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Healthy Skepticism Library item: 19641

Warning: This library includes all items relevant to health product marketing that we are aware of regardless of quality. Often we do not agree with all or part of the contents.


Publication type: news

Srinivasan S
Dangers of FDI in pharma
Business Line 2011 Oct 14

Full text:

Among the imminent concerns, regarding access to medicine in India is the issue of FDI in pharma. We need to ask why we need FDI in pharma sector, whether brownfield or greenfield projects. We have been doing well otherwise too, thank you.

If and when and we need investment, it ought to be based on the technologies and medicines necessitated by India’s disease patterns. The choice ought to be in our hands as to where we source investments from. That way, we can avoid technologies with little or no evidence base or relevance to India coming under the guise of new technologies.


Let alone 100 per cent FDI, even a controlling share in any local pharma major by an MNC means it ceases to be an Indian company for all practical purposes. Why should that concern us? That’s because a foreign pharma company is that much less accountable to the local needs and to the national government; and having deeper pockets, their ability to influence our government and bring upon cross-sectoral pressures from Western governments is very high.

During the last decade, Indian pharma companies have become the chief source of low-priced quality generics (that is drugs out of patent). For instance, more than 60 per cent of UNICEF’s international medicine procurement is from India while India is the major supplier of medicines for HIV in Africa. So what would a “good” pharma MNC with strategic grasp do? Take the war where it hurts: lobby for tougher IP regimes, and lobby against inconvenient measures like Section 3d of India’s Patents Act. Canvass in international fora for a slew of measures that make things difficult for India’s pharma exports. These include border measures like ACTA that legitimise seizing goods in transit, the whole exercise to call India-made generics “counterfeit”, and within India opposition to any kind of price regulation. At the same time, they promote the idea that salvation of sorts for India’s pharma industry lies in 100 per cent automatic FDI.

Novartis is one of the companies battling against Section 3 d even as it attempts to get product patent on the anti-cancer drug Gleevec (brand name for Imatinib mesylate) and stall generic competition. Most importantly, the Novartis version of this vital anti-cancer medicine is priced at Rs 1.3 lakh for a month’s dosage whereas the local generic versions cost Rs 6,000 to Rs 10,000 per month’s dosage.


If you do not want to offer lower prices, buy the competition. That is the real danger of the 100 per cent FDI and the selling/takeover of Indian companies. It is the decimation of competition by buying over. The competition, unfortunately, is selling gladly. For, now apparently is the “right time”.

Now imagine this real scenario: you buy Indian companies because here in India manufacturing costs are cheap. You have the much-vaunted pool of technical personnel. Finally, this tendency will — or let us say could — result in a handful of MNCs controlling more than 50 per cent of the market; it has jumped to 30 per cent after the recent takeovers.

Try and impose conditions like price regulation or an essential-medicines-only policy on them, and they will say they cannot operate in these conditions. Government panics and withdraws strict regulation on prices. High prices rule the roost. Government wants to impose compulsory license but there are no takers, because there are few or no Indian generic companies left to pick up the gauntlet.

Slowly, because of such dominance, or abuse of dominance, entry barriers for new companies are set higher and higher — no young man or woman would dare a pharma start-up unless he/she has deep pockets. Gradually, there would be a monopoly of maybe half a dozen big multinational pharma companies with no motivation to service local needs, or no compulsion to comply with local government interests.

This denouement, if anything, highlights the need for maintaining the current plurality of Indian generic companies with intelligent use of price regulation, compulsory license provisions and TRIPS flexibilities.


The Maira Committee report would, however, want us to believe in the goodness of big pharma. Indeed, to expect (as the Maira Committee report does) the pharma industry to comply with the government’s request for “responsible behaviour”; to comply with price regulation; “to give an undertaking that it (pharma companies) will co-operate without hesitation should the Government require it to manufacture under a compulsory license, as a public commitment of its intention to make affordable medicines in the public interest”; and that the pharma industry would respond to exhortation to “voluntarily become a role model of a new paradigm of business responsibility” — reveals a deliberate naiveté on the part of the Maira Committee or a poor reading of pharma history world over. All these homilies seem to be aimed at ensuring that “India cannot be accused of ‘going back’ on reforms and discouraging foreign investment”.

The Maira Committee has reposed a lot of faith in the Competition Commission of India (CCI). These are untested waters. How does one explain that the same medicine of comparable quality is made and marketed at a variety of prices in India — and priced often 10-20 times the cost price? Overpricing of medicines and unethical marketing practices of pharma companies, resulting in insufficient access and consequent misery, are not seen as a failure of competition or abuse of dominance.

Indeed, these are not a primary concern, as yet, to the CCI, because of CCI’s restricted interpretation of competition. The CCI is perhaps already seen as helpless against, if not oblivious to, the real problems consumers have with pharma companies.


However, the Prime Minister has displayed some awareness of the political reality. Now, a distinction will be made between ‘brown’ and ‘green’ projects. Brown FDI in green disguise is, however, going to emerge as problems down the line. Brown projects — the traditional merger, acquisitions — will go eventually through CCI. Green projects, presumably bringing in new technologies or new ventures from the scratch, would get automatic approval.

But will the CCI intermediation, such as it is, help us stop takeovers of domestic pharma companies? Or will the CCI go through the M&A details, which almost certainly will not be in the public domain, and declare certain takeovers are kosher and some not so kosher? But why all this? Why not put a moratorium on acquisitions in national interest because our generic pharma industry in India is the backbone of the health of our people and that of the developing nations?

These after all are the real stakeholders.
No matter what the Maira panel would have us believe, foreign pharma firms will continue to buy out low-cost domestic manufacturers and raise prices.


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Email a Friend influence multinational corporations effectively, the efforts of governments will have to be complemented by others, notably the many voluntary organisations that have shown they can effectively represent society’s public-health interests…
A small group known as Healthy Skepticism; formerly the Medical Lobby for Appropriate Marketing) has consistently and insistently drawn the attention of producers to promotional malpractice, calling for (and often securing) correction. These organisations [Healthy Skepticism, Médecins Sans Frontières and Health Action International] are small, but they are capable; they bear malice towards no one, and they are inscrutably honest. If industry is indeed persuaded to face up to its social responsibilities in the coming years it may well be because of these associations and others like them.
- Dukes MN. Accountability of the pharmaceutical industry. Lancet. 2002 Nov 23; 360(9346)1682-4.