After Prime Minister Manmohan Singh last week overruled the department of industrial policy and promotion’s (DIPP) objection and allowed the $1.85-billion acquisition of the Bangalore-based Strides Arcolab’s injectibles arm by Nasdaq-listed Mylan, the department is now working on a new policy to include crucial issues of R&D spends, capacity creation and technology transfer for future acquisitions.
According to officials, most of the research done by global pharma players is around clinical trials ?which is not actual research?. Clinical trials are sets of tests in drug development that prove the therapeutic effect of a particular drug under investigation.
?The MNCs have been substituting actual research with clinical trials and not creating additional infrastructure or employment in the country. Besides, not enough technology transfers have happened and we want companies to furnish full information on such transfers and royalty payments. We need to look at general health issues also before drafting the paper,? said a DIPP official.
The department is drafting a Cabinet note on these critical areas, which will be finalised and circulated in another 10 days. The note is being moved after the PM asked for an overhaul of the FDI policy in pharma sector last week.
While India allows 100% foreign direct investment (FDI) in the pharma sector, any foreign investment in existing pharma companies requires an FIPB nod.
The note will also propose stringent conditions for verticals like vaccines, injectibles as well as oncological injectibles and active pharmaceutical ingredients.
Currently, a drug company accepting FDI has to maintain the quantitative level of essential medicines produced at the time of induction of foreign investment for a period of five years. The level is defined as the highest annual production level of the medicines in any of the three years preceding the induction of foreign investment.
On research and development (R&D), the condition states that expenses incurred by the Indian company, on a yearly basis, at the highest level in the three preceding years to induction of foreign investment will be maintained in value terms annually over the next five years, following the induction of FDI.
?round 98% of pharma FDI proposals that we receive are of the brownfield category, with only 2% being greenfield investments. This is at a time when treatment of complicated diseases continue to be expensive. We need to put in place a policy that addresses public health concerns as well as business needs,? Saurabh Chandra, secretary, DIPP said recently. While the current pharma FDI policy does not specify any conditions, it states that the ?government may incorporate appropriate conditions for FDI in brownfield cases at the time of granting approval?.
The DIPP has insisted on rigorous regulatory assessment of brownfield pharma investments, saying foreign takeover of domestic drug companies would be detrimental to India’s healthcare.
