[Ip-health] India May Cap Foreign Direct Investment In Pharma

Judit Rius Sanjuan judit.rius at keionline.org
Mon Jan 3 13:01:13 PST 2011


India May Cap Foreign Direct Investment In Pharma
By Ed Silverman // January 3rd, 2011 // 9:24 am

Concerned that many of its drugmakers may be taken over in a wave of mergers and acquisitions, the Indian government is considering a proposal that would place a 49 percent lid on foreign direct investment in its pharmaceutical companies. Officials from the ministry of commerce and industry and ministry of health have met several times in recent weeks, and more meetings are scheduled, according to LiveMint.

The initiative stems from a paper floated last summer by the Indian Department of Industrial Policy and Promotion in response to a growing wave of deals in which multi-national drugmakers have been acquiring Indian pharma companies. Global drugmakers have espoused the “emerging markets’ trend as they desperately seek to bolster their thinning pipelines.

“Most of these companies are export oriented,” the DIPP wrote in its paper. “There is a concern that their takeover by multinationals will further orient them away from the Indian market, thus reducing domestic availability of the drugs being produced by them. This may weaken competition leading to headroom for increase in domestic drug prices…” The DIPP also promoted compulsory licensing as “a focused and sharp response which can be invoked when a single critical drug is either unavailable per se or unavailable at reasonably affordable prices.” The move alarmed prompted opposition from PhRMA (read here).

Among the deals: the $3.6 billion acquisition of Ranbaxy Laboratories by Japan’s Daiichi Sankyo; Mylan Laboratories’ $734 million acquisition of Matrix Laboratories; Fresenius spent $219 million to buy Dabur Pharma in 2008; Sanofi-Aventis acquired a majority stake in Shanta Biotech in 2009 for about $700 million; Abbott Laboratories paid $3.72 billion to acquire Piramal Healthcares domestic drug formulation unit and spent $726 million to buy Paras Pharmaceuticals.

Currently, foreign drugmakers now command 15 percent of the Indian market, up from 10 percent in 2009. “Considering the current local business ownership of foreign drugmakers, their market share will exceed 20 percent by the end of this fiscal year,” Ranjit Kapadia, senior vp of institutional research, pharma at HDFC Securities, tells LiveMint.

The line of thinking is promoted by the Indian Pharmaceutical Alliance trade group. “The recent trend has shown that the foreign companies are taking over the existing businesses from the local players to instantly grab a significant market share instead of making new investments that help in expanding the industry,” Dilip Shah tells LiveMint.

Judit Rius Sanjuan
Knowledge Ecology International (KEI)
NYC Phone: 212 222 5180
Washington DC Phone: 202 332 2670

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