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Action urged on foreign takeovers of Indian drugmakers

NEW DELHI — On the face of it, the takeover of six of Indian's key drug firms by major foreign players in the past four years seems to be routine business. But people within the government and industry watchdogs in India have started to worry.

In 2008, Japan's Daiichi-Sankyo took control of India's largest drugmaker, Ranbaxy Laboratories, located about 20 miles south of New Delhi. Other Indian firms that have met a similar fate include Dabur Pharma, Shantha Biotech, Piramal Healthcare, Matrix Laboratories and Orchid Chemicals and Pharmaceuticals. Local concern grows out of the fact that these companies are major producers of cheap generic versions of essential medicines and vaccines, with wide market access in India and in other developing countries.

A paper circulated by India's commerce ministry in late November 2010 noted that there is “concern that [the companies'] takeover by multinationals will further orient them away from the Indian market, thus reducing domestic availability of the drugs being produced by them.” Ultimately, it added, the situation might lead to an increase in domestic drug prices.

The concerns go beyond India, which ranks third worldwide in terms of total volume of drugs produced and is often described as the pharmacy of the developing world. “Some [developing countries] have begun to privately ask India about the mergers,” says Sachin Chaturvedi, senior fellow at the Research and Information Systems for Developing Countries, a public-funded think tank based in Delhi.

Sujay Shetty, associate director for pharma and life sciences at PricewaterhouseCoopers in Mumbai, dismisses fears of a price hike in the current drug market. “The Indian market is fragmented market and not monopolistic. There is way too much competition, and the Indian government is empowered to control drug prices if they get out of hand,” he told Nature Medicine.

But Indian policy analysts fear the long-term implications. A primary concern is the future manufacturing capacity of low-cost generics, the production of which is permitted in certain circumstances thanks to a clause in international patent laws pertaining to compulsory licensing of brand-name drugs in case of a national health emergency.

Should India need to issue a compulsory license, there might be few competent domestic firms stepping up to make the drugs, says Dinesh Abrol, senior scientist at the National Institute of Science, Technology and Development Studies, Delhi.

“As the control of foreign firms over the domestic market goes up, their leverage with distributors and bulk drug suppliers goes up,” says Abrol, noting that foreign firms are unlikely to engage in the production of generic drugs that compete with their own brand-name products.

Newspapers, including the Financial Times, have reported that Indian leaders are now pondering the possibility of rules that would require foreign companies to seek government approval before going after anything more than a 49% stake in any Indian pharmaceutical firm.

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Padma, T. Action urged on foreign takeovers of Indian drugmakers. Nat Med 17, 141 (2011). https://doi.org/10.1038/nm0211-141a

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