The pharmaceutical industry will remember 2011 as a year in which the government sought more to exercise more control over the business — be it big ticket acquisitions of domestic firms by MNCs or price controls on drugs. Amid these tussles with the government, domestic companies carried on with their business as usual.

While Ranbaxy heaved a sigh of relief after finally reaching an agreement with the US health regulator to remove a ban on the sale of drugs from certain Indian plants in the American market, Sun Pharma sought to consolidate its grip over Israeli firm Taro by proposing a complete takeover and Lupin acquired Japan’s I’rom Pharmaceutical Company as part of a global expansion drive. Nevertheless, policy was the centre of the action during the year as far as the industry was concerned.

Alarmed over the trend of big Indian pharma firms being acquired by MNCs, which could impact the availability of affordable drugs in India, the government did away with automatic approval of foreign direct investment (FDI) in existing domestic pharmaceutical companies. The decision was influenced by acquisitions of Indian firms, including that of Ranbaxy Laboratories by Daiichi Sankyo of Japan, Shanta Biotech by Sanofi Aventis of France and more recently the domestic formulations business of Piramal Healthcare by US-based Abbott Laboratories.

According to the new guidelines, for any merger or acquisition, overseas investors will now have to seek permission from the Foreign Investment Promotion Board (FIPB). After six months of such a proposal being approved, monopoly watchdog Competition Commission of India (CCI) will vet such deals. However, in the case of greenfield investments, 100 per cent FDI will be allowed under the automatic route, under which investors only inform the Reserve Bank about the inflows and no specific government nod is required.

With access to good quality medicines at affordable prices high on the agenda of the government, 2011 also saw the circulation of the draft National Pharmaceutical Pricing Policy (NPPP), 2011. As the proposed National Pharmaceutical Policy, 2006, failed to see the light of the day, the new NPPP-2011 sought to bring 60 per cent of the total domestic pharmaceutical market, amounting to nearly Rs 29,000 crore, under price control.

According to the proposed draft policy, all 348 drugs specified in the National List of Essential Medicines (NLEM), 2011, will come under price control.

It was a move that did not go down well with industry bodies. Pharma industry bodies like the Indian Drug Manufacturers’ Association (IDMA) and Indian Pharmaceutical Alliance (IPA) have raised concerns over the policy.

According to the IPA, pharmaceutical companies may suffer a sales loss of Rs 3,000 crore if the government’s span of control increases, as proposed in the new pricing policy. IPA said the move to add 1,154 drugs and 6,441 formulations to the control list would amount to raising the ambit of government control to 75 per cent, against 60 per cent of the retail market, as indicated in the NPPP.

Reacting to the industry body’s concerns, the government shot back asking the industry not to “grumble” over the proposed drug pricing policy, saying affordability and accessibility of medicines should be the first consideration and many other industrial sectors were under control.

Amid this raging debate, Ranbaxy finally came out of the woods, as the company reached an agreement with the US health regulator to lift a ban on import of drugs from certain factories in India, a move which could see the drugmaker pay up to $500 million as a fine to the American authorities. As an immediate after-effect of the intended payout, the firm’s parent, Daiichi Sankyo, downgraded its earnings forecast and imposed salary cuts on its directors.

In 2008, the USFDA had banned 30 generic drugs produced by Ranbaxy at its Dewas (MP) and Paonta Sahib and Batamandi (Himachal), citing gross violation of approved manufacturing norms and alleging forgery of documents.

Earlier, the USFDA had allowed Ranbaxy to launch a generic version of cholesterol-lowering drug Lipitor in the US market under the condition that it was manufactured at the plant of its US-based wholly-owned subsidiary, Ohm Laboratories. Getting the nod to sell generic Lipitor was of immenseimportance to Ranbaxy as the Gurgaon-based firm had exclusive rights to the off-patent version of Lipitor for 180 days.

According to analysts, the approval could help the company rake in around $400 million in the six-month exclusivity period.

On the merger and acquisition front, Sun Pharma made a proposal to fully acquire all outstanding shares of Israel’s Taro Pharmaceuticals for $367.5 million (over Rs 1,810 crore) during the year. Sun Pharma, which holds a 66.5 per cent stake in Taro, had proposed to acquire the 15 million outstanding shares at a price of $24.50 per share.

Zydus Cadila also strengthened its domestic operations with the acquisition of Mumbai-based Biochem. Meanwhile, Dr Reddy’s Laboratories and JB Chemicals & Pharmaceuticals mutually terminated their Rs 137.5 crore deal. As per the agreement, the Hyderabad-based firm had agreed to acquire pharmaceutical prescription portfolio of JB Chemicals in Russia and other CIS countries.

The year also witnessed some momentum on the pharmaceutical education front, with the Department of Pharmaceuticals announcing that it envisaged an investment of Rs 3,000 crore to set up 10 more National Institutes of Pharmaceutical Education and Research (NIPER) over the next five years to enhance the availability of skilled human resources in the pharma sector. The proposal to set up ten additional NIPERs is one of the many proposals, worth Rs 12,280 crore, that have been submitted to the Planning Commission by the Department of Pharmaceuticals (DoP) for inclusion in the 12th Five-Year Plan.