Research-linked incentive scheme in works for pharmaceutical industry

The Centre may announce a Research-linked incentive (RLI) scheme for the Indian pharmaceutical industry to raise contribution to research and development and move up the value chain of innovation, sources close to the development said.

At least three people close to the matter said that such a scheme is indeed in the works, and the internal target is to raise contribution to R&D by pharma companies to 15 per cent of the turnover.

“The industry is in active discussion with the government and such a plan is in the works. The details of the RLI scheme is yet to be firmed up, but in order to be eligible for the incentives, companies may be asked to invest at least 15 per cent of their turnover to R&D,” said a senior industry executive who has been a part of the discussions between the Centre and the industry.

Typically, the export focused pharma companies tend to spend higher on R&D. On an average around 4-5 per cent of revenues are spent on R&D at an industry level at the moment.

On Friday the top executives of leading Indian drug firms met the Union Health Minister Mansukh Mandaviya and secretary, department of pharmaceuticals, S Aparna. The Health Ministry said that the objective of the meeting was to discuss India’s Pharma Vision 2047 and roadmap for the Indian pharmaceutical sector. The session discussed the current position of the pharma industry in India, key initiatives taken by the Government in the last few years and collaborative steps that will help India to realize this vision.

Sources indicate that the discussions on what measures to take to enhance innovation in pharmaceuticals have been ongoing for a while now. Last year, the Indian pharma industry had submitted a whitepaper on how to create an eco-system of innovation in India. The project was spearheaded by Pankaj Patel, chairman of Zydus Lifesciences, who innovated the world’s first DNA-plasmid technology platform based Covid19 vaccine.

WHO’S ELIGIBLE FOR THE SCHEME

• 15% turnover investment in research could make companies eligible for the scheme
• 4-5% of turnover invested in R&D at an industry level
• 10-12% of turnovers invested by large export-focused turnovers
• White paper on innovation submitted by industry
• Government released draft R&D policy after the whitepaper

The white paper had captured the lacunae that failed growth of innovation in Indian pharma, the steps that would ensure an eco-system is developed, and also what are the need gaps, especially in securing funding.

After the whitepaper was submitted, the Centre had released a draft R&D policy for the med-tech sector that highlighted collaborations between industry-academia, funding requirements, and creation of innovation hubs like Boston, Singapore.

“The government is trying to address several of these issues, including funding. And announcing an RLI is one of the steps in that direction,” the source cited above said.

As such industry veterans have raised the demand for an RLI.

Speaking at a conference in February Kiran Mazumdar Shaw, executive chairperson, Biocon Group had indicated that there was a need to expand the current production linked incentive (PLI) scheme to make it research-linked.

Leading pharma companies in the country are already looking at increasing their research spend over the next five years as the Indian pharmaceutical market eyes a $130 bn turnover in the next ten years.

Dilip Shanghvi, the MD of India’s largest drug firm by market share Sun Pharmaceutical Industries has said at a recent event that from a current 7-9 percent of their turnover, he sees Sun Pharma’s research spend to rise to 9-12 percent of turnover in the next five years.

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

Firms like Dr Reddy’s Laboratories (DRL), Zydus have said that they would continue to invest 10 percent of their turnovers in R&D. Lupin MD Nilesh Gupta had said last November that they expect to draw 20 per cent of their turnover from innovative products. “The innovation story should be 20 percent of our total revenues. I think it’s going to take a good ten years to get there but that is the intention,” he had said.