Monopoly Concerns May Lead to FDI Restrictions into India’s Pharmaceutical Sector
Jan. 14 – The Indian government may issue new polices to only allow 49 percent foreign direct investment (FDI) into the country’s pharmaceutical market through the automatic avenue due to concerns that the increasing foreign market control may cause a price monopoly on drugs. Currently India allows 100 percent automatic FDI into the sector.
An official report circulated in August 2010 reveals a growing dominance of multinational corporations in India’s pharmaceutical sector. DG Shah, director general of the Indian Pharmaceutical Alliance (IPA) says MNCs have already expanded their market share to 25 percent from 15 percent five years ago.
Shah worries that the rising market penetration of MNCs will not only make the domestic generic industry lose more say in front of the country’s policymakers, but that it will also drive away domestic competitors.
Dr. YK Hamied, chairman and managing director of the generic drug major Cipla, predicts that the prices of life-saving drugs will march upwards in the next few years. He told the Times of India that since the Indian Patent Law allows product patents for all new molecules patented after 1995, the MNCs that patented many of these molecules enjoy a monopoly. In the next few years, through launching a large number of molecules, MNCs will have a larger and steadier market presence.
Hamied believes such a monopoly will bring about inaccessible pricing of life-saving drugs to the majority of people in India and other parts of the world. If prices of these drugs are too high, many people’s lives may be at risk.
The IPA has already been working on the issue with the government in order to prevent the unrestrained freedom of acquisition by MNCs from marginalizing the domestic sector. The alliance especially worries that some domestic enterprises may try to transform themselves into contract manufacturers for MNCs through acquisition.
Many foreign pharmaceutical companies, on the other hand, do not think they are monopolizing the drug prices. Kewal Handa, managing director of Pfizer India believes “it is only competition that drives prices.” According to Handa, during 2010, the average price increase in the top 10 drug brands that are not under price control was around 2 percent, which is much lower than the 10 percent ceiling set by the National Pharmaceutical Pricing Authority of India.
- Previous Article Despite Blockage, Oil Continues to Flow Freely Between Iran and India
- Next Article Indian IT Companies Don’t Agree on Outsourcing Demand in 2011