[Ip-health] News: Hindu Business Line- Commerce Ministry may step in to check MNC buys in pharma

Terri - Louise Beswick Terri at haiweb.org
Mon Aug 23 04:10:14 PDT 2010

Commerce Ministry may step in to check MNC buys in pharma

Sunday, August 22, 2010 3:51 PM (The Hindu Business Line) - P.T. Jyothi


Mumbai, Over the last five years, six domestic pharmaceutical operations
have been acquired by multinational drug companies, a development that
has raised red-flags with authorities at the Centre.


In an effort to tackle such sell-outs, the Commerce Ministry is
examining the regulatory action and financial incentives required to be
taken in the interest of this "vulnerable" sector, an official familiar
with the development told Business Line.


The review, an internal exercise initially, will work with the Health
Ministry and the Department of Pharmaceuticals, the official added.


The Ministry would take a close look at the present system of 100 per
cent automatic approval for foreign investment in the sector, and see if
a more guarded investment policy was required, a source familiar with
the development said.


The Government also needs to notify M&A (merger and acquisition) related
provisions in the Companies Act to facilitate the scrutiny of the
Competition Commission on acquisitions of Indian drug companies by
multinationals, points out a joint letter from a group of civil society
and patient-support organisations, including the All-India Drug Action
Network and Centre for Trade and Development addressed to the top-brass
at different ministries, including Health, Commerce, Agriculture and
Chemicals and Fertilisers (the apex Ministry for pharmaceuticals).


There are no effective legal or policy tools to address threats emerging
from the acquisition of Indian pharmaceutical companies by
multinationals, the letter observed, cautioning monopolistic behaviour
that would result in increase of the prices of medicines.


Ground realities


>From 2006 till date, sale of domestic drug operations (totally or in
part) includes the high-profile exit of Ranbaxy's promoters when they
their sold entire stake to Japanese drug-maker Daiichi-Sankyo in 2008
for close to $5 billion, and the recent sale of Piramal Healthcare's
domestic formulations business to Abbott Laboratories (NYSE:ABT) , in
May, for close to $4 billion.


Some industry-watchers say that the ground realities started becoming
difficult for local drug companies, after India implemented the product
patent regime in 2005.


Patents ensure an innovator 20 years protection on the product, or
medicine, in this case - the flip side of this being, no other company
would be able to make a generically similar version of the same product
during the patent-protected period.


This hurt the local drug companies, which have largely been makers of
generic or off patent-drugs, as innovative research required



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