The Industry Ministry today suggested that local pharma makers should be allowed to produce

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patented drugs to check medicine prices in wake of acquisition of Indian companies by multinational firms.

The ministry also suggested putting restriction on foreign direct investment in the sector.

" The Department of Industrial Policy and Promotion (DIPP) has prepared a discussion paper examining the option of introducing compulsory licensing under the Indian Patent Act (in the pharmaceutical sector)," Commerce and Industry Minister Anand Sharma said in a communication to Health and Family Welfare Minister Ghulam Nabi Azad.

He said the acquisitions of Indian pharmaceutical companies by foreign multi-national companies (MNCs) in the recent past has lead to articulation of public concern on its impact on the availability of low-cost medicines.

The discussion paper has also suggested to review the foreign direct investment policy in the sector. At present, 100 per cent FDI is allowed in the sector through automatic route.

"This (FDI) could be shifted to government route so that proposals for mergers and acquisitions in this important sector could be scrutinised by the Foreign Investment Promotion Board (FIPB)," the discussion paper said.

In 2008, country's largest drug maker Ranbaxy was acquired by Daiichi Sankyo (Japan) for USD 4.6 billion and recently the US-based Abbot Laboratories acquired Piramal Healthcare's domestic business for USD 3.7 billion.

Compulsory licensing is a system where by the government allows third parties (other than patent holder) to produce and market patented product without the consent of patent owner.

Though imports of pharma products have been growing, the emphasis on exports has resulted in a significant lower growth of domestic consumption. During 2008-09, domestic consumption in value terms fell from Rs 45,953 crore to Rs 44,579 crore.

As per a WHO report, 65 per cent of Indians still lack access to essential medicines.

While several developed and developing countries like the US, Cananda, the UK and South Africa have introduced compulsory licensing, India is yet to explore this WTO compliant option.