FDI curbs on only govt-aided pharma cos

NEW DELHI: The government has clarified that foreign direct investment (FDI) in greenfield pharmaceutical projects will continue unhindered, but companies that receive government funds for research could face some restrictions.


"There are concerns over takeovers where the funding for research has been from government institutions. It is not that FDI in the entire pharma sector had been doubted," commerce and industry minister Anand Sharma said on Friday. "100% FDI in greenfield pharmaceutical projects will continue," he said.


The clarification puts to rest speculations about a change in FDI policy for the pharmaceutical sector following concerns over takeovers voiced by the health ministry.


The country's largest drugs producer, Ranbaxy, was acquired by Japanese Daiichi Sankyo for $4.6 billion in 2008.


Another big acquisition was that of Piramal Health Care's domestic business by US-based Abbot Laboratories for $3.7 billion. "The health ministry has raised valid concerns over companies that are into development of new drugs and are prone to takeovers. This should not be confused with FDI coming in greenfield pharma projects," the minister said. Government research institutions often share their R&D results with Indian pharmaceutical companies at nominal costs for development of low cost drugs for diseases afflicting the poor.


If these companies are acquired by foreign companies, the research work could go waste or used for producing more sophisticated versions of the drugs for the global market where they fetch higher prices, the health ministry had argued. Member of Parliament's standing committee on health and family welfare Jyoti Mirdha had written to finance minister last year urging the government to put restrictions on the sale of domestic pharmaceutical players to multinationals as it could jeopardise availability of cheap medicines in the country.


Mukherjee then wrote to the department of industrial policy and promotion asking for a re-look at the existing policy. At present, foreign companies can directly purchase as much as 100% equity in local pharmaceutical companies without seeking approval from the Foreign Investment Promotion Board.