No non-compete clause in pharma sector takeovers: govt

The government has clarified that the cabinet decision to allow 100-per cent foreign direct  investment in existing pharmaceutical units is subject to the condition that there will be no `no-compete' clause in such takeovers.

This means that the promoters of the company would be free to invest in a similar pharma unit after the sale of the existing unit.

The cabinet on Thursday decided not to alter the current policy of allowing 100 per cent foreign investment in the pharmaceutical sector (See: Cabinet refuses to peg pharma sector FDI at 49%).

''It has been decided that the current policy on brownfield and greenfield projects in the pharmaceutical sector will continue, subject to the additional condition that in all cases of FDI in brownfield pharma, there will not be any non-compete clause in any of the inter se agreements,'' an official release said today.

The cabinet on Thursday considered the proposal of the Department of Policy and Promotion (DIPP) of the ministry of commerce and industry, for a review of the policy on foreign direct investment in the pharmaceutical sector, but declined to reduce FDI limit in the sector to 49 per cent from 100 per cent allowed at present.

DIPP sought changes in FDI norms in pharmaceutical sector following the closure of a number of Indian manufacturing facilities and R&D centres in cancer and oncology injectables and APIs by their foreign acquirers.

This, the DIPP feels, can render the country vulnerable in the critical area of healthcare.

The DIPP, which is under the commerce ministry, had proposed allowing 100 per cent FDI in only new or greenfield pharma units through the automatic route and limiting FDI in brownfield projects or takeovers to select drugs, under FIPB scrutiny.

It has strongly recommended to the cabinet that foreign investments in projects manufacturing critical or rare drugs should be limited to 49 per cent (FDI and FII together).