Thursday, October 6, 2011

Drugs and FDI

The other day, whilst buying Zincovit multi-vitamin tablets from the university pharmacist, I noticed that the packaging had changed and the price had gone up - the difference was around fifteen rupees, if I'm not mistaken. I wondered at it. It was only a month or so earlier that the Supreme Court had deferred judgment in a case involving multinationals and anti-retroviral drugs, challenging the sale of cheaper alternatives in the Indian market, and the African market via the Indian market.

However, a report in the current issue of Outlook is instructive in this case. 100% FDI permissibility in the pharmaceutical sector has been the policy in the drugs market since 2001. Over the years, seven top Indian companies have been taken over by multinationals. The current debate revolves around whether this investment policy has led to an increase in the prices of Indian generic drugs. (Generic drugs are drugs that are produced and sold cheaply and locally in the event of the expiry of the copyright of the original formula.) Evidently, it has. Prices have gone up 5%-23% in 2008-11. Both the Indian pharma lobby and the multinationals' lobby are interested in current policy debates in this sector. Some sections of the government (health ministry, commerce ministry, etc.) want discretionary powers and a case-by-case review of investments to ensure the prices of drugs do not put them out of the reach of the Indian consumer, especially the poor, but fear government intervention would lead to greater corruption and bad competition. Other sections of the government (finance ministry) want the sector to be "freely competitive". The debate continues.

The Indian pharmaceutical sector, from the end-user's point of view, has been largely conducive to large-scale availability and affordability. It would be undesirable to manipulate the price mechanism in place in this sector. Therefore, it would be desirable for the Indian pharma lobby to secure investment caps and protection? I would think so.

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