Mergers and acquisitions (M&A) and foreign
direct investments (FDI) in pharmaceutical sector of India are on
hot list. Even the consolidated
FDI policy of India 2012 has liberalised many concepts regarding
these areas. However, with these flexibilities and permissions, India
must take care of all anti competitive and anti national activities
as well.
For instance, it has been anticipated that
multinational companies may slow down production of essential
medicines after they acquire Indian pharmaceuticals companies. This
may affect the national interest of India in general and public
health in particular. Now Indian government has decided to build
stringent safeguards to ensure availability of life-saving drugs even
after such acquisition.
An inter-ministerial group set up by the finance
ministry to consider new norms for clearing foreign direct investment
(FDI) proposals in the 60,000-crore pharmaceutical sector has
recommended incorporation of a stringent clause that mandates that
the Indian companies shall continue to make and sell the essential
drugs in India even after they are acquired by a foreign company.
The current policy allows 100% FDI in the
pharmaceutical sector, but after a spate of acquisitions in the
sector that raised fears of MNCs neglecting Indian interests, the
government has decided to put brownfield investments in the sector on
the automatic route.
Till now foreign investment promotion board (FIPB)
of India is only empowered to examine proposal from the stand point
of the Foreign Exchange Management Act and the FDI policy. The new
guidelines will help it scrutinise foreign investments in existing
companies from a public health perspective.
There is a chance that the government could also
require that FIPB continue to look at the FDI proposals in the sector
even after the oversight on mergers and acquisitions in the sector
passes over to the Competition Commission of India.
