At a recent meeting of the Union Cabinet during the last week of November, an important decision was taken which almost went unnoticed by the media. The decision would shake the very basis of manufacture of affordable medicines.
The meeting held in the backdrop of a strong demand for protecting domestic pharmaceutical industries, came up with a tame note: “The current policy in brownfield and greenfield projects in the pharmaceutical sector will continue.” The term Greenfield Foreign Direct Investment (FDI) refers to the investment to set up a new business and Brownfield FDI refers to the acquisition of an existing business.
The UPA government’s largesse to the multinational drug companies will have far reaching consequences on the prices and availability of many vital and essential drugs for millions of poor people. Strangely, the government was going against the wishes of the Parliamentary Standing Committee on Commerce (110th report on FDI) which had strongly recommended a blanket ban on the acquisition of Indian pharmaceutical companies by pharmaceutical multinational corporations (MNCs).
The investigation by the parliamentary committee was prompted by a series of acquisitions of Indian pharmaceutical companies by MNCs since 2006. During the last seven years many Indian pharmaceutical companies have been acquired by the powerful drug industries. Some of the high profile acquisitions include the acquisition of Ranbaxy, Shantha Biotech and Nicholas Piramal by Daiichi Sankyo, Sanofi-Aventis and Abbott respectively.
The ministries of health and family welfare and Commerce & Industry have publicly expressed their grave concern over these acquisitions.
Areas of concern
What are the implications of this Cabinet decision on making medicines affordable to the common people? Firstly, these serial acquisitions of the Indian generic companies by the MNCs will have significant impact on the competition, price level and availability of medicines. It could incapacitate the Indian domestic drug industry and all these in turn could adversely impact the availability and access to medicines at affordable prices. A few more takeovers of this kind may destroy the benefits arising out of India’s generics revolution that rightly earned India the epithet of the “pharmacy of developing countries”.
Secondly, the increasing dominance of the foreign companies will hit domestic companies. The market dominance will lead to more prescriptions for the foreign companies, driving away the domestic players from the pharmaceutical sector. The domestic companies have taken three decades to secure a position of eminence in the doctors’ chambers. This will be lost soon, if the foreign companies were to have uncontrolled freedom of acquisition.
Thirdly, multinational drug companies’ acquisition of the Indian drug companies would prevent the introduction of generic versions of patented medicines by utilising the flexibilities contained in the Indian Patents Act such as compulsory license or pre-grant opposition. For instance, the Daiichi-Sankyo, a Japanese drug company immediately after acquisition of Indian company Ranbaxy, withdrew all its patent challenges on Pfizer’s blockbuster medicine Lipitor filed in more than eight countries.Fourthly, the multinational drug companies having entered the global market space will penetrate the market in developing countries which is currently being held by Indian companies and will use their dominant position to throttle Indian companies in the global market, impacting their export performance.
Several developing countries which have noted the contribution of Indian generic industry towards making medicines affordable are now a worried lot. The acquisitions are a strategy route for the monopolists to buy out competition in order to prevent the emergence of affordable medicines. The real danger of the 100 per cent FDI and the selling/ takeover of Indian companies is the decimation of competition as well as capabilities.
In case the present FDI policy continues, then our domestic drug producing capabilities will gradually wither away. In that eventuality, India will be compelled to be dependent for life-saving medicines either on domestic facilities of the MNCs or on imports. What is the way forward? For this there is an urgent inevitability to revive the public drug manufacturing sector that would address the health needs of the country. A robust and strong public health care system would definitely shield the pharmaceutical sector from threats of investment policies by the MNCs.
(The writer is the convenor of Drug Action Forum - Karnataka)