Government to conduct study to assess impact of FDI in pharma industry

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

"An expert from 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 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 of Indian pharmaceutical companies by foreign giants could impact the accessibility and growth of generic industry, another source said.

A report of the Parliamentary Standing Committee on Commerce had suggested that a study group 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 take over/acquisition of domestic pharma units.

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

As per the current policy, 100 per cent FDI is permitted in the existing pharma companies through the approval route. 100 per cent 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 per cent of the total FDI in the sector between April 2012 and April 2013 came into the brownfield pharma companies.