Industry Apprehensive Of 49% Cap On FDI In Pharma Sector.

The industry is apprehensive about the proposed cap on Foreign Direct Investment (FDI) upto 49 per cent in pharma sector as it may change the business dynamics of the Indian industry. This issue was highlighted during a one day conference organised by FDA Smart to analyse how the FDI slash will affect the future Mergers and Acquisitions (M&A) of the Indian biopharm industry.

The meeting comes at a perfect timing as the government is soon expected to take a call on the FDI cap. If the FDI cap comes into force it will not only limit the FDI in the pharmaceutical sector by 49 per cent but it will also be routed through the government. It is believed that the government is considering this to put a break on uncontrolled M&A's of the Indian pharma companies by the MNC's, which could lead to rise in drug prices.

According to Ranjit Shahani implementing FDI cap may have a negative impact on the Indian industry since it will limit the growth prospects Indian generic companies which are having  great scope of development through acquisitions.

He said, “Cost of R&D is constantly going up whereas innovation is going down thus a collaboration of MNC's and generic companies is a great model to follow which includes sharing the risks and rewards by both the sides. It is a strategic movement and has nothing to do with control.”

The general consensus during the meeting was that since price control is the prerogative of the NPPA, M&A's will not have a larger effect on the pricing of the drugs. Many industry insiders where of the opinion that the control of any company does not depend upon who holds the highest equity share. but it depends on the market demand.

Giving a legal and regulatory perspective, Simone Reis from the Nishinth Desai Associates pointed out the if the 49 per cent cap comes in, it is going to change the dynamics of the Indian pharma industry since in the last decade M&A's had become a preferred route for many to expand and conduct business.

The MNC's are looking at India at a bigger way since India is known for its branded generics and having a share in this will give the MNC's a chance to establish their market in in India. At present there is a 100 per cent FDI in the pharma sector and the industry is fearful that if the cap of 49 per cent comes in place it will effect the prospects for M&A with foreign drug firms.

Source : pharmabiz.com