India won't cap foreign M&A, but deals will face review

It looks as if India has come to a compromise on foreign pharma investment. Instead of putting a cap on M&A or requiring all foreign investment to pass muster with government officials, the new rules would require foreign acquisitions to submit to review by competition watchdogs. Investments involving new facilities or expansions would be review-free.

The proposal emerged from a meeting between three government ministers who had been feuding over potential protections for domestic pharma and the Indian prime minister, The Hindu reports. One faction had proposed a 49% limit on foreign M&A, claiming Big Pharma's buyouts of Indian drugmakers threatened to tighten up access to affordable drugs. Officials also disagreed about which agency should scrutinize proposed deals.

The government officials had agreed that some sort of oversight was necessary. After all, Abbott Laboratories ($ABT) became the country's biggest drugmaker in one fell swoop with the buyout of Piramal Healthcare last year. That deal followed several others, including Daiichi Sankyo's buyout of homegrown Ranbaxy Laboratories and Sanofi's ($SNY) deal for vaccine maker Shantha Biotechnics.

Deals requiring review will go through the Foreign Investment Promotion Board for now to allow the Competition Commission of India time to develop regulations for M&A, thus ensuring "a balance between public health concerns and attracting FDA in the pharma sector," the government said. After that, the CCI will handle deal review.

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