Inject investment into biotech

The biotechnology industry is one of the fastest growing in the country and the outlook for it show no signs of dimming as we push forward to 2025.

Currently, a significant portion of the sector’s growth is contributed by pharmaceuticals, where growth has followed a rapid and impressive trajectory, following the economic liberalisation of the early nineties.

Despite this optimistic scenario for the healthcare and biotech sectors, there is a danger of the potential coming unstuck if we fail to bolster it with some critical investments.

We need to take a long-term view of the resources needed to sustain this growth.Public policy, insofar as it impacts the biotech sector, has been largely growth-oriented and investment-friendly.

A PwC report on the outlook for the pharmaceutical industry in India highlights some of these initiatives.

Some initiatives On the infrastructure front, they have included building more healthcare facilities, boosting access to healthcare, improving the quality of medical training and increasing public spending on healthcare. In addition, tax incentives and policies have been rolled out to attract more private investment in the sector — from domestic and international companies.

These are important measures, but there is now a need to further scale this investment to where its impact will be far-reaching and sustainable.

We are talking about an annual investment of $4-5 billion over the next four to five years in order to support new infrastructure development, research geared to new drug discovery, and a fresh round of investment-friendly incentives.

In the current environment, the domestic pharmaceutical industry is expected to grow at a compound annual growth rate (CAGR) of 15-20 per cent, according to the PwC report, reaching a value of anywhere between $50 billion and $74 billion by 2020.

This kind of sustained investment will provide further impetus to industry growth and enable India to emerge as a real bio-economy.

The favourable business environment that is created as a result will allow the biotechnology and healthcare sectors combined to grow at a rate of 25-30 per cent with the potential to generate revenues of $100 billion by 2025.

This is not only the right strategy for India at its current stage of development, it also makes sound economic sense.

Sensible approach Consider the market for healthcare and healthcare-related products in a country of India’s size.

Currently, the penetration of prescription drugs and pharmaceutical products is still very low in rural areas. According to a report by PwC, 742 million people live in rural areas but rural markets contribute only 17 per cent of overall market sales.

Increasing penetration into these markets through public distribution channels, better healthcare facilities and public-private partnerships represents a huge opportunity.

While the economic benefits in this scenario are abundantly clear, it will also dramatically improve the government’s ability to ensure access to quality healthcare services and products in under-served sections of the country.

Currently, India is a leading producer of generic drugs but the next step in the industry’s evolution will involve new drug discovery and product development.

While this is already happening at a certain level, a concerted and planned effort in building research and educational infrastructure is needed to support cutting edge research. Public funding and grants are critical to this effort.

The availability of public funds for original R&D will also alleviate one of the biggest challenges in the sector.

Currently, many biotech firms — especially the smaller ones — find it difficult to obtain the financial resources to conduct such projects. Since outcomes in this sector can take a long time, private investors and venture capitalists are often wary of tying up their money in such projects. Infusing public funds into the system will ease this situation and set the stage for better and more productive collaboration between public institutions and industry.

Destination of choice India is already the preferred destination for MNCs seeking to outsource much of their research and manufacturing activities.

The development of world class research facilities and the presence of well-trained research talent will make it more attractive in this respect.

Along with the right tax incentives and policies, these positive trends will cement India’s status as a biotech hub. The economic impact — in terms of better employment opportunities in the sector and overall contribution to GDP — is likely to be significant.

Investment in other key sub-sectors of the biotech industry — namely, bioinformatics, agri-biotech and industrial biotech — is also essential at this juncture of India’s development.

It will enable us to make advances on several fronts: in recognising disease conditions and patterns that are unique to our population, in boosting agricultural yield and productivity, and in helping us develop sustainable solutions to our developmental challenges of energy production and water supply.

A figure of $5 billion may seem like a significant investment for the government in any given year.

However, the economic case for such an investment is compelling as its impact extends beyond the sector into other areas that are linked to overall national growth and prosperity.

(The author is president of the Association of Biotechnology-led Enterprises (ABLE). The views are personal.)

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