Govt may act to save generic firms from MNC mischief
17 Aug 2013 10:48 PM GMT
The government is set to make major changes in the current FDI policy in the pharmaceuticals sector to protect domestic generic industry in the wake of increasing acquisitions of homegrown companies by foreign players.
After a high-level meeting held on Friday chaired by Prime Minister Manmohan Singh, it has been decided that the Commerce and Industry would soon start a consultation process to address 'dangers inherent' in the current model of FDI in brownfield pharma units.
'Today's (Friday) meeting looked at two dimensions. One is that the proposals which have come under the existing policy, there are some concerns, particularly with regard to oncology, injectibles and vaccines, where we see there is a critical need which must be met at all cost and that the policy will ensure,' Commerce and Industry Minister Anand Sharma told reporters here.
He further said the proposals before the FIPB would go through the existing policy and if there were 'safeguards required that will be discussed as what should be the nature of safeguards so that affordable life saving medicines are available to the people'.
Elaborating the steps to be taken up, a top official in the Commerce and Industry ministry said: 'The Department of Industrial Policy and Promotion (DIPP) will soon start consultations for the proposed changes with the concerned departments, including Health. It will soon move the draft Cabinet note.'
The changes to be brought will be prospective in nature, the official said, adding the current policy was not serving its objectives and it needs to be changed in order to ensure affordable drugs to the general public.
'Multi-national companies (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,' the official added.
Among the main concerns that were raised in the meeting is how to prevent MNCs from changing product mix from generics to branded generics or patented ones after acquiring Indian companies, which could impact the cheapest price generic for the Indian population.
'Also, there is a concern that dominant MNCs can block small domestic companies from establishing their presence in the global market,' a source said adding the government may look at reducing FDI cap from 100 per cent in the sector. Â
There is also concern that the ability of Indian firms to take advantage of the situation of blockbuster drugs going off patent through 2015 could be impaired. As many as 67 per cent of drugs worth $80 billion is expected to go off patent during 2011-2013.
Besides, FDI has not led to significant addition to gross assets or jobs or increase in R&D expenditure. It has led to outsourcing, clinical trials to India rather than new investment in R&D for development of new drugs.
About 28 per cent of the market is controlled by pharma MNCs. 'If another top 3 Indian companies are acquired by MNCs, their share would rise to 41 per cent and on acquisition of the next rung of 8 companies their share will go over 55 per cent. In the last five years, the share of pharma MNCs has grown from 15 per cent to 25 per cent,' the official said.
Moreover, the other big concern of the government is that the MNCs can resist regulations and production of essential drugs. There may not be applicants for compulsory licence if conditions of national emergency or extreme urgency requires.
Besides, 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, sources added.
Earlier this week, a Parliamentary committee had suggested a 'blanket ban' on FDI in existing pharmaceutical companies saying the policy in the sensitive sector should be dictated by public good.
It had 'strongly' recommended the Commerce Department to take all measures to stop any further takeover or acquisition of domestic pharma units.
The panel headed by BJP MP Shanta Kumar had said FDI in brown field pharma has encroached upon India's generics base and adversely affected the industry. It also said collaboration between foreign and domestic pharma companies has served Western markets more than the needs of the local population.
After a high-level meeting held on Friday chaired by Prime Minister Manmohan Singh, it has been decided that the Commerce and Industry would soon start a consultation process to address 'dangers inherent' in the current model of FDI in brownfield pharma units.
'Today's (Friday) meeting looked at two dimensions. One is that the proposals which have come under the existing policy, there are some concerns, particularly with regard to oncology, injectibles and vaccines, where we see there is a critical need which must be met at all cost and that the policy will ensure,' Commerce and Industry Minister Anand Sharma told reporters here.
He further said the proposals before the FIPB would go through the existing policy and if there were 'safeguards required that will be discussed as what should be the nature of safeguards so that affordable life saving medicines are available to the people'.
Elaborating the steps to be taken up, a top official in the Commerce and Industry ministry said: 'The Department of Industrial Policy and Promotion (DIPP) will soon start consultations for the proposed changes with the concerned departments, including Health. It will soon move the draft Cabinet note.'
The changes to be brought will be prospective in nature, the official said, adding the current policy was not serving its objectives and it needs to be changed in order to ensure affordable drugs to the general public.
'Multi-national companies (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,' the official added.
Among the main concerns that were raised in the meeting is how to prevent MNCs from changing product mix from generics to branded generics or patented ones after acquiring Indian companies, which could impact the cheapest price generic for the Indian population.
'Also, there is a concern that dominant MNCs can block small domestic companies from establishing their presence in the global market,' a source said adding the government may look at reducing FDI cap from 100 per cent in the sector. Â
There is also concern that the ability of Indian firms to take advantage of the situation of blockbuster drugs going off patent through 2015 could be impaired. As many as 67 per cent of drugs worth $80 billion is expected to go off patent during 2011-2013.
Besides, FDI has not led to significant addition to gross assets or jobs or increase in R&D expenditure. It has led to outsourcing, clinical trials to India rather than new investment in R&D for development of new drugs.
About 28 per cent of the market is controlled by pharma MNCs. 'If another top 3 Indian companies are acquired by MNCs, their share would rise to 41 per cent and on acquisition of the next rung of 8 companies their share will go over 55 per cent. In the last five years, the share of pharma MNCs has grown from 15 per cent to 25 per cent,' the official said.
Moreover, the other big concern of the government is that the MNCs can resist regulations and production of essential drugs. There may not be applicants for compulsory licence if conditions of national emergency or extreme urgency requires.
Besides, 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, sources added.
Earlier this week, a Parliamentary committee had suggested a 'blanket ban' on FDI in existing pharmaceutical companies saying the policy in the sensitive sector should be dictated by public good.
It had 'strongly' recommended the Commerce Department to take all measures to stop any further takeover or acquisition of domestic pharma units.
The panel headed by BJP MP Shanta Kumar had said FDI in brown field pharma has encroached upon India's generics base and adversely affected the industry. It also said collaboration between foreign and domestic pharma companies has served Western markets more than the needs of the local population.
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