An inter-ministerial group set up
to resolve issues on FDI cap in Pharma sector for brownfield investment has taken a decision to remove
the condition of mandatory transfer of technology by the foreign investor to
the target company. Brownfield investment means investment into an existing company. The group has however imposed following conditions:
1.
The
level of generic medicines produced for domestic use (other than for exports)
after FDI should not fall below the average level for the last five financial
years preceding the induction of FDI or the period since the date
of commencement of production by the company. The word level will be deemed
to mean the percentage of the total turnover of the pharma company and the
total quantity of production of generic medicines;
2.
That
the level of investment in research for “diseases relevant to India”
expressed as a percentage of the total cost of production shall, after
induction of FDI, increase by at least five percentage points over the
average level for the last five financial years preceding the induction of
FDI or the period since the commencement of production by the company. The
condition has to be met within a period of three years of the induction of
FDI.
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It is pertinent to recollect that this inter-ministerial group was
formed as there was inordinate delay in clearing of FDI proposal. Such delay
was mainly attributed to the differences between health ministry and other
departments. While health ministry wanted a strict policy, other departments
recommended for a liberal regime. This difference caused delay in investment
from major pharma companies such as Akorn Inc (the US), Chemo Espana (Spain)
and Global Par Pharma (the US).
The group also agreed
that instead of using the term generic the phrase “national list of essential
medicines", which could be modified from time to time, should be used. The
group further requires the health ministry
to come out with some classification specifying diseases relevant to India.
