Protect public health, but don’t stop the funds

P. T. Jyothi Datta Mumbai | Updated on March 12, 2018


Be it Dr Reddy’s, Cipla or Lupin, at some point or other, India’s biggest drugmakers have been asked if they were up for sale.

The questions, of course, were driven by market speculation about such a sale.

Pharma industry watchers insist that the best Indian companies are on the radar of overseas buyers. With more than six domestic drugmakers selling their business, entirely or in parts, between 2006 and 2010, the Government decided to hit the brakes on such transactions.

Now, as part of an ongoing process, the Government is looking to streamline the process for the acquisition of domestic drugmakers further.

And although the different ministries involved appear to be pulling in different directions, the action is said to be driven by the public good.

Some industry watchers, however, believe that protecting the health of citizens can go together with bringing funds into the country.

If affordability is the worry, the latest measures taken by the Government do not address this concern, says an industry expert. When the Government has the tools to ensure that companies continue to make what it defines as critical drugs, why should it stop foreign investments from coming in, he asks.

Seeing Ghosts?

If vaccines or cancer drugs are concern areas, the Government should undertake programmes to procure medicines and provide them free or at subsidised prices, or even invest in public sector companies to produce medicines for its citizens, says the expert. But stopping the flow of funds to a sector that needs to grow will hamper local industry, as well, he adds.

The Government needs to have a clear regulatory framework to ensure that critical medicines continue to be made for the local market, even as it lets funds come in by way of foreign direct investment (FDI), says Sujay Shetty, partner with global consultant PwC.

Echoing similar sentiments, Ranjit Shahani, who heads industry lobby Organisation of Pharmaceutical Producers of India, says: “We are seeing ghosts, where there are no ghosts”.

Data does not show that prices have increased after local firms were acquired by foreign owners, he adds. And even in future, he opines that more than 95 per cent of the local market will continue to be dominated by less expensive generic drugs.

“We are a developing country and don’t need to be scared anymore,” says Shahani, adding that India needs FDI.


He feels that the Government and industry should find creative ways to make medicines more affordable for people who need them.

K.M. Gopakumar, legal advisor at Third World Network, an independent non-profit organisation, points out that there are no mechanisms to ensure drug companies continue to make medicines critical to the country after they have been acquired.

The present system of acquisitions being cleared by the Foreign Investment Promotion Board is a weak mechanism, he adds.

Gopakumar feels that mergers and acquisition of drug-makers should be vetted by an independent body, under the Health Ministry, as such deals impact the health of local people and the medicine-making capability of the country.

He believes that since the public sector does not have a strong presence in manufacturing, private assets become strategically important.

As a result, he adds, acquisitions of existing drug companies should be prohibited or operations and investments by foreign drugmakers should be allowed only in new facilities.

Published on August 19, 2013

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