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The Industry Department (DIPP) is proposing to extend restrictions on foreign direct investment (FDI) on medical equipment production, as well. The Department is in the process of finalising a Cabinet note on imposing restrictions on FDI in existing pharmaceutical projects.
While this is in line with the Health Ministry’s definition of drugs, it goes against a suggestion made by the Finance Ministry to the DIPP that there should be a re-classification of products covered under pharmaceuticals in the FDI policy. The Finance Ministry is in favour of deleting at least some medical equipment, such as sutures, from the list.
The DIPP is in favour of restrictions on at least three categories of pharmaceuticals – vaccines, injectibles and oncology (cancer) medicines.
Generics issue
It has gone strictly by the Health Ministry’s classification and has retained medical equipment in the category of drugs to be covered by the restrictions. “The Health Ministry is very clear that most medical equipment, including sutures, fall under the classification of drugs. We are going by their definition,” a DIPP official told Business Line .
The issue will come up for discussion in a meeting called by the Health Secretary to discuss the FDI policy for pharmaceuticals with his Finance and Industry counterparts and several health experts early next month.
The DIPP wants to place curbs on the flow of pharmaceutical FDI in brownfield projects as it is concerned that it could seriously affect the country’s capacity to produce low-cost generic drugs. According to Reserve Bank of India data, FDI worth $2.02 billion came into brownfield pharma projects between April 2012 and April 2013, while greenfield projects could attract only $87.35 million.
“Over 96 per cent of FDI during this period has been in brownfield, thereby merely a substitution of domestic capital by foreign capital rather than being an additionality,” an internal DIPP note points out.
Global pharma companies invest a negligible amount on research and development, which is less than the domestic pharma companies, and even lower than the public sector firms in India, the note adds.
Based on these arguments, the DIPP had convinced the Foreign Investment Promotion Board (FIPB), which approves FDI proposals, to put on hold for some time US-based Mylan’s bid to take over Indian generic drug maker Agila.
Following intense lobbying by Mylan, an inter-ministerial group led by Prime Minister Manmohan Singh decided earlier this month that FDI proposals in the pharmaceutical sector pending with the FIPB should be cleared, based on the existing policy.
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