Expert committee asks for an urgent reversal of the present FDI position in the Pharma sector

An expert committee appointed by the Planning Commission and headed by Srinath Reddy president, Public Health Foundation of India has asked for an urgent reversal of the present position of Foreign Direct Investment (FDI) in the Pharma sector. The expert committee wants the foreign drug multinationals to bring down their stake in the Indian subsidiaries to 49%.

The final report of Srinath Reddy committee to be submitted to Montek Singh Ahluwalia, Deputy Chairman of Planning Commission on November 28 has stressed on the urgent need to “revisit India’s FDI regulations to amend the present rules of an automatic route of 100% share of foreign players in the Indian industry to less than 49%, so as to retain predominance of Indian pharmaceutical companies and preserve self-sufficiency in drug production”.

However, another committee, headed by Planning Commission member Arun Maira formed in June this year, which had the mandate to see the impact of FDI in pharmaceuticals in the context of increasing mergers and acquisitions in the domestic drug industry and the need to turn India into a global pharma manufacturing and research hub, had sought for continuance of 100% FDI in the pharmaceutical sector. The government had accepted the Maira committee report and decided to maintain a status quo on its FDI policy in pharma sector. On the Maira panel suggestion, the government also decided to route all pharmaceutical M&A clearances through the Competition Commission of India, irrespective of the size of the deal.

Meanwhile, the Reddy committee vows to strengthen the capacity of the Public Sector for the manufacturing of domestic drug and vaccines and has recommended that the central and state governments should assist and revive public sector units that manufacture generic drugs and vaccines, limit the voting rights of foreign investors in Indian companies, and take other measures to retain and ensure self-sufficiency in drug production.

The Reddy committee also talks about the importance of issuing compulsory licenses to make available, at affordable prices, all essential drugs relevant to India’s disease profile. The committee has further recommended a national package for all citizens, irrespective of their financial status through public sector as well as contracted in private facilities, which includes Non-Profit Organizations and Non-Government Organization.  Under the proposed package, citizens will be permitted to supplement free of cost service both in patient and out-patient care offered under the Universal Health Coverage (UHC) system by paying out-of-pocket or directly purchasing additional private voluntary medical insurance from regulated insurance companies.

However, for financing the proposed UHC system it will require public expenditure on health to be increased from around 1.2% of current gross domestic product (GDP) to minimum 2.5% by 2017 and to 3% of GDP by 2022.