The Indian government has announced plans to amend its policy on foreign direct investment (FDI) in the pharmaceutical sector in order to protect domestic generics makers from acquisition by foreign multinationals.

India automatically allows 100% FDI for foreign firms investing in new pharmaceutical industry projects - "greenfield" investments - but FDI investments in existing Indian drugmakers - "brownfield" projects - must be approved by the Foreign Investment Promotion Board (FIPB).

Critics point out that more than 90% of FDIs are currently for brownfield projects, which accounted for $989 million during April 2012-April 12013 compared to just $87.3 million for greenfield investments, and that this has already led to the loss of local production of many important drugs, including penicillin, which India now imports.

Foreign investment and takeovers could lead to Indian generics makers having to switch production towards export-oriented patented drugs or branded generics, thus reducing supplies for the domestic market and make medicines unaffordable for Indian patients, they warn, adding that Indian generics makers could also be prevented from taking full advantage of the $80 billion-worth of blockbuster drugs losing patent protection during 2011-13.

Speaking ahead of a meeting on the proposals at the weekend chaired by Indian Prime Minister Manmohan Singh, Commerce and Industry Minister Anand Sharma said "there are some concerns, particularly with regard to oncology, injectables and vaccines, where we see there is a critical need which must be met at all cost." 

And last week, a parliamentary committee called for no further brownfield FDI projects to be permitted. In a report on pharma FDI, the Department-Related Parliamentary Standing Committee on Commerce stated that years of FDI have not helped Indian pharmaceutical R&D to advance, led to technology transfer, job creation or improvements to production or distribution, and that it has harmed India’s exports.

FDI has proved more beneficial to western markets than to Indian patients, said the Committee, adding: "the pharmaceutical industry is not like any other industry/business. It is one sector of the economy which has to be dictated by public good rather than foreign investments, profit and revenue."

Meantime, beginning consultations with government departments on the proposed amendments to FDI policy, the Department of Industrial Policy and Promotion (DIPP) has stated that the changes should be prospective, not retrospective.

Observers also note that the policy moves will allow the current backlog of proposed FDI projects tomove forward.