India mulls limits on foreign pharma deals

Big Pharma companies eyeing potential M&A in India might want to hurry up. Spooked by recent buyouts, Indian officials are weighing a new cap on foreign investment in domestic companies. The 49 percent limit would keep outside companies from controlling Indian drugmakers and help protect access to cheap medications, LiveMint reports, citing sources.

Plenty of foreign drugmakers have made deals with Indian companies. For example, Sanofi-Aventis ($SNY) acquired a controlling stake in vaccine maker Shantha Biotech in 2009. Sanofi has since been plagued by manufacturing trouble at Shantha, but that's another story. But it was Abbott Laboratories' May buyout of Piramal Healthcare's pharma business that lit a fire under Indian drugmakers and government officials. That $3.72 billion deal put Abbott at the top of India's pharma market, a shift that prompted local players to view foreign investment in a new light. 

Officials are now predicting foreign drugmakers will control 20 percent of India's drug business by the end of this fiscal year. Already, that share has risen to 15 percent from 10 percent in 2009. Locals say they're afraid that Big Pharma will raise prices, cutting off poor Indians from treatment, but no doubt they're just as afraid that domestic drugmakers won't be able to compete with multinationals. Justifiably proud of their pharma industry, Indian officials want to protect it.

The proposal would still allow foreign companies to buy controlling interest in Indian firms. But those deals would require government approval, which, considering the current fears, could be tough to obtain. Talks are said to continue this week.

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