Government to ensure Indian pharma firms to make, sell drugs after being acquired by a foreign firm.

NEW DELHI: Worried at the prospects of multinationals slowing down production of essential drugs after they acquire Indian pharma companies, the government has decided to build stringent safeguards to ensure availability of life-saving drugs.

An inter-ministerial group set up by the finance ministry to consider new norms for clearing foreign direct investment (FDI) proposals in the 60,000-crore pharmaceutical sector has favoured stiff clause that will ensure Indian companies continue to make and sell the essential drugs in India even after they are acquired by a foreign company.

"Opinion seems to be in the favour of having such a check," a finance ministry official told ET. The current policy allows 100% FDI in the sector, but after a spate of acquisitions in the sector that raised fears of MNCs neglecting Indian interests, the government has decided to put brownfield investments in the sector on the automatic route.

The inter-ministerial group was set up last month to formulate guidelines that the foreign investment promotion board will follow while giving sanctions to such brownfield FDIs.

The group has officials from all stakeholder ministries including the department of industrial policy and promotion and department of pharmaceuticals and health. Though there were significant differences, the needs of public health prevailed over other considerations.

The new rules will require the foreign investor to give an undertaking that if the company is investing in producing an essential drug, as mentioned in the government list of such drugs, then it will continue to produce that medicine.

The department of pharmaceuticals and finance ministry were in favour of imposing conditions on FDI in pharmaceuticals sector that would be 'reasonable' and 'measurable' addressing the core concerns of supply of drugs for public health without further underming the investment climate.

The department of pharmaceuticals is also against any mandatory increase in R&D expenditure for diseases prevalent in India or technology transfer, the official said. It has argued that these terms are vague and also difficult to measure or regulate.

Health ministry officials had suggested the stiff riders to ensure that the acquisitions did not result in higher prices of essential drugs or their shortage in local market.

"We want a procedural filter to ensure public health interest is protected," a health ministry official said.

FIPB is only empowered to examine proposal from the stand point of the Foreign Exchange Management Act and the FDI policy. The new guidelines will help it scrutinise foreign investments in existing companies from a public health perspective.

There is a chance that the government could also require that FIPB continue to look at the FDI proposals in the sector even after the oversight on mergers and acquisitions in the sector passes over to the Competition Commission of India.

After the government had put brownfield FDI in the sector on the approval route, an inter-ministerial group headed by the prime minister had also decided to make CCI the approving body for such foreign investments in the sector.

Source : economictimes.indiatimes.com