Foreign takeovers of Indian drug companies fuel fear of rising prices

Washington Post Staff Writer
Saturday, March 12, 2011

NEW DELHI - Global pharmaceutical conglomerates' recent acquisitions of Indian companies have alarmed health officials and patient advocacy groups who say that cheap generic drugs may no longer be available for millions of poor people in the coming years.

Now, the government is considering erecting barriers to foreign investment in India's booming pharmaceutical industry to prevent takeovers. Officials say they could introduce new caps on foreign investment and tighten the rules of entry into the industry.

"The recent acquisitions of Indian companies by multinationals are a cause of major concern for us. This will affect availability and affordability of generic drugs for India's poor," said L.C. Goyal, additional secretary in the Ministry of Health and Family Welfare. "Right now, our policy says anybody can walk in and acquire. We have to ensure that these acquisitions do not undermine our public health priorities."

Since 2008, global pharmaceutical giants have acquired six Indian drug companies. The Japanese company Daiichi Sankyo took over India's largest drug producer, Ranbaxy, for $4.6 billion, and U.S.-based Abbott Laboratories acquired the domestic business of Indian firm Piramal Health Care for $3.7 billion last year.

A health panel of lawmakers has called for new policies to ensure that major Indian drug companies remain in domestic hands.

Last month, Commerce Minister Anand Sharma said that foreign investment in existing Indian drug companies will no longer be "automatic," and that future investors will have to apply to the Foreign Investment Promotion Board for approval.

India's $11 billion drug industry is likely to grow to $30 billion by 2020, a jump of 163 percent, analysts say. Indian firms produce 20 percent of global generic drugs, and account for almost 30 percent of the U.S. generic market.

Analysts say that the recent mergers and acquisitions of Indian companies are aimed at the $150 billion in business opportunities that will open up by 2014, when several drug patents expire. With research funds drying up, the economic slump and drug patents expiring, big companies are turning to the generic drug market.

"This kind of an opportunity for growth does not come very often. Indian drug companies are perfectly placed to tap this with our generic manufacturing expertise. This is why so many global companies are acquiring Indian firms," said Dilip G. Shah, chief executive officer of Vision Consulting Group, which advises pharmaceutical companies.

The U.S. Food and Drug Administration has approved 119 Indian manufacturing sites, the highest number of any foreign country. Almost all of Wal-Mart's U.S. pharmacies source their medicines from India, Shah says.

Health officials say that the global takeovers will turn India into a low-cost manufacturing hub for richer nations, and weaken their domestic focus.

"The Indian industry was built to make cheap lifesaving medicines available for its poor. But the foreign takeovers may shift their focus toward exporting to developed nations," said Goyal.

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