| Date: |
22-09-2011 |
| Subject: |
FDI in Pharma Likely To Need Govt Approval |
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With large Indian pharma companies like Ranbaxy Laboratories being taken over by global players in recent years, the government is likely to put foreign direct investment in brownfield pharma companies under approval route.
Presently, 100 per cent foreign direct investment is allowed under automatic route both in greenfield investments and in existing Indian pharma companies.
Putting FDI in existing Indian pharma companies under approval route would not amount to rollback of the foreign investment policy, as “FDI in the sector is not being restricted but only a procedural filter is proposed,” a government official said on Wednesday.
Commerce and industry minister Anand Sharma has already written a letter to prime minister Manmohan Singh in this regard and a meeting is scheduled next month to deal with the pressing issue.
In recent years, there has been several takeovers of Indian pharmaceutical companies by multinational players. A record $8.99 billion FDI has come into drugs and pharmaceuticals in past one decade. Nearly half of it, $4.73 billion, has been through mergers and acquisitions in form of brownfield investments.
Apart from Ranbaxy’s takeover by Japan’s Daiichi Sankyo, other major acquisitions are Matrix Lab by Mylan of the US, Dabur Pharma by Fresenius Kabi of Singapore, Shanta Biotech by Sanofi Aventis of France, Orchid chemicals by Hospira of and Piramal Healthcare by Abbott Lab of the US.
Department of industrial policy and promotion (DIPP) has proposed change in FDI norms following red flag raised by health ministry on such takeovers that this is likely to affect government’s efforts at making available lower priced versions of generic drugs. Health ministry also feared that such takeovers are likely to create an oligopolistic market with large companies working as cartel.
India's pharmaceutical industry is now the third largest in the world in terms of volume. The total turnover of India's pharmaceutical industry was $21.04 billion, according to latest available estimates. The domestic market was worth $12.26 billion.
In the domestic market, Cipla retained its leadership position with 5.27 per cent share. The highest growth was for Mankind Pharma (37.2 per cent). The Indian pharmaceuticals market is expected to reach $55 billion in 2020 from $12.6 billion now.
President of Indian Pharmaceuticals Association (IPA) C Gopalkrishna Murty told Financial Chronicle there are at least 200 Indian pharma companies that could be targeted for takeover by foreign companies. But, at the moment he is not aware of any Indian pharma company being in the radar for foreign takeover.
He said there are apprehensions that there could be more takeovers by foreign pharma companies and hence government could be considering putting FDI in brownfield companies through the approval route to keep a tab on takeovers.
There are at least 800 Indian pharma companies registered as members with Indian Drug Manufacturers Association. Its rival, Organisation of Pharmaceutical Producers of India (OPPAI) has mostly multinational drug companies operating in India as its members.
DIPP has convened an inter-ministerial meeting in February 2011 to discuss the issue. DIPP is not averse to continuing the policy of allowing 100 per cent FDI through the automatic route in setting up new pharmaceutical units to make India a major destination for FDI in quality drug research, development and manufacturing of both bulk drugs, intermediates and formulations.
Indian generic pharma industry has in recent years posed a major challenge to multinationals through production and export of low cost high quality medicines as well as patent challenges and hence there are fears of more takeovers.
Source : mydigitalfc.com
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