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Unhappy with the “mass approval” given by the Foreign Investment Promotion Board (FIPB) for foreign investments in existing Indian pharmaceutical companies, the Department of Industrial Policy and Promotion has decided to consult the Health Ministry for the framing of specific criteria to vet such proposals.
As many as 58 proposals out of the 60 applications for FDI in brown-field pharmaceutical projects have been approved by the FIPB after the Government decided to stop automatic clearance for such proposals last year.
“The fact that the FIPB gave a green signal to almost all proposals made by foreign companies shows that no attempt is being made to judge how these would affect availability of drugs in the country. It seems that the FIPB is not using its discretionary powers at all,” a DIPP official told Business Line .
Although FDI up to 100 per cent was allowed by the Government in all pharmaceutical projects way back in 2002, the Government decided to route such proposals in existing Indian drug companies through the FIPB following a string of acquisitions. It was recognised that such indiscriminate acquisition could hamper production and availability of cheap generic drugs in the country. The FIPB, headed by the Department of Economic Affairs Secretary, takes a call on FDI proposals that do not come under the automatic route. The move to see that the FIPB evaluates applications on the basis of fixed and definite criteria is regarded as a step towards consistency and transparency. “Together with the Health Ministry, we want to put together some criteria which would help the FIPB to scrutinise pharmaceutical proposals and base its judgment on sound reasons,” the DIPP official said.
In an FIPB meeting last week, the DIPP had tried to put on hold applications made for FDI in the pharmaceutical sector, but the FIPB did not agree to it.
Acquisitions
India’s largest pharmaceutical company Ranbaxy Laboratories was taken over by Japan’s Daiichi-Sankyo in 2008.
This was followed by Germany’s Fresenius Kabi acquiring Dabur Pharma and French drug major Sanofi Aventis buying Shanta Biotech. A number of other buy-outs, including Matrix Lab by the US-based Mylan, Orchid Chemicals by Hospira and Piramal Healthcare by Abbott Laboratories have since happened. “The Health Ministry had raised concerns about multinational companies destroying India’s domestic capacities for producing cheap generics and channelising the industry to produce more expensive medicines catering mostly to the developed countries. The DIPP also shared similar concerns. This has put pressure on the Prime Minister’s Office to change FDI rules for the pharma sector,” the official claimed.
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