Govt reviewing FDI policy in pharma sector: report

The centre is planning to review its policy on foreign direct investment in the pharmaceutical sector as the existing policy has failed to attract FDI in new projects.

More frustrating has been the effect of a relaxed FDI policy in the pharmaceutical sector as it has only helped to make drugs costly for the common man. It has also not helped in ensuring the availability of essential medicines. 

In fact, most of the FDI in the pharmaceutical sector has been in take overs of existing pharmaceutical units, with negligible investments in greenfield or new projects.

A Hindu Business Line report quoted a Department of Industrial Policy & Promotion (DIPP) official as saying that the DIPP is working on a review of the current policy which allows 100 per cent FDI in both greenfield and brownfield pharmaceutical projects.

The DIPP, which was forced to switch to a composite cap of 100 per cent in both fresh and brownfield investments in the pharmaceutical sector under pressure from the finance ministry, is now forced to revisit the policy as it has neither helped to boost growth in pharmaceutical production nor ensure the availability of drugs.

The current policy allows 100 per cent FDI in both brown-field and greenfield pharma projects, but in the case of takeover of exiting companies, the investment is not automatic and it has to be approved by the government.

The safeguards incorporated in the policy that the non-compete clause will not apply in case of takeovers - which allows the seller to enter into a similar trade after the sale - has also not helped to stem the tide of takeovers.

''We are examining if FDI in the pharmaceutical sector has affected production and availability of cheap generics,'' the report quoted the DIPP official as saying.

As per DIPP estimates, almost 90 per cent of FDI in pharmaceuticals has gone into brownfield projects while less than 10 per cent has gone into new ventures.

The DIPP official also cited key takeovers of major Indian drug companies like Piramal, Shantha Biotech, Agila Specialities and Dabur and Ranbaxy.

Global giants such as Japan's Daiichi Sankyo, US-based Mylan and Pfizer and France's Sanofi have been active in the takeovers in India and these have restricted India's ability to take advantage of blockbuster drugs going off patent in 2015, DIPP officials point out.

India, one of the key producers of generics or off-patent drugs in the world, has been playing an active role in meeting the needs of low-cost drugs both at home and abroad.