Whether to have a cap on FDI in pharmaceutical sector or not has been under discussion by various ministries and departments of the government for some time now. The issue became a subject of heated debate in the country in the wake of ongoing trend of acquisitions of large Indian companies by the multinationals and subsequent increase in the number of patented products in the country. Public interest groups and patient organizations have been expressing serious concerns over this dangerous trend as MNCs started  launching  highly expensive patented drugs after the acquisitions. Realizing this threat, the government  set up an inter-ministerial group, comprising of officials from health, pharmaceutical and industry departments to review the situation and take a decision on the matter. The Group had initially recommended to the finance ministry that the FDI be lowered to 49 per cent from the current 100 per cent to check take-overs of Indian companies.  Now the finance ministry referred the matter to the Planning Commission. The health ministry had already made its stand clear of restricting FDI in the pharmaceutical sector although  the Planning Commission has expressed concern against enforcing a cap in the sector. Now in the last meeting of the Group, major differences of opinion have emerged between the members of the Group over  the issue. The Group is expected to submit its report by the end of September.

What is worrying the health ministry and consumer groups is the stand of the Planning Commission and the finance ministry. It seems that they are  in favour of not fixing any kind of restrictions on FDI in pharma sector on the ground that country needs huge flow of foreign capital for development. While it is fine to have 100 per cent FDI in the greenfield projects facilitating transfer of technology and capacity creation, it is not desirable to allow MNCs to have control on domestic market without establishing manufacturing facilities. For over decade, what is happening in the country is phased discontinuation of manufacturing of both APIs and formulations by MNCs. Most of the products are being outsourced from the medium and small scale units and only marketed by MNCs. Take just one case of Becosules. The product with the second largest annual turnover in the country is marketed by Pfizer but outsourced for the last several years. 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 and their research pipelines are drying up. Therefore, India’s  huge domestic market with no price control on patented products and cheap manufacturing facilities of SMEs is a great attraction for MNCs. Already they have launched several patented products in the Indian market at very high prices after 2005. India’s FDI policy in the pharmaceutical sector has to be, therefore, modified and designed taking into consideration of these realities. Otherwise India is heading for a period of high drug prices dictated by the powerful MNCs.