The Industry Ministry has suggested putting restrictions on foreign direct investment (FDI) in the pharmaceutical sector stating that local pharma makers should be allowed to produce patented drugs to check medicine prices in the wake of multinational companies (MNCs) acquiring Indian companies.

“The Department of Industrial Policy and Promotion (DIPP) has prepared a discussion paper examining the option of introducing compulsory licensing under the Indian Patent Act (in the pharmaceutical sector),'' Commerce and Industry Minister Anand Sharma said in a communication to Health and Family Welfare Minister Ghulam Nabi Azad.

He said the acquisitions of Indian pharmaceutical companies by MNCs in the recent past had led to articulation of public concern on its impact on the availability of low-cost medicines.

The discussion paper suggests review of the FDI policy in the sector. At present, 100 per cent FDI is allowed in the sector through the automatic route. “This (FDI) could be shifted to the government route so that proposals for mergers and acquisitions in this important sector could be scrutinised by the Foreign Investment Promotion Board (FIPB),'' the discussion paper says.

In 2008, the country's largest drug maker Ranbaxy was acquired by Daiichi Sankyo (Japan) for $4.6 billion and recently U.S.-based Abbot Laboratories acquired Piramal Healthcare's domestic business for $3.7 billion.

Compulsory licensing is a system where by the government allows third parties (other than the patent holder) to produce and market patented products without the consent of the patent owner. Though imports of pharma products have been growing, the emphasis on exports has resulted in a significant lower growth of domestic consumption. Domestic consumption in value terms fell to Rs. 44,579 crore in 2008-09 from Rs. 45,953 crore.

As per a WHO report, 65 per cent of Indians still lack access to essential medicines. While several developed and developing countries like the U.S., Cananda, the U.K. and South Africa have introduced compulsory licensing, India is yet to explore this WTO compliant option.

PTI reports:

The discussion paper talks about the spread of serious diseases like HIV and cancer and the high costs and availability of potent medicines.

Asked to comment on the discussion paper, which seeks views from all stakeholders by September 30, Associated Chambers of Commerce and Industry of India President Swati Piramal, whose Piramal Healthcare just sold its domestic formulation business to U.S.-based Abbot, disagreed with Mr. Sharma's view.

“I don't think mergers and acquisitions will affect the prices of drugs. There is a lot of competition and no company can afford to increase prices... There are over 50 manufacturers for a single molecule,” she said.

Earlier, the Chemical and Fertiliser ministry had suggested capping FDI in the pharma sector at 49 per cent, warning that uncontrolled acquisitions by foreign firms could lead to higher drug prices and cartelisation.