A Lakshman Rekha in pharma FDI

Policy makers in India need to adapt fast to new realities and move forward like other global regulators

MNC pharmaceutical companies and global investors hoping for an easing of FDI norms have been disappointed by the July 24 decision of the inter-ministerial group. The group’s decision that the Foreign Investment Promotion Board (FIPB) will need to clear foreign investments resulting in higher than 49 per cent equity stakes in an Indian pharma company is sure to make investors think twice. Another dampner is the caveat that MNCs exceeding this Lakshman Rekha will have to maintain the same level of investment in research activities and production of essential medicines for five years.

These restrictions stem from the Government’s stance that the MNC investors’ gameplan for India may not always gel with the country’s healthcare needs and realities. Indeed, it would seem that India’s policy makers view home-grown pharma companies with the same jaundiced eye. After months of stalemate between the health, pharma and commerce ministries, the PM Manmohan Singh had to step in and decide that 100 per cent FDI in greenfield investments through the automatic route will be allowed. This decision raised hopes that direct FDI in smaller pharma companies might be allowed via the direct route, with the inter-ministerial group setting a turnover cap. But the July 24 meeting dashed this hope too.

Of course, this is not the last word on the FDI in pharma debate. In fact it’s just the beginning. As pressure from different stakeholders, both global and local, builds up, its anyone’s guess how things finally pan out once it reaches the PMO for final approval.

It is ironical that one camp of policy makers blocks access to the Indian market, another pushes for access into global markets. Our cover story in the Market section, ‘So near and yet so far’ highlights the strategies of India-based pharma companies to make inroads into Russia’s pharma market and mentions Union Minister Anand Sharma’s recent efforts to lobby that country’s authorities to, among other suggestions, “streamline the registration process”.

But it seems that policy makers are allowed to have double standards. While the US’ Affordable Care Act is all about making healthcare affordable for US citizens, there are loud protests when India does the same. Compulsory licensing of Bayer’s Nexavar was the latest flashpoint, even though the US had invoked similar legislation when faced with the anthrax attack scare in 2001 and again in November 2005 when avian flu threatened to attain pandemic propotions.

But the point is, policy makers in India need to adapt fast to new realities and move forward like other global regulators. For instance, faced with a 25 per cent drop in clinical trials, the EU Commission is proposing a re-think of the 2001 Clinical Trial Directives, hoping to attract more clinical trials. Unfettering FDI, with a minimal Lakshman Rekha, will help take the pharma industry in India to the next level. Someday we will have to stop relying on compulsory licensing to meet our healthcare needs. Only then can we aspire to discover the next Nexavar right here in India.

Viveka Roychowdhury
Editor

viveka.r@expressindia.com