Two months after the government tightened the foreign direct investment policy in the pharma sector by allowing up to 100 per cent brownfield investment only after Foreign Investment Promotion clearance, there have been several applications from international pharma companies interested in Indian firms.
However, the FIPB in its last meeting a few weeks ago threw a spanner in the works by deferring four such applications.
A brownfield investment means acquiring or buying a stake in an existing company.
Earlier, FDI in both brownfield and new investments were under the automatic route.
Now, brownfield investments in the sector will be cleared by the FIPB for the next six months.
After that period, they will be scrutinised and cleared by the Competition Commission of India.
International pharma companies are rushing to get clearances from the FIPB within the six-month window.
After that, applications would be with the CCI, which will be empowered for effective oversight.
The FIPB and the department of pharmaceuticals have taken a tough stance on the new applications.
Click here for Rediff Realtime News!
Nearly half a dozen other international pharma companies are waiting in the wings and will decide on their next step based on the fate of the existing applications.
The FIPB has in its deliberations said in the wake of the new policy changes, it wants to study the applications carefully on various grounds -- whether they would impact the affordability of drugs for the common man, help the domestic pharma industry or bring about the infusion of new technology in the country.
The pharma companies under scrutiny are the US-based Akorn Inc, which manufactures niche generic drugs, Spain-based Chemo Espana, a health care multinational, the US-based Par Pharmaceuticals and Aptuit LLC, a US-based
Akorn Inc wants to acquire 100 per cent in Akorn India Pvt Ltd, controlled by Indian shareholders.
Its plan is to convert the company into a wholly owned subsidiary and acquire business assets and manufacturing rights from Kiltech Drugs and NBZ Pharma Ltd.
These two companies are engaged in the manufacturing of generic pharmaceutical formulations.
However, the FIPB has contended that in view of the affordability of critical drugs for the common man, it needs further consultations on the application.
Similarly, Chemo Espana and some other companies together have put up a proposal to invest up to 100 per cent in Indian company Ordain Healthcare Global, based in Chennai.
However, the Indian company does not have any manufacturing facility and will be engaged in marketing and wholesale distribution of finished dosage formulations.
The department of pharmaceuticals has contended it does not support the proposal as the company will import chemicals without any gain to the Indian pharma industry, and there is no proposal for the upgrade of products currently manufactured by the Indian company.
Par Pharmaceuticals has agreed to buy out 100 per cent in Edict Pharmaceuticals Ltd, a 100 per cent export-oriented unit in the business of research, development and manufacture of pharma products for markets in the US.
The department has argued the application does not envisage any new products or technology and there is no value addition in the acquisition.
Experts say the six-month window may be extended as the government has to amend the Competition Act, which will require parliamentary endorsement.
The Ministry of Corporate Affairs plans to amend the Competition Act, 2002, to introduce sector-specific assets and turnover thresholds for merger and acquisition scrutiny.
© 2024 Rediff.com -