Foreign investors in existing pharmaceutical companies in India may have to continue producing essential drugs and invest in research and development for five years after acquiring the company. This has been proposed by the Department of Industrial Policy and Promotion (DIPP).
Commerce and Industry Minister Anand Sharma has discussed the issue with Finance Minister P. Chidambaram on Monday and a follow-up meeting between senior officials from key sectors, including pharmaceuticals and health, will take place on Tuesday.
DIPP Secretary Saurabh Chandra told newspersons that foreign investors should continue to produce essential drugs and their research and development spend for the next five years should the highest amount that the company to be acquired had made in the last three years.
India allowed 100 per cent FDI in pharmaceutical through the automatic route in 2002, but last year, on the insistence of the DIPP and the Health Ministry, the Government decided to route brownfield or existing projects through the Foreign Investment Promotion Board (FIPB).
However, despite routing these projects through the FIPB, 58 of 60 proposals in the pharma sector were approved.
The DIPP expressed its objections to the indiscriminate approvals being given to pharma FDI proposals in May this year and wrote to the FIPB stating that approvals shouldn’t be given without adequate safeguards in place.
The next FIPB meeting scheduled on July 5 has as many as ten proposals related to the pharmaceutical sector and the DIPP is hopeful that the new measures will be in place before that.
The spate of acquisition 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 is acquisition of Bangalore-based Agila Specialties by US-based Mylan for $1.85 billion in February this year.