Centre to review FDI policy in pharma sector on Nov 25

PTI New Delhi | Updated on March 12, 2018 Published on November 22, 2013


Government will take up on Monday the issue of tightening FDI in existing pharmaceutical companies in the wake of concerns over multinationals taking over domestic drug makers.

“The Cabinet will review the FDI policy in pharmaceutical sector on Monday,” an official said.

The Department of Industrial Policy and Promotion (DIPP) has proposed to reduce FDI cap from 100 per cent to 49 per cent in the “rare or critical pharma verticals.”

It has also proposed to incorporate conditions for foreign firms like mandatory investment in R&D and non-compete clause in the shareholders pact.

As per the proposal, sources said, the foreign company would not be allowed to close down the existing R&D centre and would have to mandatorily invest upto 25 per cent of the FDI in the new unit or R & D facility.

The total investment, as per the condition proposed, would have to incur within 3 years of the acquisition.

Sources said that there is a feeling in the government circle that with MNCs taking control of Indian firms, there could be reduction in supply of vaccines, injectables, particularly for cancer and active pharmaceutical ingredients.

“MNCs which are acquiring domestic firms have spent less than one per cent of their total sales in R&D in India. They are doing only clinical trials in India and not actual drug development work,” another source said.

A Parliamentary committee had recently suggested a blanket ban on FDI in pharma, saying the policy in the sensitive sector should be dictated by public good.

Over 96 per cent of the total FDI in the sector between April 2012 and April 2013 has come into brownfield pharma.

Currently, India permits 100 per cent FDI in pharmaceutical sector through automatic approval route in the new projects but the foreign investment in existing pharmaceutical companies are allowed only through FIPB’s approval.

Published on November 22, 2013
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