Hands-Off Policy on FDI in Pharma.

New Delhi, Aug. 28: India is unlikely to impose any restriction on foreign direct investment in pharma amid worries of foreign takeovers in the industry hiking medicine prices.

A committee set up by the Prime Minister and headed by Plan panel member Arun Maira is sharply divided over a proposal to whittle down foreign investment in pharma to 49 per cent from 100 per cent by declaring the sector “sensitive”.

The health and industrial policy departments, which are represented by their secretaries, are apprehensive of easy takeover opportunities threatening cheap medicine supplies to the poor.

However, the Plan panel as well as the pharma and other departments feel the move will be “retrograde and send a wrong signal to global investors”.

A suggestion to continue with earlier takeovers and stop fresh buyouts by imposing a 49 per cent cap on existing firms while allowing 100 per cent FDI in greenfield companies has also been ruled out as this may not be compatible with WTO norms on cross-border investments.

There have been around eight takeovers of Indian companies over the last three years, including the $3.6-billion buyout of the country’s largest drug firm, Ranbaxy Laboratories, by Japan’s Daiichi Sankyo in 2008.

It is feared that MNC companies buying out Indian firms will jack up the prices of generic drugs as also the prices of new medicines researched by Indian firms.

Many of the Indian firms that have been bought out were working on molecules and patents. As Indian research costs are among the lowest in the world, the final products are also expected to be cheap.

However, MNCs are expected to fix higher rates as they benchmark the medicines to global standards.

Besides fears voiced by Indian leaders, Third World diplomats tasked with sourcing cheap medicines from India and global NGOs have raised an alarm at the prospect of global players choking off cheap medicine flows from India to protect their monopolies.

Health ministry officials said they were not adamant on FDI norms but would insist that a way be found to ensure that the flow of cheap medicines was not stopped as this would “jeopardise healthcare not only in India but in much of the developing world and even for the poor in Western countries”.

Last year, the department of industrial policy had suggested that there be compulsory licensing to ensure low-cost versions of patented drugs. However, lobbies representing foreign drug makers, including Japan and US, have opposed this move.

Source : telegraphindia.com