FDI policy in pharma set for major overhaul

The government is set to make major changes in the current foreign direct investment policy in the pharmaceuticals sector to protect domestic generic industry in the wake of increasing acquisitions of homegrown companies by foreign players.

After a high-level meeting held on Friday chaired by Prime Minister Manmohan Singh, it has been decided that the Commerce and Industry would soon start a consultation process to address ‘dangers inherent’ in the current model of FDI in brownfield pharma units.

"Today's meeting looked at two dimensions.

“One is that the proposals which have come under the existing policy, there are some concerns, particularly with regard to oncology, injectibles and vaccines, where we see there is a critical need which must be met at all cost and that the policy will ensure," Commerce and Industry Minister Anand Sharma told reporters in New Delhi.

He further said the proposals before the Foreign Investment Promotion Board would go through the existing policy and if there were ‘safeguards required that will be discussed as what should be the nature of safeguards so that affordable life saving medicines are available to the people’.

Elaborating the steps to be taken up, a top official in the Commerce and Industry ministry told PTI: "The Department of Industrial Policy and Promotion will soon start consultations for the proposed changes with the concerned departments, including Health. It will soon move the draft Cabinet note."

The changes to be brought will prospective in nature, the official said, adding the current policy was not serving its objectives and it needs to be changed in order to ensure affordable drugs to the general public.

"Multi-national companies which are acquiring domestic firms have spent less than one per cent of their total sales in R&D in India.

“They are doing only clinical trials in India and not actual drug development work," the official added.

As part of the proposed changes, the Health Ministry would be asked to suggest whether any specific critical verticals in the sector should be retained only with the Indian companies in case of M&As, the official said.

Among the main concerns that were raised in the meeting is how to prevent MNCs from changing product mix from generics to branded generics or patented ones after acquiring Indian companies, which could impact the cheapest price generic for the Indian population.

"Also, there is a concern that dominant MNCs can block small domestic companies from establishing their presence in the global market," a source said adding the government may look at reducing FDI cap from 100 per cent in the sector.