MNCs swallowing India’s pharmaceutical firms

A week ago, in the cover of declining rupee and shrinking FDI inflows, US based Mylan pharma has acquired Bangalore based Agila Specialities for a whopping figure of Rs 5158 crore. The Cabinet Committee on economic Affairs, the executive body responsible for approving FDI above Rs 1200 core has ratified the acquisition. The takeover was ratified after intense discussions within the government wings, and finally the US Company was able to complete the strategic takeover of Agila which is a specialist in vaccine and injectable-drug making.

Mylan’s Agila acquisition was the last one of a serial of takeovers by foreign pharma companies in India. Increasing acquisitions in the pharmaceutical sector has raised concerns from different quarters. Recently, a Parliamentary Standing Committee has observed that increasing such acquisitions may result in increased drug prices in the country.

India holds the largest generic drug making industry in the world. Presence of such drugs at cheap prices is a real threat to MNCs. Under the proposed India-EU free trade agreement, the EU wanted India to curtail the export of generic drugs to Europe to protect the interest of European MNCs. But in many European cities, people protested the proposed FTA, accusing that it will block cheap medicines for them.

For the MNCs, the acquisition of Indian companies is a tactical way to shut out cheap drug based competition from the country. Once a major portion of India’s pharmaceutical firms are acquired, it will enable them to consolidate their position globally. India at present is a major drug exporter with nearly one third of the domestic produce exported.  

Hence, growing acquisition is a health safety concern for the people and the government has identified it.

Pharmaceutical sector of the country has emerged very competitive in the period before TRIPs that is before 2005, under process patent regime. The country has produced many sound generic pharma firms which have made India as one of the lowest drug priced country in the world.   

But after 2005, with product patent regime under TRIPs, many domestic firms find the going tough and a few have sold out their firms to MNCs. One such major sold out was that of Ranbaxy laboratories in 2008. Malwinder Singh and his brother sold Ranbaxy to Japancese firm Daichi Sankyo for nearly Rs 8500 crores that shocked the corporate world. In 2006, Mylan has bought Hyderabad based Matrix laboratories for nearly Rs 3500 crores. 

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