That slightly alarmist view is only partly true. Unlike big Indian auto and IT companies, pharma industry has still not reached the inflexion point where it can challenge big MNCs. Till a few years ago it was believed Indian pharma companies' highly profitable generic business model,they were able to corner a large share of market for drugs going off patent, and occasionally challenged patents through Para IV filings in the US, would allow them to build financial muscle.
Greater size, it was expected, would allow them to set aside more funds for increasingly expensive research, eventually allowing them to become full-fledged research-based global pharma companies.
That assumption no longer holds water as MNCs have devised their own generic strategy, a related company launches a generic version or it authorises another company to launch a generic — making Para IV challenges difficult.
Meanwhile, through greater interaction, MNCs have become aware of the strengths of the Indian pharma industry: low-cost manufacturing, large domestic market and quality personnel. A successful big Indian acquisition would allow MNCs to focus on drug discovery and marketing, leaving the acquired company to do the production.
However, even as MNCs acquire existing generic players, Indian pharma industry itself is seeing an interesting transformation. Most of the action is now taking place on the research side, some at large corporate level and others through small venture capital-funded initiatives.
The availability of skilled professionals allows research in India at a fraction of the cost in developed countries. Some of these research firms will themselves sell out to MNCs but some would find backers among Indian corporates and eventually become big on the global stage.
Therefore, developing India's strength in the pharma space and not necessarily Indian ownership should be the objective at this stage. Besides, a large chunk of global FDI moves through M&As, which also frees up local capital that can be invested elsewhere.