India's government has begun inter-departmental talks aimed at addressing fears that the growing number of takeovers of Indian drugmakers by multinational corporations (MNCs) could harm the domestic drug supply.
Officials at the Ministry of Health and Family Welfare and industry groups led by the Indian Drug Manufacturers Association (IDMA) and the Indian Pharmaceutical Alliance (IPA) have warned that the trend towards foreign acquisitions could weaken competition on the home market, resulting in drug prices being increased to unaffordable levels, and switching the focus of acquired companies from India to overseas markets.
Already, the emphasis on exports has led to significantly lower growth in the domestic market, "despite India having a large unmet demand for critical medicines," says the Health Ministry. Before they were taken over by MNCs, a significant portion of the market value of Indian drugmakers had arisen because of of state support and they were catering to niche markets for relevant drugs, but "with their transfer to foreign control, they may no longer be interested in doing so," it says, warning that "an oligopolistic market" and cartels could develop, with a very small number of companies dictating the prices of essential drugs.
The Health Ministry has asked the Ministry of Commerce and Industry for a review of current foreign direct investment (FDI) in the pharmaceutical sector, and has suggested that the policy of automatically allowing 100% FDI for drug sector projects should be abandoned, requiring such investments to go through the Foreign Investment Promotion Board (FIPB) instead.
The Department of Industrial Policy and Promotion (DIPP) has also been examining the issue and inviting comments from stakeholders. The suggestions it has received include shifting FDI in the pharmaceutical sector from the automatic route to the government route, and imposing an investment cap of 49%, Jyotiraditya Scindia, the Minister of State for Commerce and Industry, told the Parliament's Rajya Sabha (Council of States) this week.
However, the Finance Ministry is reported to oppose any attempt to change FDI policy as it relates to the pharmaceutical sector, and the Cabinet Commerce and Industry Minister, Ananad Sharma, said recently that the 100% automatic route will remain for new projects, although there could be new restrictions on firms whose research is supported by government funding.
The Organisation of Pharmaceutical Producers of India (OPPI) is also opposed to any attempts to limit FDI in the sector and says it does not accept that foreign acquisitions of domestic drugmakers will push up prices, pointing out that India's National Pharmaceutical Pricing Authority (NPPA) monitors drug prices very closely, which would prevent this from happening.