US-based pharmaceutical firm Mylan Inc’s Rs 5,168-crore proposal to acquire Indian generic drugs company Agila Specialties was cleared by the Government here on Tuesday.
The Department of Industrial Policy & Promotion (DIPP) has been pushing for restrictions on the flow of pharmaceutical FDI in brownfield projects for quite some time as it is concerned that such investments could seriously affect the country’s capacity to produce low-cost generic drugs.
On its insistence, the Foreign Investment Promotion Board (FIPB) had put on hold Mylan’s proposal to acquire Agila, but had subsequently approved it when an inter-ministerial group headed by the Prime Minister decided to approve all pending proposals based on the existing FDI policy.
Subsequently, following discussions with other ministries including Finance and the PMO, the Department decided to work on a Cabinet note placing restrictions on at least three categories of pharmaceuticals, such as vaccines, injectibles and oncology (cancer) medicines, in addition to bulk drugs.
As per RBI data, FDI worth $2.02 billion came into brownfield pharma 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.
It is also apprehensive that once Indian companies are taken over by foreign companies, there won’t be any efforts made to develop new low cost medicines for the poor in the country.
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.