Cosme Farma was bought by Adcock Ingram for Rs.480 crore [4.8 billions] on 12th July 2k12 .It is first acquisition to be allowed after being assessed by FIPB.
Cosme Farma was an Indian firm, Adcock Ingram is second largest pharma firm of South Africa.
This marks a strategic shift of MNCs pharma acquisitions: they are on look out for small companies .The small company will provide good-distribution network and an entry into generic space .
Until recently there has been 100% automatic route for FDI in pharmaceuticals.But after the report of the inter-ministerial panel in July 2011, all the investment had to be be brought under the purview of CCI (Competition Commission of India).But since the present laws do not allow for CCI to scrutinize these, it was allowed for FIPB [Foreign Investment Promotion Board] to do so for six months until amendments in Competition Acts are made.
This inter-ministerial panel was triggered due to series of brownfield buyout since 2006 which saw major Indian Pharma firms losing Indian controls as Matrix Laboratories, Ranbaxy Laboratories, Shantha Biotechnics, Dabur Pharma, Orchid Chemicals(Injectibles) , Piramal Healthcare. It was handled the task of analyzing the impact of FDI on pricing and availability of medicines in India, dependence on imports and innovation for low cost medication.It was also asked to see if checks on FDI would cause decline in funds for drug discovery.
The panels view were not homogeneous.The panel was bifurcated over curtailing FDI.The Planning Commission member and the panel head Arun Maira was of the view that FDI should not be curbed at all as it would send signals about India taking back on liberalization policy.Others including Ministry of Commerce and Industry,Department of Pharmaceuticals,DIPP [Department of Industry Policy Promotion] wanted stiff riders on FDI in pharma sectors.The latter view prevailed but there were differences over which agency should do the gate-keeeping. Maira wanted CCI while others favored FIPB to do the scrutiny.The difference was patched as PMO put weight behind Maira. Lastly in November the responsibility was handed over to FIPB till amendment in Competition Law was done.
Lobbying is not uncommon in bureaucracy or politics, but the extent of lobbying seen in case of FIPB is disturbing. FIPB has been accused of sitting on $500 million investment and causing unnecessary delay.A special committee was formed to fasten the process of approving the proposals but myriad differences came out and the their report is still due.
Indian pharma industry though is going through a bullish phase but experts believe that this surge is short termed.The general secretary of Indian Pharmaceutical Alliance,Dilip G Shah warns that the impact measuring only through change in price levels and competition would be highly inappropriate.He also cautions that the Maira Committee and Special group both are missing the point of future of the pharma industry & poor countrymen by doing over simplistic analysis.He questions if we should develop our own indigenous R&D and develop our own manufacturing capabilities or allow MNCs to take over the industry similar to other sector.
The present scenario reveals that the Shahs fears are not unfounded.The cost of drugs has substantially risen over a month.Life saving drugs as Haemaccel (used in case operation,severe burns,and as drug carrier #1) have been priced Rs 219 from Rs.99.02 per 10 300 ml injection. Gardenal 60 mg tablet (used for relieving anxiety and during seizures) is now priced Rs 35.36 from pre-acquistion Rs.16.0. Supradyn(Multivitamiin) is another example which has undergone about 50% price increase.
The manufacturing capacity of India is being used for exporting drugs.Matrix is focused on selling antiretrovirals[drug used for HIV/AIDS] for third world countries.Shantha biotechnics is manufacturing products for European and North American markets.Orchid(injectibles) is being used for developed country markets.
The current status is automatic 49% investment FDI is allowed till their is ownership change and anything beyond that will be routed through FIPB or CCI. The company will be asked to give an undertaking of manufacturing NLEM [348 drugs have been included in the NLEM (National List of Essential Medicines),generics was considered too broad] after acquisition but technology transfer and R&D support has been dismissed on grounds of “no objective yardstick”.
The indigenous pharma industry might be sold up entirely under pressure or end up being cheap manufacturing unit for foreign investors while the government is busy deciding over which agency to assess the FDI.
While the debate for FDI in retail and other sectors are grappling the media and country, pharma sector has already been FDIed and there is not much discussion being done for this industry which affects the life(or death) of poor people too much.
This article has been compiled after taking data from numerous sources.