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FDI in Pharma Sector: Past, Present & Future

Published on Mon, Oct 21,2013 | 17:50, Updated at Mon, Oct 21 at 18:01Source : 

By: Rabindra Jhunjhunwala & Sameer Sah, Khaitan & Co.

Drugs and pharmaceuticals form part of the basic necessities of the public at large. For this precise reason, India treats drugs and medicines as “Essential Commodities” and regulates their production and supply along with other essential commodities, such as sugar. In India, around the early 1970s, the bulk of the drugs production was done by Indian arms of multinational companies. 

With the gradual tightening of exchange control norms and restrictions on foreign direct investment (FDI) generally, the dominance of Indian generic drugs manufacturers grew. They were also aided by the Indian patent regime which did not recognise product patents until 2005, and allowed generics’ manufacturers to flourish. Eventually, bowing to its TRIPS’ obligations, India amended its patent laws to recognise product patents.

With changes in Indian foreign investment laws since the decade of the 90s, and with the eventual liberalization of FDI in the pharmaceutical sector in the year 2000, multinational companies gradually increased acquisition activity in India. India was recognised as a cost effective jurisdiction to manufacture drugs and pharmaceuticals that were compliant with EU and US export requirements, and also to service the Indian pharmaceutical market.  This flurry of activity caused concerns in the Government regarding production and pricing of drugs and since 2011, there have been restrictions on FDI in this space.

This article traces the changes in this policy.

Attachments : ERGO Perspective P3 Oct 2013_Article 1.pdf

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