Sunday, October 9, 2011

PM to mediate in DIPP, PlanCom slugfest on pharma FDI

The Department of Industrial Policy & Promotion (DIPP) and Planning Commission member Arun Maira are sticking to their guns on foreign direct investment (FDI) in the pharmaceutical sector. Prime Minister Manmohan Singh will hold a meeting with the stakeholders on Monday to sort out the differences.
The Maira Committee draft recommends the rules guiding 100 per cent FDI in pharma through the automatic route should not be changed, but the Competition Commission of India (CCI) should vet all mergers and acquisitions (M&As).

However, four of the eight panel members, representing the ministries of health (two members), commerce, and science and technology (one each), have opposed the report.

The DIPP, on its part, has submitted a dissent note against the contents of the draft, which is being added to the report. Singh will consider the report on Monday.
On allowing 100 per cent FDI in acquiring pharma companies, the DIPP said: “We are worried a stage may come when we may not have a company ready to manufacture drugs on behalf of the government, even if the provision of compulsory licence is invoked.”
A senior official from the health ministry said the report had failed to recognise the difference between sectors where 100 per cent FDI was allowed and the health sector. “It’s not just an issue of competition,” he said. Favouring 100 per cent FDI, Maira wants monitoring of this overseas investment through the CCI. “We still believe the CCI should be used to keep a tab on M&As in the pharmaceutical sector as it is a competent body,” Maira told Business Standard.
The DIPP, however, has raised serious questions on the roles and powers of CCI, which, it says, were approved recently and would take substantial time before being effectively implemented. It said the CCI had been mandated to work on anti-competitive practices and, thus, it would not be able to address public interest issues on health.
The health ministry official said the country’s health care security could not be protected by mere competition control or price control. “You need to build and sustain health care capabilities through sufficient generic competition and national ownership of such capabilities,” the official said.
The fact that acquiring companies were paying huge valuations, which were many times the cost of setting up greenfield projects, did raise a question on their motivation, said the DIPP, adding the (Maira) Committee should have appreciated this position. Earlier, the health ministry had raised concerns on the impact of a series of takeovers happening since 2006 in the domestic drug industry. Subsequently, it urged the ministry of commerce and industry to tweak the FDI policy, following which the Maira Committee was formed to examine the current policy on pharma.

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