Draft Cabinet note proposes stricter pharma FDI policy
16 Nov 2013 4:11 AM IST
The Department of Industrial Policy and Promotion (DIPP) has proposed these steps in its draft cabinet note for tightening foreign direct investment (FDI) in the existing domestic pharmaceutical companies.
As per the proposal, the foreign company would not be allowed to close down the existing R&D centre and would have to mandatorily invest upto 25 per cent of the FDI in the new unit or R & D facility, sources said.
The total investment as per the condition proposed would have to incurred within 3 years of the acquisition, they said.
‘As comments of some ministries have come late, the DIPP is moving a supplementary note on the matter,’ they added.
The note has also proposed to reduce FDI cap to 49 per cent in rare or critical pharma verticals.
Sources said that there is a feeling in the government circle that with MNCs taking control of Indian firms, there could be reduction in supply of vaccines, injectables, particularly for cancer and active pharmaceutical ingredients.
‘MNCs which are acquiring domestic firms have spent less than one per cent of their total sales in R&D in India. They are doing only clinical trials in India and not actual drug development work,’ another source said.
A Parliamentary committee had recently suggested a blanket ban on FDI in pharma saying the policy in the sensitive sector should be dictated by public good.
In 2008, Japanese firm Daiichi Sankyo had bought out the country's largest drug maker Ranbaxy for USD 4.6 billion.
US-based Abbot Laboratories had acquired Piramal Health Care's domestic business for $3.7 billion. Another US company Mylan bought Matrix Lab while Dabur Pharma was acquired by Singapore's Fresenius and France's Sanofi Aventis purchased Shanta Biotech and Orchid Chemicals by US-based Hospira.
As per the proposal, the foreign company would not be allowed to close down the existing R&D centre and would have to mandatorily invest upto 25 per cent of the FDI in the new unit or R & D facility, sources said.
The total investment as per the condition proposed would have to incurred within 3 years of the acquisition, they said.
‘As comments of some ministries have come late, the DIPP is moving a supplementary note on the matter,’ they added.
The note has also proposed to reduce FDI cap to 49 per cent in rare or critical pharma verticals.
Sources said that there is a feeling in the government circle that with MNCs taking control of Indian firms, there could be reduction in supply of vaccines, injectables, particularly for cancer and active pharmaceutical ingredients.
‘MNCs which are acquiring domestic firms have spent less than one per cent of their total sales in R&D in India. They are doing only clinical trials in India and not actual drug development work,’ another source said.
A Parliamentary committee had recently suggested a blanket ban on FDI in pharma saying the policy in the sensitive sector should be dictated by public good.
In 2008, Japanese firm Daiichi Sankyo had bought out the country's largest drug maker Ranbaxy for USD 4.6 billion.
US-based Abbot Laboratories had acquired Piramal Health Care's domestic business for $3.7 billion. Another US company Mylan bought Matrix Lab while Dabur Pharma was acquired by Singapore's Fresenius and France's Sanofi Aventis purchased Shanta Biotech and Orchid Chemicals by US-based Hospira.
Next Story
