Pharmabiz
 

CAPING FDI AT 40

P A FrancisWednesday, November 3, 2010, 08:00 Hrs  [IST]

The policy of economic liberalization started by the Central government in 1991 had some tangible benefits to Indian economy which was witnessing a serious shortage of capital for its industrial development during late eighties. The free flow of foreign capital allowed by this policy to various sectors of the economy did give a big push to the overall development of the country. But the policy subsequently started showing its negative impact as well hitting some of the key manufacturing sectors and agriculture. This was mainly due to massive relaxations of imports of goods and services by way of reduction of import duty over the last 15 years. India’s chemical, intermediates and bulk drug industries are some of the victims of the liberalization policy and they were hit quite badly because of the large scale imports. Several units making APIs and intermediates in large and small scale sectors had to thus shut down on account of the unrestricted imports at lower tariff. That made Indian pharmaceutical industry once again dependant on imports for its APIs and intermediates. The liberalization policy also had its adverse impact on food processing and agricultural sectors. Liberal imports of food grains, vegetables and fruits under the policy have badly hit the agricultural production throughout the country. That is what made India’s agricultural production stagnant for the last four years. One of the main reasons for the government’s failure to check the raging food inflation for the last two years is this lack of foresight.

But, the worst of the liberalization policy is yet to come and that is in the healthcare sector. Acquisition of Ranbaxy, India’s largest pharmaceutical company by Daiichi in 2008 and domestic pharma business of Nicholas Piramal by Abbott Labs this year are just alarm bells. By taking over the domestic business of Nicholas, Abbott is having largest market share of 7 per cent in the Indian domestic market. MNCs are planning acquisitions of most of large Indian pharma companies as government allows 100 per cent foreign direct investment in this sector. For MNCs, acquisitions in emerging markets like India have become a necessity for their survival. Most of their patented products are expiring in the next couple of years. The research pipelines are drying up. New molecular research is not going to yield much results in the near future. If these acquisitions are not checked, MNCs are bound to dominate the domestic pharmaceutical business dictating their own prices of most of the widely prescribed medicines. Already MNCs have launched several patented products in the Indian market at very high prices after 2005. This has serious implications to access to medicines for vast majority of Indians. Some civil society groups have already alerted the government asking it to scrutinise the recent acquisitions of Indian companies and impose a cap of 40 per cent in pharma sector. The government may not find  it easy to intervene in this matter as MNC lobby is quite active now in India. All these call for a review of policy of allowing 100 per cent FDI in pharmaceutical sector so as to avoid entire take over Indian pharmaceutical market by MNCs.

 
[Close]