Updated on 25 June 2012
It may be recalled that during mid last year, the takeovers of Indian pharmaceutical companies by multinationals in the last few years have triggered a debate on whether this could increase the possibility of other takeovers of Indian companies and impact the country's healthcare scenario by affecting price of drugs and their availability. Considering sensitivity of the issue, the Department of Commerce, in August 2011 on the request of the Department of Pharmaceuticals, asked consultant firm Ernst & Young to study the situation and come up with report.
In October 2011 a high-level meeting of inter ministerial group was chaired by the prime minister of India, Dr Manmohan Singh, and attended by Union Finance Minister Mr Pranab Mukherji, Health Minister Mr Ghulam Nabi Azad, Commerce, Industry and Textile Minister Mr Anand Sharma, Pharmaceutical and Chemical Minister Mr MK Alagiri and Deputy Chairman of Planning Commission Dr Montek Singh Ahulwalia that discussed the issue. While striking a balance between larger public health concerns and strengthening domestic manufacturing capacities, the meeting finally agreed upon two things.
a) India to continue to allow FDI without any limits (100 percent) under the automatic route for Greenfield investments in the pharma sector. This will facilitate addition of manufacturing capacities, technology acquisition and development.
b) In case of brownfield investments in the pharma sector, FDI will be allowed through the FIPB approval route for a period of up to six months. During this period, necessary enabling regulations will be put in place by the Competition Commission of India (CCI) for effective oversight on mergers and acquisitions to ensure that there is a balance between public health concerns and attracting FDI in the pharma sector. Thereafter, the requisite oversight will be done by the CCI entirely in accordance with the competition laws of the country.
However, the debate continues over wider coverage for FDI in the pharmaceutical sector. Now, the Department of Pharmaceuticals has submitted a proposal to the FIPB to continue clearing stake purchases by multinational companies in Indian pharmaceutical industry as it seeks to end the uncertainty that has halted the inflow of investments from MNCs in the sector.
"At present, there is no proposal before the government for change in the FDI policy in the pharmaceutical sector is under consideration," said Mr Jyotiraditya M Scindia, Union minister of state for Commerce and Industry, Government of India, on May 7, 2012. "FDI policy is reviewed on an ongoing basis, with a view to making it more investor-friendly."