The Government is expected to soon take a call on slashing the foreign direct investment (FDI) limit in the pharmaceutical sector in order to bring down the prices of drugs, chiefly essential drugs. It is mulling capping the FDI in the sector at 49 per cent and routing it through the government. Currently, the FDI limit in the sector stands at 100 per cent through the automatic route.
The government fears that 100 per cent FDI will lead to uncontrolled mergers and acquisitions (M&A) by foreign drug firms, which could lead to further increase in drug prices and also cartelisation. "There is a clear indication from the PMO (Prime Minister's Office) and the health ministry to control the escalating drug prices. State governments have also complained about it. We expect to take a call on it soon. May be around the (time of) annual budget," said a senior official at the ministry of commerce and industry requesting anonymity. The ministry formulates FDI norms.
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