In a bid to protect the Indian drug manufacturing sector, the government is contemplating tougher foreign investment norms for multinational firms to acquire existing pharmaceutical facilities in India. The new draft pharma policy lists out a range of measures such as continuation of manufacturing of essential medicines, expenditure on R&D and technology transfer to seek approval for foreign direct investment (FDI).
“At present there is no mechanism or system to monitor the post-acquisition (FDI) activities of the company. A system would be developed or monitor the adherence to these conditions,” the new draft policy said. It highlighted how several neighbouring countries like Vietnam, South Korea, Sri Lanka and Bangladesh are emerging as generic drug manufacturers and posing competition to India. Known for its ability to supply low priced quality generic medicines, India is currently witnessing a decline in its compounded annual rate of growth in the pharmaceutical industry. “The competitive advantage is being undermined through another route- the acquisition of Indian companies by foreign companies. Countries that are traditionally not strong in manufacturing formulations have started acquiring formulation-manufacturing plant companies through automatic and government approval route,” the draft policy said.
Sources believe since manufacturing is cheaper in India, and most of the facilities have state-of-the-art infrastructure, foreign firms acquire these units and then stop manufacturing drugs for use in India.
