Fdi In Indian Pharma Goes A Cosmetic Make-Over Prime Ministers clears the Desk & asks CCI to be the Watchdog.
Maharastra, Mumbai, 18th October 2011 : The big debate on Foreign Direct Investment ( FDI) in pharmaceuticals is finally over after years of deliberations most recently in last six months of hectic lobbying by the industry organizations & others in various authorities finally landing at the doorstep of Prime Minister Dr Manmohan Singh. Though the industry welcomed the moves, but those who know the real intricacies will know that the route is going to be very tough & road very zigzag with CCI becoming the watchdog to check the loopholes as 100 per cent FDI which was allowed under the automatic route in the drugs and pharmaceuticals sector including those involving use of recombinant technology will now go under checks & balances by the CCI (Competition Commission of India). The Original Reformer of Liberalization Policy that India witnessed in 1993, Dr Singh, the the than Finance Minister ruled out any possibilities of any cap on 100 % FDI as speculation in the industry & among the investors kept increasing following the statements of the Finance Minister Pranab Mukerjee that 100 % FDI in Pharma was indeed tough, finally to be cleared by PM. Prime Minister Singh is aware that pharmaceuticals is one of the sensitive & lucrative sector & is perceived by the world Pharma Leaders as a major business hub given its rich technological background & breakthrough in research that is currently sweeping in the Indian Pharma R & D. There is no denying the fact Research & Development has occupied a prominent position & as a growth indicator, Many top ranking Pharma Majors are investing heavily in Drug Discovery, NCE, NDDS, Clinical Trials & Research. This has been published in the reputed bi-monthly Magazine Pharmaleaders ( www.pharmaleaders.co.in )
The pace of liberalization & exposure to Globalization led Indian pharma players to explore & experiment many options including selling of their home-grown brands that dominated Indian market for years. We witnessed the last decade & some in the beginning of this decade some of the biggest brands & companies being taken over by the overseas players creating a big surprise to many established players. “I feel the trends are changing as we have seen the maverick entrepreneurs with financial muscle opting out of the successful venture & selling this in premium to a foreign player, this may be called as gambling of thought process or inclinations to enter the newer ventures, to me it makes no sense to see your ideantity which you are known for, while one can shop or buy new products but not at the cost of selling the age-old brands” says Satya Brahma, Editor-In-Chief of Pharmaleaders Group. We, in India, have been practicing inclusive polity for quite some time-now, it is time for an inclusive economy. These are the type of changes happening on the ground which will have a long term impact of the economy- for the better. Making it a still hotter destination for investment. What else is being done by the Government for promoting FDI in India? Gradually, from the days of a massive restriction on FDI, today the list of sectors where 100% FDI is allowed is long and growing by the day. These are Auto, Gaming, Current Affairs Channels, TV Broadcasting & Films, Power, Road & Highways, Petroleum and Gas, Steel, Mining, IT, Pharmaceuticals, Real Estate, Retail-Cash& Carry. The Government has been reviewing and relaxing FDI policy norms on a six monthly basis since Dec 2010. The present government, in its last budget, has identified FDI as the single most stable source of foreign investment into the country, and has pledged ways of relaxing norms in most sectors that still need further liberalization. Hence the initiatives by the Ministry of Health & Family Affairs, Industries, Finance, Chemicals & Fertilizers are commendable only to the extent of leaving it to the final decision at Prime Minister’s office as a high-level inter-ministerial group chaired by the prime minister has decided to continue with the 100% foreign direct investment regime in the pharmaceuticals sector, overruling concerns raised by the health and industry ministries about rising medicine costs due to acquisitions of Indian drug companies by multinationals.
According to one estimate, the value of drugs going off-patent between 2016 and 2020 will fall 62% from the value in the preceding five-year period (2011-15). For Indian companies, this means a smaller opportunity in their main business: off-patent drug exports. Given the environment opportunities in Indian pharmaceutical sector & the plethora of incentives it gives in investment, Pharmaceutical Industry in india has emerged out as one of the best & safe nest. the upcoming patent cliff provides strong growth opportunities for the Indian pharmaceutical companies. But Indian firms need to develop a stronger focus on value-added and differentiated products in order to capitalise on this opportunity. The pharmaceutical industry in India is valued at US$ 12 billion with an annual compound annual growth rate (CAGR) of 10-11 per cent. The industry spends around 18 per cent of its revenue on research and development (R&D). In India, the clinical research industry is estimated to be a US$ 2.2 billion with a healthy CAGR of 23 per cent. India is ranked as the third largest emerging market and is growing fastest in conducting number of trials. Moreover, India is expected to join the league of top 10 global pharmaceuticals markets in terms of sales by 2020 with the total value reaching US$ 50 billion, according to a report by PricewaterhouseCoopers (PwC). India and China are likely to be the most preferred destinations for drug development activities in the coming years & the pharma companies’ focus on R&D is shifting from US to India and China. More and more R&D activities are expected to happen in both these countries, as they provide tremendous opportunities,” . “The global drug industry’s overall expenditure on discovering and developing new medicines was cut, at $68 billion in 2010 from $70 billion in 2008 and 2009, and it is likely to have some negative impact,” Sharma said.
It is pertinent here to note that India received foreign direct investment (FDI) worth $1.10 billion in July 2011, 38.38% lower compared with that in the same month last fiscal. However, for Apr-Jul 2011, FDI went up by 92.34% to $14.54 billion from $7.56 billion in the year ago period as inflows were robust in the initial months. Despite uncertainties in the global economy, FDI is expected to touch $35 billion in FY12, as against $19.4 billion realised in the last fiscal. The Department of Pharmaceuticals has prepared a “Pharma Vision 2020” for making India one of the leading destinations for end-to-end drug discovery and innovation and for that purpose provides requisite support by way of world class infrastructure, internationally competitive scientific manpower for pharma research and development (R&D), venture fund for research in the public and private domain and such other measures.
The Author is Editor-In-Chief of Network 7 Media Group that publish Pharmaleaders ( www.pharmaleaders.co.in ) & Indian Affairs ( www.indianaffairs.in ) & a passionate advocate of liberalization & Globalization. The Full text of the interview will be published in the Sept-Oct 2011 Issue of Pharmaleaders.