FDI in Domestic Pharma Cos to Be Cleared by FIPB
The government today decided that all foreign investments in existing domestic pharma firms should be allowed only after clearance by the FIPB, amid mounting concerns over availability of affordable essential drugs in the wake of multinationals acquiring local companies.

According to sources, the decision was taken at a high level meeting chaired by Prime Minister Manmohan Singh that was attended by Finance Minister P Chidambaram, Commerce and Industry Minister Anand Sharma and Health Minister Ghulam Nabi Azad, among others.

"Every proposal for foreign investment in existing Indian pharmaceutical companies will go to FIPB till the time the Competition Act is amended," a source said.

The source further said that any foreign company acquiring an Indian firm, which had been producing essential medicines, would have to continue to do so till the time the Competition Commission of India was empowered to vet such deals.

"Whosoever acquires an Indian firm producing essential drugs will have to continue to manufacture it till CCI is empowered to take a view on such mergers and acquisitions," the source added.

It is also understood that although the amendment to the Competition Act 2002 was approved by the Cabinet in October this year, the government is checking the legality of inserting new sectoral specific clauses in the Act so that the CCI could direct foreign firms to produce a specific quantity of essential medicines after acquiring an Indian company.

"Moreover, it is also being examined whether the threshold limit for foreign investment in brownfield projects that would require CCI clearance should be revised from the existing about Rs 750 crore limit," another source said.

Differences, mainly between the Finance and the Commerce and Industry ministries, on how much FDI in existing domestic units must be approved by the Foreign Investment Promotion Board (FIPB), had led to a delay in relaxation of foreign investment norms in the pharma sector.

While the Finance Ministry has been in favour of allowing up to 49 per cent FDI in pharma companies through automatic route, the Commerce and Industry Ministry along with the Health Ministry wanted all sorts of foreign investment in existing companies to be approved by the FIPB.

In October 2011, a ministerial group headed by the Prime Minister had put foreign investment in brownfield pharma on approval route, changing a 10-year-old policy of automatic clearance.

Under it, for any merger or acquisition, the overseas investor will have to seek permission from FIPB. After six months, monopoly watchdog CCI would vet such deals.

However, 100 per cent FDI under automatic route is allowed in new projects.

The issue of FDI in existing Indian pharma companies started attracting government's attention after some foreign firms acquired big Indian companies such as Ranbaxy, Shanta Biotech and Piramal Health Care's health unit.
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