Indian panel rejects cap on pharma M&A, backs commission review

An Indian government panel weighing new rules for foreign pharma investment has spoken. The good news--for M&A-minded global drugmakers anyway--is that the panel doesn't want to cap direct investment in domestic pharma companies. But the panel does recommend that pharma M&A face review by the country's competition commission before deals close.

The panel, headed up by Planning Commission member Arun Maira and backed by the Finance Ministry, rejected calls for a 49% cap on foreign pharma investment, the Economic Times reports. The Indian Health Ministry and the Department of Industrial Policy and Promotion (DIPP) proposed that cap and advocated that deals be cleared by the Foreign Investment Promotion Board rather than the competition commission.

Indian drugmakers have been lobbying for M&A review since a series of buyouts put some leading pharma companies in the hands of foreign drugmakers. The ET notes that, since 2006, a half dozen major Indian pharma companies have been taken over by foreign drugmakers. According to the Wall Street Journal, foreign companies bought nearly 90 Indian companies for more than $15 billion total over that time period.

But it was Abbott Laboratories's buyout of Piramal's domestic drug business--which made Abbott ($ABT) into India's biggest drugmaker overnight--that finally touched off calls for an investment cap. Indian pharma firms and some government officials say they're worried that foreign-controlled drugmakers could raise prices and reduce patient access to medicines.

Maira told the Economic Times that competition commission review of deals is an appropriate approach to governing foreign pharma M&A. As the WSJ notes, the Maira panel's moderate approach will likely appeal to Indian government types who don't want to return to the days when foreign investors shied away. Whether domestic drugmakers will come around remains to be seen.

- get the ET coverage
- read the WSJ story
- check out the Times of India piece