Indian Pharma: a strategic sector from ‘Make in India’ to ‘Make and Develop in India’

Indian pharmaceutical industry will not only need stable policies and regulatory transformations for the industry to thrive, but also strong collaborations between the government, industry and existing academic and research institutes to foster innovation.

By Sudarshan Jain

India is a prominent and rapidly growing player in the global pharmaceuticals industry. India is the largest provider of generic medicines globally, occupying a 20% share in global supply by volume, and supplies around 60% of global demand for vaccines. The Indian pharmaceutical industry is US$42bn in size and ranks third worldwide for production by volume and thirteenth by value. “India’s booming pharmaceuticals industry is not only a great source of innovation and employment generation, but it has also become a global healthcare provider in need” as said by Union Health and Chemicals and Fertilizer Minister Mansukh Mandaviya. The country exported more than 66 million of COVID-19 doses to 95 countries in the last 16 months.

The industry is of strategic importance for India in terms of economic contribution and foreign trade. Poised to grow to USD 120 to 130 billion by 2030, the sector contributes significantly to India’s economic growth— 1.7 percent to the country’s GDP last year as compared to its contribution at one percent, a decade ago. For India to sustain its position as the world’s pharmacy, it is vital to move up in terms of value chain and promote innovation and research and developments. While India has witnessed some early successes with 5+ NME launches already and more in the pipeline, the overall scale of innovation continues to significantly lag other countries, driven by need for improvement across all elements that need to create an innovation ecosystem.

The big question is – how can Indian pharma become the sunrise sector? More importantly, how do one foster a culture of research and development and innovation. While some improvements have been made over the years, there is still room for improvement. For example, we should be looking at the simplification of regulatory approval processes to enable rapid drug discovery and development. Also, in emerging areas like biosimilars where R&D investments are 10 to 20 times higher than for generic products, sometimes, regulatory approvals cause inordinate delays. Currently, the time for approvals is over two to three years. Such challenges not only lead to cost overruns but also act as hindrances compared to other markets for launch of new medicines. To ensure this runs more smoothly, simple steps like reducing the number of agencies involved, and simplifying the required documentation and modes of submission will help. The project management system and the single window clearance can lead to ease of business and be the catalyst for innovation culture.

Innovation, research and development calls for huge investment. Exploring mechanisms to incentivize investment in research and evaluating various funding mechanisms such as budgetary support from government, venture capital, CSR funding besides fiscal incentives will be critical in incentivising companies to get into innovation.

Additionally, there is much need and scope for strengthening the collaboration between industry and academia, including building a talent base that may be required for the industry to move up the value chain. The industry currently provides employment to over 2.7 million people in high skill areas such as manufacturing and research and development. Such building of talent base and up-skilling will be important for future employment. Thus, it is important that we invest in R&D to sour innovations.

We must grow three times in the next 10 years to reach the desired target which will require an intensive effort towards a policy framework to enhance Indian Pharmaceutical Companies R&D capacity for creating new molecules.

Let’s take a look at how the global world is encouraging innovations. The governments around the world are supporting their pharma industries through competitive tax breaks on R&D investments, technology transfers, capital gains and flexible regulatory processes.

Additionally, implementing differential tax rates for innovative companies will help them attract more investments. For instance, in Ireland, Knowledge Development levies a corporate tax rate of 6.25 percent on qualifying R&D profits. In contrast, India introduced a patent box (allowing concessional tax rates for incomes from intellectual property) in 2016, and royalty incomes from patents developed and registered in India are taxed at a concessional 10 percent (plus applicable surcharges). To make investments more lucrative, we should look at either increasing the scope of qualifying income to include incomes from the patented products, incomes from the sale of patented rights, and products incorporating the patented invention, or decrease the concessional tax rate.

Indian pharma is standing at the cusp of a giant leap from where it is re-positioning itself as global leaders in drug development. This is not possible without innovations and substantial investments in R&D. To encourage private sector R&D investments,  the need is to invest more in biosimilars and new molecular entities and this can happen if steps like 200 percent tax breaks for ‘R&D investments’, that require larger investments and longer time resource commitments by private companies, are taken up. It’s time to invest in innovation and reward incremental innovation for Indian pharma to become the sunrise sector.

The Indian pharmaceutical industry will not only need stable policies and regulatory transformations for the industry to thrive, but also strong collaborations between the government, industry and existing academic and research institutes to foster innovation. The strategic advantage of India in terms of manufacturing scale, scientific talent base, demographic profile and strong IT skillset positions India as an innovation hub for the pharma sector. The time is now and we should ‘seize the opportunity’.

(The author is Secretary General, Indian Pharmaceutical Alliance (IPA). The article is for informational purposes only. Views expressed are personal and do not reflect the official position or policy of the Financial Express Online.)