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As their role of being ‘medicine-makers to the world' comes under inflationary and regulatory pressures, domestic drug-makers hope that Budget 2011 will outline measures to support their strengths in manufacturing and research.
The Centre needs to encourage exports, including extending the benefits given to export-oriented units, at least by another year, says Mr S. Ramesh, Lupin's President-Finance and Planning, voicing a major concern of several export-oriented drug companies.
The Government also needs to rethink plans of introducing MAT (Minimum Alternate Tax) on Special Economic Zones, he said, adding that it negated the purpose of an SEZ as units in such zones are totally exempt from income-tax on export income for five years, besides being exempt from MAT.
Another tax provision needing remedial measures is the anomaly between excise duty on the import of active pharmaceutical ingredients (API) and intermediaries, at eight per cent, points out Mr Ramesh. The excise on finished forms of medicine is four per cent, this needs to be synchronised, he points out.
In fact, the Indian Pharmaceutical Alliance (IPA) urges the Centre to address issues affecting the position of Indian drug companies on the global platform, including their dependence on APIs from China.
Indian drug-makers get affected by vagaries in the Chinese market, including when chemical units shut down in the run-up to the Olympics, to control pollution. “The prices of many raw materials, intermediates and active pharmaceutical ingredients sky-rocketed and several were not available,” the IPA observes.
“The greater danger is of the Indian companies losing their dominant position in the global market as Chinese companies learn compliance with the regulatory requirements and block supplies to Indian companies… It is, therefore, desirable that the Government examines, analyses and evaluates factors that have led to Indian companies' dependence on China, abandoning its unique strength of production from the basic stage,” the IPA says.
The Government needs to have special fiscal incentives for the production of drugs from the basic stage to neutralise the advantage of imports, besides increasing financial support for investment in equipment for safety and protection of the environment, among other things, the Association said.
Research
While MAT is an area of concern, representatives of the Rs 1 lakh-crore pharma industry also call for expanding support to research done by domestic drug companies.
Indian companies need to do clinical trials abroad as they establish a global foot-print. But these trials are still not seen as research and development expenditure, points out Dr Swati Piramal, Director, Piramal Healthcare Ltd.
It costs about 10 times more to do it overseas, she said, adding that just one aspect of a trial, say toxicity tests, cost about $0.50 million. And the cost increases as the level of the trial advances, she said.
Lupin's Mr Ramesh agrees that research work done outside by Indian companies should be viewed as research-related expense. For instance, when companies in Japan outsource to India, they get Government support via weighted deduction, he points out.
Indian companies get 150 per cent weighted deduction on research-related expenditure, and they have been asking to increase this to 200 per cent.
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