India eyes drug industry ownership curbs

An outcry over foreign takeovers of Indian pharmaceuticals companies has prompted the government to consider imposing limits on overseas ownership of domestic businesses in the sector.

India’s drug industry, which specialises in low-cost, high-quality production of generic drugs, has attracted the attention of big global pharmaceuticals companies and led to a spate of high-profile deals.

But the takeovers have raised concerns about whether the change in ownership will lead to higher prices, putting drugs out of reach for India’s poor.

As a result, the commerce and health ministries are considering whether the government should designate the pharmaceuticals industry a “sensitive sector”, which would require foreign companies seeking more than 49 per cent in any Indian drugmaker to first obtain government approval.

India already limits foreign ownership in many sectors but there are no restrictions on pharmaceuticals ownership.

“If multinational companies are successful in taking over, they will jack up the prices,” said one senior health ministry official. “Strict regulation is necessary.”

In 2008, Japan’s Daiichi Sankyo paid $3.6bn to take over Ranbaxy Laboratories, India’s biggest drugmaker. Sanofi-Aventis paid €550m for a controlling stake in Indian vaccine-maker Shanta Biotech in 2009; and last year, Abbott Laboratories of the US paid $3.7bn for Piramal Healthcare’s domestic drug formulation business.

It is not clear whether any takeovers have led to higher prices, but the deals have set alarm bells ringing in a country where the government spends just 0.9 per cent of gross domestic product on public health – one of the world’s lowest levels.

“Manufacturing should be controlled by us, so nobody can hold us to ransom,” said Congress party politician Jyoti Mirdha, who has been pushing for tougher regulation of acquisitions in the sector.

Any change of foreign investment rules would require the backing of the finance ministry, whose minister, Pranab Mukherjee, is believed to share foreign takeover concerns.