Government readies ₹10,000-crore scheme to boost domestic API production

Maitri Porecha New Delhi | Updated on June 02, 2020 Published on June 01, 2020

₹6,490-crore earmarked as incentives for companies making key starting materials for critical drugs

A committee appointed by the Department of Pharmaceuticals (DoP) to chart a roadmap for an ambitious ₹10,000-crore scheme to boost the production of raw materials for crucial drugs has readied an implementation plan.

Officials in the know said the scheme involves offering production-linked incentives (PLIs) worth ₹6,490 crore to companies that will invest in domestic manufacturing of critical key starting materials (KSMs) required to produce active pharmaceutical ingredients (APIs) for antibiotics, steroids, anti-tuberculosis and diabetics medication, among others. Another ₹3,000 crore has been reserved for creating bulk-drug parks in various States. BusinessLine has accessed a copy of the proposed scheme.

Four key KSMs

Of the ₹6,490 crore PLI to be offered to 92 prospective companies, ₹3,600 crore is exclusively reserved for four KSMs — penicillin G, aminocephalosporanic acid, erythromycin thiocyanate and clavulanic acid.

“For instance, penicillin is the key raw material organically made by fermentation technology and is used in manufacturing API like amoxicillin and cefixime, which are crucial antibiotics,” said a committee member. “Similarly, clavulanic acid is important for potassium clavulanate, another antibiotic. None of these four KSMs is made in India at the moment. We have been importing KSMs entirely from China for 20 years now, as they are cheaper.”

According to the proposed scheme, two pharma companies will be given incentives to produce each of these four KSMs. “For penicillin, we insist that both companies have a minimum production capacity of 5,000 tonnes annually and an approximate investment of ₹750 crore in a greenfield plant,” said the member.

“If they produce thus, for every year for four years (2022-23 to 2025-26), each company will receive an annual incentive of ₹120 crore. Similarly, for clavulanic acid, the production capacity should be 1.5 lakh kg, with a minimum investment of ₹400 crore and the incentive for the next four years will be ₹60 crore per year.” The incentives will then be tapered to 15 per cent of their investment in 2027-28, and 5 per cent in 2027-28.

Initial cost recovery

While this is a one-time investment for the companies, officials said, if they receive a 20 per cent incentive for four years, they will recover their initial costs. This will encourage them to continue with the production of these crucial raw materials. According to the proposed scheme, pharma companies can submit claims for incentive reimbursement on the basis of half-yearly or annual sales.

Further, ₹1,000 crore has been reserved for 20 beneficiary companies who take up other niche fermentation-based product categories such as cyclines used for doxycycline, aminoglycoside for gentamicin, streptomycin, steroids, anti-TB drugs like rifampicin, vitamins and lincosamides.

Similarly, up to ₹960 crore has been reserved for 16 beneficiaries who will take up production of four crucial KSMs made through chemical synthesis. Popular painkiller aspirin is made through chemical synthesis. A KSM — para aminophenol — is required to make paracetamol, which in turn is an API used for making aspirin. Also, DCDA is a crucial KSM to make anti-diabetic drug metformin, also obtained through chemical synthesis.

Another ₹1,380 crore has been reserved for 23 chemical synthesis-based APIs including hypertension medication such as losartan and valsartan, anti-HIV drugs such as lopinavir and ritonavir, as well as cholesterol lowering drugs such as atorvastatin.

Officials said that they would prefer it if only one pharma company invested per product, as they wish to maximise the benefits. “There are 41 eligible products for 53 APIs. A company can initially apply for only one eligible product. Usually, in the production of fermentation products like penicillin, a dedicated facility is required. If no application is received for any eligible product, the same applicant may also apply for other products,” explained the member quoted earlier.

For chemically synthesised products, the annual incentive will be 10 per cent from 2021-22 to 2026-27. “The Department of Pharmaceuticals will finalise the scheme and advertise it in about a month’s time,” the member added.

Published on June 01, 2020
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