28 Jul 2012

FIPB Postpones Pharmaceuticals Sector FDI Proposals In India

The Foreign Investment Promotion Board (FIPB) of India was planning to consider the FDI proposals for the pharmaceutical sector in India in the last meeting. However, as per media reports, FIPB has postponed all the foreign investment proposals in the pharmaceuticals sector of India. The applications of foreign pharmaceuticals firms cannot be cleared in these circumstances.

Interestingly, a department of industrial policy and promotion (DIPP) representative told FIPB that commerce minister Anand Sharma is also in agreement with postponing of the FDI proposals.  This has taken the applicants for a surprise as the guidelines were finalised with DIPP's consent and FDI proposals in the pharmaceuticals sector are being cleared by FIPB, as sought by DIPP. The new guidelines are now awaiting approval of the Prime Minister's Office.

It has been suggested by the panel that conditions such as commitment by the buyer to manufacture and make available essential drugs post acquisition for five years and also to increase research and development (R&D) expenditure by 5% for diseases prevalent in India must be imposed to allow foreign firms buy Indian companies. It left it to DIPP to decide if the riders be imposed for acquisition of more than 49% of management control.

The consolidated FDI policy of India 2012 by DIPP is proactive on many counts and it covers vast areas of public importance. One such area pertains to FDI in pharmaceuticals sector of India. India has been taking special interest in FDI in pharmaceutical companies producing life saving drugs in India. This is more so when the mergers and acquisitions (M&A) and foreign direct investments (FDI) in pharmaceutical sector of India are on hot list.

India is also planning to reduce prices of expensive patented drugs to make medicines affordable to its predominantly poor population. In fact, a committee has already finalised a proposal in this regard and it will put it out in the public domain in a month or so. There could be reference pricing system (for patented drugs) or fixed-pricing, but a final decision has not been taken.

These steps have been taken in addition to India’s stand to provide medicines at a more affordable price after it announced earlier this month that it would implement a $5.4 billion plan to provide free generic medicines to its people.

Internationally, a system of reference pricing for medicines exists across developed markets such as the United States and Europe as well as in emerging markets.