The Hindu Business Line : Pharma industry seeks incentives for research

Mumbai, June 22 Research undertaken to develop medicines is different from research in any other industry segment, say pharma industry representatives in their pre-Budget wishlist to the Centre, even as they sought sops to support their initiatives.

There is a difference between pharma research and that done in the infotech or auto sector in terms of the magnitude of funds required, the long period of time over which sustained efforts need to be made and the high risk of failures that no other industry encounters, said Mr D.G. Shah of the Indian Pharmaceutical Alliance (IPA).

Urging the Centre to bring in a more research-friendly climate in the country, the IPA said that the Government across its departments needs to be tuned to the potential of the pharma industry, national laboratories and research scientists.

Currently, the pharma industry’s research-spend averages at about 5 per cent of turnover, lower than the levels prevalent in developed countries, at 14 to 18 per cent, the note added.

Developing a new medicine involves identifying the gene, screening thousands of chemical compounds, researching their efficacy, testing them first on animals and, subsequently, on humans, before launching the drug, said the IPA, a platform for domestic pharma majors.

With venture-capital funds not being as evolved as in developed markets and the existing funds being risk averse, the IPA sought grants linked to specific activities such as discovery, regulatory, safety and toxicity studies and clinical trials.

Several countries, including Canada, France and the UK, have specific tax relief for research-intensive small and medium sized enterprises whether making loss or profit, the representation said.

Keeping the focus on research, the Indian Drug Manufacturers Association (IDMA) has sought an extension on the weighted deduction given on research that comes to an end in 2010, said IDMA’s Mr Daara Patel. Currently, the weighted deduction on in-house research is 150 per cent, and 125 per cent on research outsourced to a third party.

But IDMA’s concern is over excise duty, and wants it to continue at the present rate of four per cent on finished drug forms. The concerns have increased given the buzz doing the rounds in the industry, and among government officials that excise duty could be increased on formulations, as part of efforts to shore up revenues.

There is an imbalance, as duties on input material stand at eight per cent, while the excise duty on the finished product is four per cent, said the Ipca’s Executive Director (Finance), Mr A.K. Jain, responding to talks of a possible excise duty increase.

Multinational drugmaker Pfizer’s head in India, Mr Kewal Handa, expects that the recently elected Government would have popular measures in the forthcoming Budget.

The rural health missions and allocations for urban poor, food subsidies and support for the unemployment would be on the cards, he said.

But what the industry across-the-board would be looking for is a policy on the direction ahead for the economy, in terms of insurance reforms, public sector disinvestment, GST and infrastructure, he added.

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