Centre plans to roll out research-linked incentive scheme for pharma sector

To create a research-driven pharmaceutical (pharma) and lifesciences ecosystem, and move up the value chain in the global pharma scene, the Centre is working actively on rolling out a research-linked incentive (RLI) scheme for the sector.

This is purported to be on the lines of the production-linked incentive (PLI) scheme.

Multiple industry and government sources in the know said that the minutiae of the scheme were being fleshed out; the contours of RLI were being designed.

“After this, it will go to the Cabinet for approval,” informed an industry source.The head of a leading pharma company in India, who has been actively involved in discussing avenues to boost the research ecosystem in the country, said that the scheme’s details were expected in some months.

A senior government official, too, corroborated this.

He said that the scheme may have several parts: companies can do research in-house or in collaboration with government laboratories (labs). There is a plan to develop the National Institute of Pharmaceutical Education and Research as centres of excellence.

“We will have some moonshot areas, and the allocation of funds will be project-based. There will be tier I, II, and III kind of categorisation of projects, and a separate chapter for micro, small and medium enterprises (MEMEs) and start-ups as well,” said the official.

Moreover, the Centre is considering having some specific areas of medical devices that could also qualify for RLI.

The target is to increase the contribution to research and development (R&D) to 15 per cent of firms’ turnover, which now hovers around 4-5 per cent at an industry level, claimed industry sources.

The scheme is likely to have five or six key areas: research in areas of biosimilars, antibiotics, orphan drugs, complex generics, and precision medicine, in which investment by drug firms will make them eligible for RLI. Besides, the scheme is likely to have separate incentives for MSMEs to encourage them to invest in R&D.

This is being considered since the bulk of funds in the PLI scheme has gone to big corporations. Said an industry source, “Around Rs 11,000 crore has gone to just 11 companies, while Rs 1,750 crore distributed among 35-40 small firms.”

The Department of Pharmaceuticals and the NITI Aayog have been holding industry consultations these past few years. Based on industry recommendations, the scope of the scheme has been expanded. A draft policy is ready, while the fine print is being worked out.

The Department of Science and Technology is also actively involved, along with the Department of Health Research. The industry source said that the final corpus that could be allotted to RLI is yet to be finalised.

In the Union Budget 2023-24, Finance Minister Nirmala Sitharaman had hinted at fostering a research-driven climate in the pharma sector in India.

She said, “A new programme to promote research and innovation in pharma will be taken up through centres of excellence. We shall also encourage industry to invest in R&D in specific priority areas.”

Facilities in select Indian Council of Medical Research labs will be made available for research by public and private medical college faculty and private sector R&D teams for encouraging collaborative research and innovation.

A senior executive of an industry lobby group said that the Centre will soon share the workings of these centres of excellence. The R&D spending of top pharma firms has been on the rise, and leading pharma firms have indicated that they aim to increase their R&D spending in the next five years.

Speaking at an event last year, Dilip Shanghvi, managing director of Sun Pharmaceutical Industries (Sun Pharma) — India’s largest drug firm by market share — said that from a current 7-9 per cent of the firm’s turnover, he sees Sun Pharma’s research spending to rise to 9-12 per cent of turnover in the next five years.

“We expect to continue to invest in research. In the next five years, we see ourselves spending around $600-650 million annually on research,” said Shanghvi.

At the same event, Pankaj Patel, chairman, Zydus Lifesciences, said the firm would continue to increase its R&D spending and eventually have around 10 per cent of its turnover being spent on research in the next five years.