The government on Wednesday decided to retain 100% foreign direct investments (FDI) for existing pharmaceutical companies setting aside the speculation that the limit, if not curbed could eventually encourage a hike in cost of medicines.
“The government has reviewed the position in this regard and decided that the existing policy would continue with the condition that ‘non-compete’ clause would not be allowed except in special circumstances with the approval of the FIPB,” said the department of industrial policy and promotion in a press note.
FDI in the pharmaceutical sector jumped by 86.5% to $1.08 billion during April-October period of the current fiscal amid concerns over continuous mergers and acquisitions of domestic drug makers by multinationals.
In the past one year, a number of multinational companies have tried to acquire Indian pharmaceutical companies leading to fears that these companies will stop producing essential and generic drugs in the country that will result in increase in the cost of medicines.
India had allowed 100% FDI in the pharma sector through the automatic approval route in 2002.
In its proposal, the Department of Industrial Policy and Promotion (DIPP) had said that the acquisition of Indian pharma companies will severely impact availability and affordability of generic medicines in the country and recommended a reduction in the FDI cap to 49% from 100% in rare or critical pharma verticals. In September 2013, the government cleared the US based Mylan’s FDI proposal.