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Saturday, May 22, 2010

Indian Pharma firms get a billion -is market failure still a valid resaon for govt support

Abbott (US) bought Piramal Healthcare's domestic formulations business for $3.72 billion. This was preceded by Shantha Biotech getting $784 m , Ranbaxy getting 4.6 Bn etc from acquisitions. There is debate on shareholders value in this acquisitions, but little is said of government. All Drug firms had been receiving support from government (DST/ DSIR/DBT/CSIR) in the form of tax benefits, grants, soft loans, duty waivers etc. The rationale in Indian case is supposed `market failure ' hence govt intervention. Many government initiatives on Patenting, R&D promotion were outcome of lobbying by Indian drug firms. It is different from S Korean policy of supporting their biggies. How should govt react?
Govt should be happy that they played their bit role in value maximisation of Indian firms. It is also time to prioritise- there are horde of small , young firms wanting to grow the size of Piramal and get their billion. Why not focus on supporting young technology ventures ?

1 comment:

G.Mohan said...

Dr Rao,

I think Govt surely has a role to play. But it should not be that 'nationalise the losses and privatise the profits."

One of the cos you mentioned in the post took early stage funding from TDB, but TDB did not get the kind of multiplier returns the promoter got, as far as I know.

I do not know it is the fear arising out of inability to innovate or is it the greed of great valuations, but Pharma sellouts by Indian promoters is not a very encouraging sign.

I still have a lot of hope from start-ups.

-G.Mohan