The Hindu Business Line : Drugmakers let down on absence of research incentives

Mumbai/Chennai, March 2 Despite the constant mention of “knowledge” in Budget ‘08, the big daddies of the pharmaceutical industry are unhappy that it did not translate into anything tangible for companies embarking on knowledge-based research initiatives.

The 125 per cent weighted deduction given to companies that outsource research will bring some cheer to drug-makers. Pharmaceutical companies cannot do everything in-house, and have to outsource some of their research, clinical trials and toxic studies done on animals, said Mr D.G. Shah of the Indian Pharmaceutical Alliance, a platform for large domestic drug-makers. But it is unfortunate that the benefit given for outsourced research was not put on par with the 150 per cent weighted deduction given to in-house research, he added.

Also, no direction was given on research, with the 100 per cent income-tax exemption for research ending in April 1, 2007, he pointed out. Drug companies focusing on research, for example the several de-merged research entities, have been left in the cold.

Research-related incentives featured prominently on the pre-budget agend as placed before the Finance Minister by both companies and the pharmaceutical industry. The halving of excise duty to eight per cent only defeats the Government’s objective to develop backward areas, he observed. The incentive was to take companies and employment to areas that required development and this gets muted, he said.

Nicholas Piramal’s Director (Strategic Alliance), Dr Swati Piramal, is in agreement. It is a little too late, she says, upset that Budget did little to address research. For the last three years, the industry had been asking for the excise duty to be brought down from 16 per cent. And it finally happens when companies have moved to tax-free zones, she points out.

The excise sops could, in fact, have a negative impact on contract manufacturing companies operating in excise-free areas, says the Elder Pharma Director (International), Mr Alok Saxena.

The Lupin Chairman, Dr D.B. Gupta, also points out that the impetus for research could have been provided in more ways than just the weighted deduction on payments made to research companies.

And the disappointment is seen across the board, with multinational drug-maker Novartis’ Vice-Chairman and Managing Director, Mr Ranjit Shahani, also in agreement that the absence of incentives for research was a huge let down.

Striking a different note, Mr K. Raghavendra Rao, Managing Director of Orchid Chemicals and Pharmaceuticals, said the weighted deduction on research was a healthy move and would encourage companies.

A spokesman of the company added that the Budget had no direct impact on the company. Only about a tenth of its turnover comes from sales within India, he said. It would have helped if the Finance Minister had taken some steps to help exports, he added.

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