Over the past decade, India’s pharmaceutical sector has seen one of the largest influxes of foreign investment and has outperformed amid the generally negative market sentiments. Since the pharma sector was liberalized in 2000, it has received more than US$18 billion in foreign direct investment (FDI), and the past few years have seen multibillion-dollar mergers and takeover activities, often at a significant premium.
Against this backdrop, since 2011 we have witnessed regulatory intervention, particularly in the brownfield sector, due to perceived policy concerns relating to drug manufacturing in India being taken over by foreign giants and an attendant risk of supply being affected and an increase in the prices of drugs.
The government has tried tackling these perceived concerns by regulating foreign investments, which has little justification in the context of the alleged problem sought to be addressed. All legitimate concerns in the pharmaceutical sector should be dealt with by a domestic sectoral regulator, in a transparent manner, with a clear nexus between policy objectives and their implementation. The source of investment, foreign or domestic, should not be material.
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Luthra & Luthra Law Offices is a full-service law firm with offices in Delhi, Mumbai and Bangalore. Vaibhav Kakkar is a partner and Snigdhaneel Satpathy is an associate at the firm. This article is intended for general informational purposes only and is not a substitute for legal advice.
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