Automatic Approval of 100% FDI in Pharma Sector May Be Changed to Approval Route.

The government is likely to change the existing automatic mode of allowing 100 per cent of foreign direct investment in the pharmaceutical sector into the approval route, with different Ministries and departments raising objections to the stand taken by the Planning Commission.

After Health and Commerce Ministries opposing the views by the Planning Commission which is against changing the pattern, the Department of Pharmaceuticals also has also pressed for routing the foreign direct investment in brown field companies through the government. Sources said the Department also has sent its views to the Prime Minister’s Office.

The Prime Minister has called a high-level meeting on October 10 to take a final decision on the issue. The Ministers for Health, Commerce and Finance are expected to attend the meeting in the backdrop of growing controversy and open opposition by the Commerce and Health Ministers against allowing 100 per cent FDI in the sector, paving way for increasing number of take-overs of Indian companies by foreign players and affecting the affordability of drugs in the domestic market.

Sources in the Pharma Dept said the government most probably should  go by the views of the majority and put curbs on the FDI at least in brown field ventures, though Planning Commission felt that such move would send wrong signals and affect the inflow of FDI in all sectors.

Meanwhile, the expert panel headed by Planning Commission member Arun Maira to study patterns and future of mergers and acquisitions in the pharma sector is expected to submit its final recommendations by the end of this month and the high-level meeting would discuss the issue based on its report. Initial reports had claimed that the panel did not want to disturb the existing pattern but may suggest that Competition Council of India monitor the mergers.

Health Ministry was the first to raise objections to the existing pattern in the wake of recent take-overs of Indian companies and the Department of Industrial Policy and Promotion (DIPP) had prepared a note and sent to all concerned departments. The Pharmaceutical Department had asked the Commerce Department to hold a study.

Recently, Commerce and Industry Minister Anand Sharma also sought the Prime Minister’s intervention in regulating FDI in the sector. Sharma has said that while FDI into new projects could continue to be at 100 per cent through automatic route, there should be filters on fresh infusion of foreign investments in the existing units.

Of late, there have been several takeovers of India pharma firms by MNCs. Japan's Daiichi Sankyo's buying out Ranbaxy Laboratories, Abbott Laboratories of the US taking over Piramal Healthcare, Hospira's acquisition of Orchid Chemicals, and Fresenius Kabi's takeover of Dabur Pharma are a few examples. As per an estimate, of a total US$ 9 billion FDI has been infused into the sector during last 11 years, about 50 per cent of which was through mergers and acquisitions.

Source : pharmabiz.com