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FDI in Pharmaceutical Industry

FDI enters the industry in following ways

Green field investment is when a company establishes a subsidiary in a new country
and starts its own production.
Brown field investment is FDI that involves the purchase of an existing plant or firm,
rather than construction of a new plant.
Joint venture is an equity and management partnership between the foreign firm and a
local entity in the host market.
Routes of FDI in Indian Pharmaceutical Industry
FDI in pharmaceutical industry in India is permitted by the following two routes:
Automatic route: This does not require any prior approval either by the government or
the RBI. Under the existing policy, FDI is permitted up to 100% for Greenfield
Prior Government Approval route: In this route, the FDI proposals are considered in a
time-bound and transparent manner by the Foreign Investment Promotion Board
(FIPB) under the Department of Economic Affairs, Ministry of Finance. Here also
100% FDI is permitted for investment in existing companies, i.e., brown field
FDI Reform,2016
The Government in June 2016, allowed up to 74% foreign direct investment in the
existing pharmaceutical companies ( brownfield) through automatic route.
The earlier situation permitted 100% FDI through Government approval route.
Therefore, in the existing policy 100% FDI is allowed through automatic route in
greenfield pharmaceuticals and 74% in brownfield (M&A) via automatic route and
any investment beyond the given mark requires Government approval, i.e cursory
review of FIPB.
Impact assessment
Facilitating growth
Increasing foreign stake in the pharmaceutical industry with definetly stir growth and
ease access to foreign technology.
Price increase
Affordability will be greatly affected with the advent of foreign stakeholders. The
generic Indian medicines wouldnt be spared.
Rich country focus
The reprioritisation will shift the focus of Indias well-honed and efficient
pharmaceutical capacity. It could be diverted from producing large volumes of
assured quality generic medicines for diseases prevalent in low- and middle-income

countries to more expensive branded products subject to patent monopolies in rich

countries and sold at exorbitant prices in select markets.
IP Policy Influence
With increased clout in the domestic pharmaceutical industry and in pursuit of its own
self-interest in the Indian and export markets, foreign controlled pharmaceuticals can
be expected to pursue policies undermining Indias commitment to the full use of
public health safeguards in its patent law that encourage competition to lower
medicine prices.