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India will continue to allow 100 per cent Foreign Direct Investment (FDI) in existing pharmaceutical companies despite concerns over continued availability of affordable life-saving drugs raised by some ministries and departments.
Domestic companies selling their facilities or operations to foreign players, however, will not be barred from starting a fresh venture in the same area as the “non-compete” clause will not apply in deals except in special cases.
The Department of Industrial Policy & Promotion (DIPP), on Wednesday, formally notified both the decisions taken by the Union Cabinet six weeks ago following extensive inter-ministerial consultations.
“The Government has reviewed the position in this regard and decided that the existing policy would continue with the condition that ‘non-compete’ clause would not be allowed except in special circumstances with the approval of the Foreign Investment Promotion Board,” the DIPP said in a Press Note.
There have been a number of high profile acquisitions of Indian pharmaceutical companies over the last few years which includes the recent take-over of Bangalore-based pharma firm Agila Specialties by US-based Mylan Inc and Piramal Healthcare by US company Abbott Lab.
The DIPP had sought reduction of FDI limit for brownfield pharma projects from 100 per cent to 49 per cent in “critical’’ areas as it feared that acquisition of Indian companies could vitally affect availability and affordability of generic (off-patent) medicines.
In an earlier note, the DIPP had pointed out that most of the FDI that has come into the pharma sector in the country has come in brownfield projects and soon the existing facilities in the country that produce cheap life-saving medicines may completely be taken over.
The Department of Science & Technology and the Health Ministry also shared the DIPP’s concerns. The Department of Science & Technology, had expressed concern that takeover of Indian pharmaceutical companies by foreign investors could lead to a waste of Government efforts, research and resources as many of these companies sourced their technologies from Government laboratories under the CSIR.
The Finance Ministry and the Planning Commission were, however, of the view that there should not be any changes in the existing FDI policy as it would serve as a deterrent for foreign investors.
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