In order to prevent market domination by pharma companies which may affect prices of life saving drugs in the domestic pharma market, the anti-trust body, Competition Commission of India (CCI) has sent notices to Sun Pharma and Ranbaxy to get specific data on the quantum of business the merger will hold in terms of sales. As per sources, the process of evaluating the deal will take three months time.
With Sun Pharma and Ranbaxy merger, the new business entity will hold 10 per cent share of India’s annual pharmaceutical market, which is estimated at Rs.76,000 crore.
In order to ensure healthy competition and to serve the larger public interest, the antitrust body wants data on the 46 drug formulations that will constitute the merged entity’s portfolio. It is speculated that the entity will have a significant presence in the market in the diabetic and cardiac segments with the clearance of the deal.
Under India’s Merger and Acquisition (M&A) Rules, companies need CCI’s approval if the combined assets of the two entities are worth more than Rs.1,500 crore or sales amount to more than Rs.4,500 crore in India.
Sun Pharma’s acquisition of Ranbaxy slightly uncommon in the pharmaceutical sector with one Indian company buying a local competitor will have estimated annual revenue of $4.2 billion (about Rs.25,200 crore). Since both companies are market leaders in various drug segments, the merger may have significant impact on drug prices.
An Industry spokesperson said, "CCI is questioning the deal and therefore doing its job of keeping a check on the monopolistic trade practice followed by any business entity. It becomes difficult to keep prices under check when companies hold between 50-90 per cent of markets share in any drug segment."
According to reports from the industry, the merger may result in highly concentrated market in 46 drug categories, throwing the drug price control in complete disarray. This is the first time the antitrust body had sent out such show cause notices during merger or an acquisition. CCI is yet to hear from the companies as to how the deal should be cleared.