David Cameron has been accused of putting "ideology" ahead of British jobs by refusing to block Pfizer's takeover bid for AstraZeneca.
Labour leader Ed Miliband said the assurances the Prime Minister had secured from the US drugs giant so far were "worthless".
But Mr Cameron insisted the UK had to be open to foreign investment, and he was doing the right thing by "engaging" with both sides.
The comments came after the bosses of the companies gave a second round of evidence to MPs, this time to the Science and Technology Committee.
Science minister David Willetts told the hearing that he wanted Pfizer to guarantee jobs and research in Britain for longer than the five years already offered.
But he stressed that "ultimately" it would be down to British-based Astra's shareholders whether a deal went ahead.
During rowdy exchanges in the Commons, Mr Miliband said: "Last week the Prime Minister said he would judge the takeover on British jobs, British investment and British science.
"But he can't offer us assurances on any of those things.
"Isn't it obvious he should have a proper test of the public interest, and if the deal doesn't pass he should block it?"
He added: "Why won't he intervene? He is falling back on the old idea that the market always knows best and doesn't need rules. From Royal Mail to AstraZeneca this is a Prime Minister whose ideology means he cannot stand up for the national interest."
Mr Cameron hit back: "Yes we measure the British interest in British jobs, British science and British investment, but we also measure it in being a country that is open to overseas investment.
"There is a reason why companies and countries are coming here to make cars, to build aeroplanes, to build trains, to fabricate oil rigs, to make new drugs in our country - it's because we have cut taxes, we welcome investment, we are growing our economy and we have got more people in work."
Earlier, a Pfizer team led by chief executive Ian Read told the Science and Technology Committee that joining with AstraZeneca would create "a powerhouse of science" delivering "much better outcomes" for patients suffering from illnesses including cancers, metabolic conditions and cardiovascular disease.
Mr Read said the proposed takeover - potentially the biggest in British corporate history - made sense from a scientific point of view because "we have complementary portfolios of information in cardiovascular, metabolic and oncology".
Astra head Pascal Soirot repeated his concerns that the as-yet informal £63 billion bid significantly undervalued the company, and could disrupt the development of crucial drugs.
But he did not rule out backing a deal if Pfizer offered the right price and reassurances about how operations would be merged.
He pointed out that some of the bid would be in stock, meaning shareholders had to be sure Astra would continue to prosper.
"To make a recommendation, it is not only a question of price, it is a question of how that price is delivered," Mr Soirot said.
"This offer has to be considered in the context of the price of it but also how we would go about integrating the two companies... indeed, there is a risk that some projects could be delayed."
Mr Willetts was pressed by the MPs on whether he believed Pfizer's promise to guarantee jobs and research in the UK for at least five years was sufficient.
"I would like that to be, obviously, as long as possible," he said. "I would like to see a longer period than that."
But he added: "It has been a historic policy of British government that ultimately these are decisions for the shareholders. Ultimately, on this occasion it would be a decision for the shareholders of AstraZeneca if there was a formal bid."
Speaking at a Resolution Foundation event, Liberal Democrat Business Secretary Vince Cable again refused to rule out using the public interest test.
"We have made it clear there are still options in terms of Government intervention," he said.
Responding to Mr Willetts's comment, a senior Labour source said: "The Government has moved from cheerleader to bystander in the space of 10 days."
But a Downing Street source said: "We continue in our hard-nosed engagement with both sides."
Mr Miliband came under attack by the Prime Minister for turning down an opportunity to meet Mr Read shortly after the bid was announced. Mr Cameron told MPs the Labour leader's office had said he was too busy campaigning for next week's elections, and taunted Mr Miliband that he had "quite literally put your own party political interest ahead of the national interest".
But the Labour source dismissed the jibe as "nonsense", insisting Mr Miliband had always made clear he was willing to talk to both companies. The Labour leader met Mr Read yesterday in his House of Commons office for a "businesslike, useful" meeting which left him even more convinced that the bid should be subjected to a public interest test.
Labour said that an extension of the terms of the 2002 Enterprise Act, to trigger an independent public interest assessment, can be ordered by Mr Cable without any need to obtain approval from Parliament, which is about to start a three-week break.