The Prime Minister, Dr Manmohan Singh, is scheduled to meet the Union Ministers of Health, Commerce and Finance, underlining the growing concern on “health security” and the “strategic” importance of the pharmaceutical sector in keeping medicines affordable in the country.

The inter-ministerial meeting slated for Monday comes against the backdrop of a spate of acquisitions of local drug-makers by foreign companies.

M&A activity

Six large Indian drug-makers have sold their pharmaceutical businesses either entirely or partially over the last five years, forcing the question of greater Government control on such mergers and acquisition (M&A) activity.

Late last month, the committee headed by Planning Commission member Mr Arun Maira had submitted its report, stating, among other things, that the Competition Commission of India (CCI) was equipped to handle M&As, even in the “strategic” pharmaceutical sector. The Committee had been set up to look into the issue of foreign direct investment in the pharmaceutical sector.

Health security

The different apex ministries are unanimous that the pharmaceutical sector being strategic and affecting the health-security of the country – its M&A activity needed to be governed more closely, a Ministry source told Business Line .

While there are differences of opinion on who should be given the task of watch-dog – the Foreign Investment Promotion Board (FIPB) or the CCI – the final call will be taken by the Government, he added.

The Health and Commerce Ministries have cast their weight with the FIPB, while the rest, including Maira committee have recommended that the CCI is equipped for the job.

Who will monitor?

In past discussions, the Health Ministry has indicated that it is comfortable with investment in new or green-field projects, while brown-field or acquisitions of existing operations needed Government approvals.

This is also because of publically-funded research or Government sops given to domestic companies – they should translate into benefits for the local people, rather than go into the hands of foreign owners, another Ministry source familiar with the development explained.

The DIPP (Department of Industrial Policy and Promotion – under the Commerce Ministry) is also for the FIPB to watch over M&As. However, the Finance Ministry is concerned that restricting FDI into the pharmaceutical sector by controlling M&As would hurt the investment-image of the country. Overseas companies were allowed to invest 100 per cent in the pharmaceutical sector, from 2001.

Despite differences over how the pharmaceuticals sector should be governed, the apex ministries are unanimous on the importance of affordable healthcare, officials said, adding that alternate mechanisms could also be explored to govern M&As in the segment.

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