Foreign investors will no longer be restricted from owning a majority stake in India's pharmaceutical companies after the government decided not to push through with a proposal that sought to limit foreign ownership in local makers of certain critical drugs.
The Wall Street Journal reported that the government decided against the proposal after India's finance ministry said that such a regulation would discourage foreign investment in the country's economy, which is struggling with slowing growth.
The proposal was put forward after politicians had raised concerns that foreign ownership would result in companies focusing on making expensive patented medicines instead of cheap drugs vital to treating India's devastating diseases.
"It's a big positive," Kapil Bhatia, head of the healthcare practice at Mumbai-based investment bank Systematix Capital Services Private Limited, said of the government's decision to back off foreign restrictions. "India is a big enough market for multinational companies coming in as investors."
The proposal sought to limit foreigners from owning more than 49% of existing Indian manufacturers of certain critical drugs which would have likely included medicines for the treatment of cancer and certain other diseases. The proposal also required foreign investors to set aside 25% of their investments within the first three years to build new plants or research centers.
Foreigners can currently own up to 100% in Indian drug makers.