FDI in pharma sector doubles during April-August

Foreign direct investment (FDI) in the pharmaceutical sector has more than doubled to $1.07 billion during the period between April and August amid concerns over increasing acquisitions of domestic firms by multinationals. FDI in drugs was at $487 million during the corresponding period last year, according to latest data from the Department of Industrial Policy and Promotion (DIPP).

Faced with a rush of multinationals to acquire Indian pharma firms, the Commerce and Industry Ministry is proposing to tighten the FDI policy for the sector by incorporating conditions like mandatory investment in R&D and non-compete clause in the shareholders pact.

During the year ended April, 2013, over 96 per cent of the total FDI in the sector has come into brownfield pharma.

"The continuous acquisition of Indian pharma companies will severely impact the availability and affordability of generic medicines in the country," an official said.

The ministry is floating a cabinet note to include major changes in the FDI policy in the sector to protect domestic generic (off-patent) firms.

The government has recently cleared a Rs 5,168 crore proposal of US-based pharma firm Mylan Inc's to acquire Indian generic drugs company Agila Specialties.

Other big recent acquisitions include Shantha Biotechnics by French pharma company Sanofi-Aventis. In 2008, Japanese firm Daiichi Sankyo bought India's largest drug maker Ranbaxy for $4.6 billion.

India allows 100 per cent FDI in the sector through automatic approval route in the new projects. However, foreign investment in existing companies is allowed only after approval from the Foreign Investment Promotion Board (FIPB).

Other sectors which received high FDI during the period included services ($1.19 billion), automobile ($661 million), construction ($592 million) and chemicals ($359 million).