretary in the department of economic affairs.

What may get discussed in detail is the roadmap that the Competition Commission of India (CCI) may have to follow if it is entrusted with the task of becoming the filter for pharma deals.

The CCI route was orginally proposed by another IMG on the same issue constituted last year and was headed by Planning Commission member Arun Maira. It is learnt that PMO may not deviate sharply from that decision taken last year.

Even the Maira-headed IMG had witnessed a near vertical split on the question of what is the best policy to ensure that availability and accessibility to medicines is not thretatened by the multiple takeovers of domestic pharma companies by multinationals.

Even though this committee concluded that CCI is the right agency to vet pharma deals, a few arms of the panel including department of industrial policy and promotion (DIPP) were not convinced with the decision.

The PMO intervened to rule that only brownfield deals would need CCI approval whereas 100% FDI would be allowed under automatic route in the case of greenfield pharma investment proposals.

The PMO further said that till the time the CCI gears up for its new role, FIPB on an interim basis should clear these deals. Although this arrangement was expected to last only six months, it has continued for almost 11 months now.

The latest IMG on pharma FDI has made it mandatory for multinationals to promise that they would not reduce production of essential drugs they are taking over for five years after the deal and would not cut the spend on R&D in the target company.

It left the decision on threshold to DIPP, which held that all brownfield proposals irrespective of stake should take a FIPB approval and sent it to the PMO to pass the final verdict on the issue.

There are concerns among a section of industry and ministry that CCI as a body can only look at aspects of competition and not consider threat to public health as a basis to block any proposed deal.

As reported by FE earlier, the PMO had sought an opinion from the law ministry on whether the CCI can actually look at the dimension of public health while filtering a deal.

The past 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 Japans Daiichi Sankyo led the pack in terms of size of the deal, many others buys such as Matrix Lab by US-based Mylan Inc, Dabur Pharma by Singapores Fresenius, Shanta Biotech by Frances Sanofi Aventis, Orchid Chemicals by US-based Hospira followed the government decision in 2002 to allow 100% FDI in pharma sector under automatic route.