Government Panel to Make Recommendations on Scrutiny of Foreign Direct Investment in Pharmaceutical Sector. India is considering making it harder for foreign investors to acquire companies in its pharmaceuticals sector, in a bid to protect the country’s thriving market for low-priced generic drugs. Such a move could restrict multinational pharmaceutical corporations’ access to a fast-growing emerging market at a time when they are dealing with aging drug pipelines and sluggish growth in the West. Any regulatory actions, however, may be tempered by concerns among some in the Indian government that a drastic move would send a signal that New Delhi is wavering in its commitment to economic liberalization.
A high-level government committee charged with looking into the matter is expected to submit a report in coming days to Prime Minister Manmohan Singh. The panel will likely recommend that India begin scrutinizing pharmaceutical mergers closely through the Competition Commission, an antitrust body, according to committee chairman Arun Maira, a member of India’s Planning Commission, an internal government think tank. He likened his favored approach to the way friendly security guards frisk visitors to nightclubs: “Please come inside and enjoy yourself, but we want to make sure you don’t cause any harm.” India, which embarked on sweeping economic reforms in the 1990s, has allowed almost unfettered foreign direct investment in pharmaceuticals since 2001. But as foreign companies have stepped up their activity through a wave of acquisitions of Indian firms, some government officials and industry lobbyists fear that foreign companies simply want to buy up Indian firms whose cheap generic products pose a threat to them.
The long-term upshot, they claim, could be higher drug prices for India’s mostly poor consumers. “If one were not to take note of it and initiate appropriate action, the damage to the domestic industry and the public health will be irreversible,” D.G. Shah, secretary general of the Indian Pharmaceutical Alliance, an Indian industry trade group, wrote in an emailed statement. Mr. Shah wants all foreign takeovers of Indian pharmaceutical firms to be subject to government approval through the Foreign Investment Promotion Board. Anand Sharma, India’s commerce minister, recently wrote to the prime minister echoing that stand, expressing concerns that foreign takeovers could be detrimental to the generics market and urging swift action to regulate the sector, according to several news reports. A Commerce Ministry spokesman referred questions to an official at the Department of Industrial Policy and Promotion, who wasn’t available for comment.