FDI in corporate hospitals' retail pharmacies under lens
While foreign direct investment in multi-brand retail outlets is not allowed, some corporate hospitals that own retail pharmacy chains have secured government permission for FDI in the holding company.
By Gireesh Chandra Prasad & Anil Nair, TNN |
NEW DELHI: The legal status of retail pharmacies run by corporate hospitals is under the government’s scrutiny. While foreign direct investment in multi-brand retail outlets is not allowed, some corporate hospitals that own retail pharmacy chains have secured government permission for FDI in the holding company, i.e., in the company which owns the hospitals. Some experts say technically this is a violation of norms, while others say it is a grey area. Up to 100% FDI is allowed through the automatic route in the healthcare sector, which includes corporate hospitals.
The finance ministry is working with the ministry of commerce to clarify the legal status of such pharmacies. The government is also expected to seek clarifications from corporate houses on this, it is understood. Industry sources said the in-house pharmacies of hospitals are meant to provide a service to its patients and should not be regarded as a violation.
The status of pharmacy chains operating outside hospital premises - but owned by the same company which owns the hospital - dispensing medicines to other consumers should be clearly specified, government officials say.
Recently, Apollo Hospitals Enterprises had announced that foreign private equity firm Apax Partners would pick up a 12% stake for Rs 426.40 crore. Apollo Hospitals has the largest retail pharmacy chain in the country. It has over 70 round-the-clock retail outlets in the country selling prescription drugs, OTC medicines and other health and body-care related products.
“It is a rather blurred area whether a main business that diversifies into a downstream retail business attracts FDI norms. Some have taken the view that it is legally allowed. Clarity on this will help a lot,” said PricewaterhouseCoopers’ FDI practice head Vivek Mehra.
There is also the interpretation that FDI norms apply only when the parent is a “foreign-held holding company”, which means that the parent has more than 51% FDI. Full foreign ownership is allowed in hospitals through the automatic route. Companies only need to inform the Foreign Investment Promotion Board to update their records about the transaction.
The finance ministry is working with the ministry of commerce to clarify the legal status of such pharmacies. The government is also expected to seek clarifications from corporate houses on this, it is understood. Industry sources said the in-house pharmacies of hospitals are meant to provide a service to its patients and should not be regarded as a violation.
The status of pharmacy chains operating outside hospital premises - but owned by the same company which owns the hospital - dispensing medicines to other consumers should be clearly specified, government officials say.
Recently, Apollo Hospitals Enterprises had announced that foreign private equity firm Apax Partners would pick up a 12% stake for Rs 426.40 crore. Apollo Hospitals has the largest retail pharmacy chain in the country. It has over 70 round-the-clock retail outlets in the country selling prescription drugs, OTC medicines and other health and body-care related products.
“It is a rather blurred area whether a main business that diversifies into a downstream retail business attracts FDI norms. Some have taken the view that it is legally allowed. Clarity on this will help a lot,” said PricewaterhouseCoopers’ FDI practice head Vivek Mehra.
There is also the interpretation that FDI norms apply only when the parent is a “foreign-held holding company”, which means that the parent has more than 51% FDI. Full foreign ownership is allowed in hospitals through the automatic route. Companies only need to inform the Foreign Investment Promotion Board to update their records about the transaction.
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