The Department of Industrial Policy and Promotion (DIPP) is likely to study and submit a report on the recent spate of takeovers in the pharma sector and the impact on the domestic market, following the concerns raised and requests made by the Ministry of Health and Family Welfare and the Department of Pharmaceuticals.
The Commerce Ministry, under which the DIPP works, is learnt to have passed on the requests by the DoP and Health Ministry to the agency for further follow-up action and make a study on the subject. Since the DIPP had already made a discussion paper a discussion paper seeking views on foreign takeover of Indian pharma companies, the agency is likely to submit the report without long delay, sources said.
The paper of the DIPP, which warned that the takeovers could lead to an oligopolistic market, had also cited the issue of compulsory licensing for pharma. These may lead to fewer companies and effective drug availability and may also threaten cheap and effective drug availability, it said, adding that the takeover by foreign company could push drug prices up.
The DoP and the health ministry had also raised same kind of apprehensions and sought a comprehensive study from the commerce ministry on the takeover issue. Besides, DoP also has constituted a team to study the matter on their own after domestic pharmaceutical companies claimed that they were being forced to sell out due to lack of funding for research and development.
Health minister Ghulam Nabi Azad had raised the issue of acquisition with the commerce minister and pointed out that it would have impact on the availability of low-cost medicines in the country. He had also sought a review of the FDI norms in the sector.
The minister suggested that FDI in the domestic pharmaceutical industry should be shifted from the automatic route to the Foreign Investment Promotion Board (FIPB) route to ensure healthy growth of pharmaceutical industry and easy access to medicines for ordinary Indians. Shifting to the FIPB route would make the takeover difficult, he said in a letter to the commerce ministry.
In the last four years, at least six major acquisitions of Indian companies took place – Ranbaxy, Dabur Pharma, Shanta Biotech, Piramal Healthcare, Matrix Lab and Orchid Chemicals. Further, there have been tie-ups between MNCs and domestic companies including GSK’s link with Dr Reddy’s; Pfizer with three companies - Aurobindo, Strides Arcolab and Claris Life Sciences; Abbot with Cadilla Health Care and Astra Zeneca with Torrent.