DIPP seeks to restrict FDI in brownfield pharma projects

Amiti Sen New Delhi | Updated on March 12, 2018 Published on September 11, 2013

The Department of Industrial Policy & Promotion (DIPP) has floated a Cabinet note seeking restrictions on foreign direct investment (FDI) in existing pharmaceutical projects in specific areas, such as vaccines, injectibles and oncology medicines.

“Once we have incorporated the comments of all ministries (Finance and Health) and departments in the note, we will send it to the Cabinet for approval,” a DIPP official told Business Line.

The Government allows 100 per cent FDI in pharmaceuticals, but while investments in new projects are allowed automatically, investments in brownfield or existing pharmaceutical companies are required to be routed through the Foreign Investment Promotion Board (FIPB) since late last year.

The DIPP is keen on placing a check on the acquisition of existing pharmaceutical projects, as it is concerned that it could seriously affect the country’s capacity to produce low-cost generic drugs. It wants to impose restrictions on at least three categories of pharmaceuticals —vaccines, injectibles and oncology medicines — in addition to bulk drugs.

High-profile acquisitions of Indian companies by multinationals started in 2008 with Japan’s Daiichi-Sankyo taking over Ranbaxy Laboratories.

This was followed by Germany’s Fresenius Kabi acquiring Dabur Pharma and French drug major Sanofi Aventis buying Shanta Biotech.

Later, Matrix Lab was taken over by US-based Mylan, Orchid Chemicals by Hospira and Piramal Healthcare by Abbott Laboratories. The latest in the series is Mylan’s acquisition of Indian generic drugs manufacturer Agila for $1.6 billion.

According to RBI data, FDI worth $2.02 billion came into brownfield pharmaceutical 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 addition,” an internal DIPP note says.

It is also apprehensive that once Indian companies are taken over by foreign companies, there won’t be any effort to develop new low-cost medicines for the poor.

Global pharma companies invest a negligible amount on R&D, often lesser than the domestic pharma companies and even lower than the public sector firms in India, the note adds.

Published on September 11, 2013
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