"The apprehension amongst policy makers is that if five or 10 foreign companies take over production bases in India through the 100 percent FDI route, it would give rise to monopolies, which would be able to dictate prices of common drugs," Srikant Kumar Jena, chemicals and fertilisers minister, said at an industry event here.
Jena was speaking at a Federation of Indian Chambers of Commerce and Industry (FICCI) event.

"The acquiring companies need to clearly demonstrate the value addition brought forth, either for servicing the domestic segment or significant increases in export earnings," Jena said.

"The motive should not merely be shopping of Indian companies to access one of the highest growth markets in India or to acquire facilities and reduce competition of potential Indian pharma industry in its quest for access to emerging export markets," he said.

Pharma industry representatives also expressed their apprehensions about a proposed price monitoring system by the government saying it would constrain growth of the sector.

Jena was quick to clarify that only the prices of "most essential drugs" would be under surveillance.

"Unlike the FMCG, medicines are not available in a free market as the prescription of a doctor drives the market and there is an asymmetry due to the interests of various stakeholders," Jena said.

Jena said the issue impacted not just India but also developed countries.

"This is an issue that is engaging the attention of governments of even developed countries, where a well-developed insurance sector and more informed public is also finding it difficult to contain costs of medicines and overall healthcare."

Under the current framework, foreign direct investment (FDI) up to 100 percent under automatic route in greenfield investments is allowed; FDI up to 100 percent in existing companies is allowed under government approval route.