The Hindu Business Line : Making India an R&D powerhouse

INDIA and innovation? Global pharmaceutical majors would have laughed at such an association 10 years ago when it was fashionable to brand India as a nation of copycats and pirates. The days of derision and ridicule are now history. Over the last decade, the world has woken up to the innovative potential of Indians as well as the advantages that India offers for basic as well as applied scientific research. "Make no mistake, India is heading for greatness," says the New Scientist magazine in its latest cover story on India.

Everyone, Indian as well as overseas investors, is unanimous about India's potential to blossom as a regional hub for research in life-sciences. More than 100 international companies, including Fortune 500 outfits, have set up their research and development centres in India in the last five years. India offers advantages that few other countries can match — abundant availability of scientific talent, skilled labour, world class academic institutions dedicated to science and technology, entrepreneurial energy of its industrialists and costs that are very competitive by global standards.

With India embracing the global product patent regime, it is high time that leaders in industry, academia and the government came together to brainstorm on a strategy to leverage India's advantages to make the country an innovation powerhouse. Fired by entrepreneurial ambition and prodded by India's commitment to adopting product patents, leading Indian pharmaceutical companies entered the unchartered field of new drug discovery in the 1990s. Despite their late entry, Indian firms have not fared badly. More than a dozen new chemical entities, potential new medicines, are in various stages of clinical trials.

Humungous costs

Because of the huge costs involved in continuing clinical trials up to the proof of concept stage, most Indian companies have been licensing out their molecules to American and European firms for further development. Indian companies that have received milestone payments from pharmaceutical majors for their research molecules include Ranbaxy, Dr Reddys and Glenmark.

In his inaugural address at Wockhardt Biotech Park in Aurangabad last September, the President Dr A. P. J. Abdul Kalam, lamented that Indian firms were handing over the fruits of their research to other nations.

He regretted that the advantages of value addition and further development went to foreign companies. But this seems inevitable, considering the huge costs involved in conducting clinical trials before a drug candidate passes the final test before it reaches the chemist shop.

If an Indian company has to capture the full value of its discovery research, it will mean conducting global clinical trials of its drug candidate. It will cost anything from Rs 600 crore to Rs 800 crore per molecule, depending on the therapy and length of trials. With such huge costs involved, instead of coming out with a blockbuster, the company itself can go bust. Let us not forget the fact that the annual sale of a single blockbuster drug for many a multinational exceeds the annual sales of the entire Indian pharmaceutical industry valued at $4.5 billion!

Fiscal incentives

This brings us to the question: How can we make research more affordable to Indian companies? India already offers a host of income-tax, Customs and excise duty reliefs to promote research and development. While these incentives are certainly helpful from a purely Indian context, they offer little solace in today's global environment where the company has to spend in dollars and euros for its discovery research. We will need to do a lot more to canalise our scientific talent towards productive research so that Indian companies and research institutions can take advantage of global opportunities for creating wealth for the nation.

The following are some steps that could make research more attractive:

Treat recognised R&D establishments like special economic zones for tax purposes. They should be allowed to make payments through forex and EEFC accounts to meet their expenses. They should also be exempt from duties such as Customs and excise.

Exempt all earnings out of discovery from taxes. This includes milestone payments, royalties and revenue generated from sales of patented products.

Developed countries pump in enormous funds to boost research in their countries. In Wales, UK, the government funds 35 per cent of investment in research as a free grant. It also bears the cost of the people engaged in research, for two years. The governments of Germany and Canada extend similar incentives. The tax breaks available in India pales into insignificance when compared to what the developed countries do to promote research.

Institutionalising innovation

Even more important than incentives is the need to nurture innovative culture across all sections. In the US and Europe, institutes of technology, in addition to teaching technology, train students on the basics of innovation, patenting and selling ideas.

We ought to nurture an yearning for innovation from the high school level. This will give rise to a new breed of technocrat-entrepreneurs. Inventors and innovators should get national recognition. Media should make them heroes on par with industrialists and cricketers.

A culture of innovation is fundamental to sustaining and building on India's competitive advantages and this is not possible without institutionalising innovation. Innovation is not for companies alone. Individuals should earn their rewards for innovation and become role models for aspiring students of science and technology. The government should institute a corpus for all post-graduate institutions, IITs, national laboratories and premier medical schools for patent-related activities. Simultaneously, we will need to protect confidentiality and protect IPR rights of innovators.

Corporatising academia

The government-funded research institutions, with few exceptions, have not produced results commensurate with the investment. Corporatisation of these institutions, greater collaboration with private sector and rewarding the scientists and the institutions for fruitful research will go a long way in making them engines of innovation. It will be a good idea for each institution to focus on a few select areas instead of the whole gamut of science and technology.

Institutions such as the Indian Space Research Organisation (ISRO) and those devoted to aeronautics have done well as they are focused. More than 50 out of 250 plus Indian universities have active academia-business relationships.

Harnessing PIO power

Indian industry and academia should embark on a structured mechanism to tap the invaluable experience and contacts of people of Indian origin (PIOs) who are an important part of the innovation businesses in Europe and the US.

Indians who have done well in the West will be only too willing to contribute their time, expertise and even money for R&D projects in India.

The Weissman Institute of Science of Israel is a hot house of innovation that has contributed immensely to Israeli industry. Teva, the world's largest generic pharmaceutical company, is one of the beneficiaries of the Weissman Institute.

Many of Weissman's research programmes are funded by overseas Jews. Our universities and research institutions could tap eminent PIOs for specific projects — the funding could be linked to project progress in the form of milestone payments.

More funds for R&D

At the end of the day, R&D requires a great deal more funding that it gets at present. The Council for Scientific and Industrial Research (CSIR), under the leadership of Dr Raghunath Mashelkar, has launched a Rs 250-crore New Millenium Indian Technology Initiative aimed at bringing together industry and academia to promote innovation in 14 specific areas, including nanotechnology, fuel cell power and climate modelling.

The objective is to make India a world leader in these disciplines. But Rs 250 crore appears to be a small amount for funding ground-breaking research in 14 high-technology areas.

Compare this with the investment of over Rs l, 000 crore by five of India's leading national pharmaceutical companies last year!

(The author, Chairman of Wockhardt Ltd., is Member, National Manufacturing Competitiveness Council.)

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