Panel for FDI ban in pharma companies
NEW DELHI: A Parliamentary panel has recommended a ban on foreign direct investment (FDI) in existing pharmaceutical companies, a suggestion which is going to provide ammunition to the commerce and industry ministry that has been opposing the entry of overseas players that are acquiring stakes in Indian drug manufacturers.
The report comes days ahead of a scheduled meeting between Prime Minister Manmohan Singh and commerce and industry minister Anand Sharma. Sharma has got the government to suspend decisions related to acquisitions arguing that the M&A transactions will affect availability of crucial medicines at affordable rates. His ministry had earlier got the government to tighten the norms for share acquisition beyond 49%.
The Parliamentary panel, which submitted its recommendations on Tuesday, has also asked the government to introduce a legislation to make it legally binding on all doctors to prescribe only low-cost generic drugs. “The committee feels that the pharmaceutical industry is one sector of the economy, which has to be dictated by public good rather than foreign investments, profit and revenue,” the Parliamentary standing committee on commerce, headed by BJP MP Shanta Kumar said in its report.
It has urged the government should use all flexibilities available under the World Trade Organization’s Agreement on Trade Related of Intellectual Property Rights (Trips) and the Indian Patents Act to ensure that no individual is deprived of any medicine due to its prohibitive costs. The panel, however, has no reservations against 100% FDI in greenfield pharma projects under automatic route.
The committee was surprised that since 2006-07, seven prominent domestic pharma companies were acquired by foreign companies at highly over-valued prices. “It appears that 100% FDI in pharma sector has been conveniently used as an instrument by multinational companies to gain monopoly over Indian market and to destroy India’s technological capability to produce generic medicines,” the panel noted in its report on ‘FDI in Pharmaceutical Sector’.
The committee is concerned over the shift of ownership of generic drug makers to the hands of multinational companies, that leads to change of business model and marketing strategy. It said the country is a leading player in the generics drug market and exports around Rs 42,000 crore worth medicines every year. The panel is worried that supply of low-priced quality generics to developing countries will suffer a setback due to acquisition of domestic companies.
It was noted that FDI in brownfield pharma projects would jeopardize the entire health and intellectual property framework of India in terms of access and affordability of medicines. The panel found that FDI has failed to bring about any real change in the existing pharma R&D environment as domestic companies are still to gain the competence and capacity to achieve cutting-edge drug innovation by carrying a new compound through all stages of research. “After all these years of FDI in drugs and pharmaceuticals sector, India is still weak in laboratory stage drug discovery,” it said, arguing that takeover and acquisitions are adversely impacting the exports.
The pharma industry has been attracted FDI to the tune of Rs 18,678 crore during the last three years, out of which less than 3% (Rs 524 crore) was FDI share in R&D.
The panel feared that these MNCs can change or tweak the product mix and can go from producing generics into branded or even more expensive patented medicines. “Its direct impact will be on the availability of the cheapest priced generics for Indian population which may decrease substantially,” it said.
