FIPB to vet pharma FDI as Competition Commission of India needs time.

NEW DELHI: The government is grappling with regulating stake acquisition of 74% or more by foreign pharmaceutical firms in local drug companies even as the six-month deadline set by Prime Minister Manmohan Singh for Competition Commission of India (CCI) to regulate the pharma FDI is barely a few days away.

At a meeting, convened by commerce & industry minister Anand Sharma, on Thursday, it became apparent that CCI, the fair trade watchdog, is in no position to regulate FDI even though it was supposed to take over the function from April. In the wake of the PM's directive, the government realized that the regulator did not have the legal mandate and ran the risk of litigation. Though a legal amendment could be done to empower CCI, the corporate affairs ministry wants an overhaul of the Competition Act at one go that is expected to take several months.

To make matters worse, the health ministry that has been pushing for regulating M&As by big pharmaceutical companies to keep a check on drug prices, is not comfortable with CCI as the regulator and arguing that its mandate is to ensure free-play and public health concerns may be ignored.

Given the government's inability to sort out the mess despite intervention at the highest level, FIPB will continue to vet all FDI proposals that involve stake acquisition of 74% or more in existing Indian pharmaceutical companies. In case of greenfield ventures, 100% FDI under the automatic route will be permitted.

The middle-of-the-road plan to regulate pharmaceutical M&As was formulated by the PM amid strong opposition to the move from most ministries including finance, pharmaceuticals and the Planning Commission, while the department of industrial policy and promotion and the health ministry argued for regulation. Planning Commission member Arun Maira had suggested the solution.

The issue was first raised by domestic players, who wanted the FDI cap pared to 49%, in what would have been a first-of-its kind move. They cited a series of takeovers to argue that Indian generics manufacturers were being bought out by multinationals, and this will lead to a scarcity of off-patent medicines and prices will go up. In recent years, several homegrown players have been acquired by multinational firms, including Ranbaxy Laboratories by Daiichi Sankyo of Japan, Shanta Biotech by Sanofi Aventis of France and Piramal Healthcare by Abbott Laboratories of the US.

Source : timesofindia.indiatimes.com