FDI policy for pharma set for overhaul to protect local units

Commerce Ministry to bring out a Cabinet note on the proposals

Updated - December 04, 2021 11:07 pm IST

Published - August 16, 2013 11:53 pm IST - NEW DELHI:

A chemist is seen working in a pharmaceutical lab. File photo.

A chemist is seen working in a pharmaceutical lab. File photo.

The government is likely to come out with major changes in the foreign direct investment (FDI) policy in the pharmaceutical sector, and unveil steps to protect the domestic generic drug industry.

High-level meeting

This was decided at a high-level meeting chaired by Prime Minister Manmohan Singh.

The Commerce and Industry Ministry has been asked to start inter-Ministerial consultations on the issue, and single out dangers in the current FDI model. It has also been asked to bring out a Cabinet note on the proposed overhaul of the policy in the pharmaceutical sector in consultations with the Ministry of Health.

The government is also seriously considering reducing the 100 per cent FDI limit in the sector to protect domestic interests.

Commerce and Industry Minister Anand Sharma had, last month, urged the Prime Minister to urgently look into the matter and convene a high-level meeting on the issue. “In case the present FDI policy continues, then our domestic capability will gradually wither away. In that eventuality, India will be compelled to be dependent for life-saving medicines either on domestic facilities of MNCs or on imports,” Mr. Sharma had conveyed to Dr. Singh.

Talking to reporters after the meeting with Prime Minister, Mr. Sharma said, “The meeting looked at two dimensions. One is that the proposals which have come under the existing policy, there are some concerns, particularly with regard to oncology, injectibles, and vaccines, where we see there is a critical need which must be met at all cost and that the policy will ensure”.

Before the proposals were placed before the Foreign Investment Promotion Board (FIPB) for approval, they would have to go through the existing policy, he said.

“If there are safeguards required that will be discussed as what should be the nature of safeguards so that affordable life-saving medicines are made available to the people,” he added.


There has been a growing feeling and concern within the Commerce and Industry Ministry that the present policy is not serving its objectives and that it needs to be fine-tuned to ensure that cheap drugs are made available to the people at large. The other concern is that MNCs have acquired brownfield projects of domestic companies but have spent very little on R&D in India. “They are doing only clinical trials in India and not actual drug development work. We will ask the Health Ministry to shortlist their concerns and suggest the verticals in the sector that should be sole domain of the Indian companies,” a senior Commerce Ministry official, who was part of the meeting, said.

The meeting discussed how to prevent MNCs from changing product-mix from generics to branded generics or patented ones after acquiring Indian companies, which could impact the cheapest price generic for the Indian population.

The meeting expressed concern over the ability of Indian firms to take advantage of the situation of blockbuster drugs going off patent through 2015 could be impaired.

As many as 67 per cent of drugs worth $80 billion is expected to go off the patent regime between 2011 and 2013. “Over 96 per cent of FDI between April 2012 and April 2013 has come into brownfield projects. It has not led to significant addition to gross assets or jobs or increase in R&D expenditure.

It has led to outsourcing, clinical trials to India rather than new investment in R&D for development of new drugs. About 28 per cent of the market is controlled by MNCs. If another top three Indian companies are acquired by MNCs, their share would rise to 41 per cent and on acquisition of the next rung of eight companies, their share will go over 55 per cent,” the official added.

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