2011: An Uncomfortable Year for Pharmaceutical Sector
Wednesday, 28 December 2011, 18:11 IST
Printer Print Email Email
New Delhi: The pharmaceutical industry will remember 2011 as a year in which the government sought more to exercise more control over the business, be it big ticket acquisitions of domestic firms by MNCs or price controls on drugs. Amid these tussles with the government, domestic companies carried on with their business as usual. While Ranbaxy heaved a sigh of relief after finally reaching an agreement with the US health regulator to remove a ban on the sale of drugs from certain Indian plants in the American market, Sun Pharma sought to consolidate its grip over Israeli firm Taro by proposing a complete takeover. Furthermore, Lupin acquired I'rom Pharmaceutical Company in Japan as part of a global expansion drive. Nevertheless, policy was the centre of the action during the year as far as the industry was concerned. Alarmed over the trend of big Indian pharmaceutical firms being acquired by MNCs, which could have an apparent implication on drug prices, the government decided that it was high time some control mechanism was put in place. After deliberations and debate with stakeholders, the government introduced checks by doing away with automatic approval of Foreign Direct Investment (FDI) in existing domestic pharmaceutical companies. According to the new guidelines, for any merger or acquisition, overseas investors will now have to seek permission from the Foreign Investment Promotion Board (FIPB). After six months of such a proposal being approved, monopoly watchdog Competition Commission of India (CCI) will vet such deals. The decision followed a directive from Manmohan Singh,Prime Minister, who, along with his senior Cabinet colleagues, had deliberated over concerns arising out of several acquisitions of domestic pharma firms by overseas firms. The decision was influenced by acquisitions of Indian firms, including that of Ranbaxy Laboratories by Daiichi Sankyo of Japan, Shanta Biotech by Sanofi Aventis of France and more recently the domestic formulations business of Piramal Healthcare by US-based Abbott Laboratories. The government feared that a monopoly by MNCs will have an impact on the availability of affordable drugs in India. However, in the case of greenfield investments, 100 percent FDI will be allowed under the automatic route, under which investors only inform the Reserve Bank about the inflows and no specific government nod is required.
Source: PTI
siliconindia