Just two weeks ago another big deal to acquire an Indian pharma company by a multinational was cleared when the whole policy of foreign direct investment in the pharmaceutical sector is under review. For clearing this 1.6 billion dollar deal of the US multinational, Mylan acquiring Agila Specialities of the Bangalore based Stride Arcolab, prime minister of the country himself intervened. This is despite the stiff opposition to the deal put up by the department of industrial policy and promotion (DIPP). At the same time, FIPB's clearance of 12 other FDI proposals in the sector, involving investments of around Rs. 350 crore, was put on hold as DIPP insisted that the FDI policy must be reviewed. It is believed that the PM's intervention to clear the Mylan’s deal is in the context of government desperation to attract overseas investments to finance widening current account deficit. DIPP raised objections to Mylan acquiring Agila specializing in cancer drugs because it fears that through this big-ticket deal, the country would lose yet another critical cancer drug and vaccine plant to an MNC. It is certain that if critical drug making facilities fall into foreign hands, the country may no longer be in a position to control prices of these drugs and may even have to depend on imports for such products.
The pressure on India has been mounting to open up the pharmaceutical sector for foreign direct investment for some years now and the government had allowed 100 per cent FDI in the sector through automatic approval route in case of greenfield projects. But, MNCs have not been keen to invest in new projects and preferred to acquire existing projects as they get ready facilities with established market for the products. The recent MNC investments by way of acquisition of Ranbaxy and Piramals, etc are indicative of this trend. These takeovers of Indian companies by the multinationals had neither added any fresh capacity, nor generated employment nor gave push to the R&D in the sector. The matter has been seriously reviewed by the Parliamentary Standing Committee on FDI in the pharmaceutical sector. The Committee observed that this trend is indicative of the fact that FDI is primarily being used to strengthen the business network of pharma MNCs and to keep the domestic pharma companies in a subservient position without adding anything positive to the Indian health sector. The panel's observation should be taken as a serious warning. India’s huge domestic market with no price control on patented products and availability of cheap manufacturing facilities is a big attraction for MNCs. The concern of the public interest groups and patient organizations that the main objective of the MNCs is to capture the domestic market by acquiring Indian companies and then to start launching highly expensive patented drugs in the Indian market is already proving to be true. A total overhaul of the FDI policy in brownfield projects of the pharma industry needs to be effected without losing any more time in the context of the new realities.