Commerce Ministry commissions study to assess impact of FDI on pharma sector

The Commerce and Industry Ministry has commissioned a study to assess the impact of foreign direct investment (FDI) in pharmaceutical companies amid concerns over mergers and acquisitions of domestic drug manufacturers.

"An expert from the academic field has been engaged in this exercise along with the National Productivity Council," an official said.

The report is expected to be submitted in the next three to four months.

The experts would look into issues like the impact of foreign direct investment (FDI) in the brownfield pharmaceutical companies and access to affordable medicines, the official said, adding access to medicines can be ensured only when India would have a strong generic medicine industry.

The mergers and acquisitions (M&As) of Indian pharmaceutical companies by foreign giants could impact the accessibility and growth of the generic industry, another source said.

A report of the Parliamentary Standing Committee on Commerce had suggested that a study group will be set up to investigate the effect of FDI in brownfield pharma or operational firms.

There are apprehensions that takeovers by multi-national firms have impacted the generic medicine industry of the country.

The Committee had said that the government should impose a blanket ban on any FDI in brownfield pharma projects.

It had also suggested for measures to stop any further takeover/acquisition of domestic pharma units.

"In many countries, takeovers are not allowed in strategic sectors like pharma. For India, affordable health care is a challenge and for that access to medicines is important," said an industry expert.

As per the current policy, 100% FDI is permitted in the existing pharma companies through the approval route. 100% FDI is also allowed in greenfield (new) projects.

India is recognised as a major generic medicine hub of the world. The market size of the country's pharma industry is estimated at over $20 billion.

In 2008, Japanese firm Daiichi Sankyo had bought out the country's largest drug maker Ranbaxy for $4.6 billion.

US-based Abbot Laboratories had acquired Piramal Health Care's domestic business for $3.7 billion. Another US company Mylan bought Matrix Lab while Dabur Pharma was acquired by Singapore's Fresenius and France's Sanofi Aventis purchased Shanta Biotech and certain assets of Orchid Chemicals were acquired by US-based Hospira.

As per estimates, over 96% of the total FDI in the sector between April 2012 and April 2013 came into the brownfield pharma companies.