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Pharma FDI: What does it really mean? - Views on News from Equitymaster
 
 
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  • May 14, 2001

    Pharma FDI: What does it really mean?

    Recently the government opened 100% foreign participation in drugs and pharmaceutical companies through the automatic approval route. What does it really mean for the pharma industry in India? Does it mean more investments by MNCs? Does that mean that the Indian consumer would have access to latest blockbuster products of pharma MNCs in the near future?

    To answer these questions lets have a look at the historical data of new product introduction by MNCs in the last five years.

    The table above points to only one thing, that is, MNCs typically have been shy in launching their blockbuster products in India. This is because India doesn’t offer patent protection and reverse engineering is a norm in the industry. Apart from this the Indian pharma market is extremely price sensitive.

    In such a scenario it is unlikely that the MNCs will launch their blockbuster research products any time soon. At least not until patent protection laws become stringent in the country. Compare this against China where the patent protection is much more stricter. Global pharma majors have invested more than US$ 2 bn in China alone.

    It seems quite unlikely that the opening of sector to 100% foreign participation would increase chances of India getting access to technology transfer from Pharma MNCs. It will actually take time before an Indian will have instant access to Viagara or Lipitor at affordable costs.

    However, there is one big plus the automatic FDI approval could bring for India. This policy may stimulate MNC investments to set up low cost research bases in the country.

     

     

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