India may allow foreign investors to buy up to 49% of existing drug companies as part of a push by Prime Minister Narendra Modi to liberalize investment rules. Investors would just have to notify the Reserve Bank of India on any transactions.
The tweak to make it easier to invest however has critics inside the industry and among civil groups concerned that manufacturers in the $20 billion-plus generic drug industry could potentially be squeezed, the Hindu BusinessLine reported.
India's Department of Industrial Policy and Promotion and the Finance Ministry are reviewing the issue as part of broader efforts to open up sectors of the economy to more foreign investment as was done with insurance last year with the cap nearly doubled from 26% to 49%.
For the drug industry, India allows 100% ownership of so-called greenfield, or new projects. But foreign investment in existing drug companies needs a nod from the Foreign Investment Promotion Board, which in the past was granted in the case of Daiichi Sankyo's 2008 purchase of a majority in Ranbaxy Laboratories, among other deals.
Separately, India's Commerce and Industry Ministry has commissioned a study to assess the impact of foreign investment on the drug industry prompted by concerns that flows to date have been in existing companies instead of the hoped-for greenfield projects.
India plans drug industry foreign investment scorecard