Indian clinical trials market: A blockbuster dream

[Guest guest]

A blockbuster dream

Reghu Balakrishnan

Thursday, February 22, 2007 19:25 IST

India has the potential to tap the $45 bn global clinical trials

market. The costs here are 50-60% lower and the process could be

done 75% faster. That's why India is becoming an attractive

destination for multinationals

It is well known that generic drugs drive the Indian pharma industry.

But how long will this push last? This is the question the industry

has been asking ever since India entered the new product patent

regime in 2005.

Indian pharma majors have now started to realise the need for

developing their own molecules (new chemical entities) to boost

revenues. Their wish to become companies with a few blockbuster drugs

reflects in their expectations from the ensuing budget.

Last year, their cries had fallen on deaf ears. This time, the

industry is expecting some R & D incentives from the coming budget.

The Organisation of Pharmaceutical Producers of India (OPPI), the

association for Indian as well as MNC pharma majors, has been

strongly demanding R & D incentives.

With the Intellectual Property (IP) regime in place, an encouraging

environment for R & D and innovation is the need of the hour. Since the

pharmaceutical discovery process takes about 9-12 years, tax

incentives for R & D should be extended up to March 31, 2017, from

March 31, 2007, the OPPI demands.

India, these days, is becoming a hub for R & D activities, especially

outsourced work from multinational majors. Drug development, where

clinical trials take the bulk of the investments, can be done about

50% lower in India. That's why India is becoming an attractive

destination for multinationals.

International clinical trials, carried out in approved hospitals in

India, should also be included in this tax incentive scheme as these

trials are an integral part of the discovery process, OPPI says.

India has the potential to tap a major chunk of the $45-billion

global clinical trials market as the cost of clinical trials in India

is 50-60% lower and the process could be done 75% faster due to the

wide pool of patients here.

According to certain studies, European and US pharma companies will

spend $1.5 billion per year in India by 2010.

Even though there is a rift among various associations in the Indian

pharmaceuticals industry, they have a clear vision about what is

needed to boost the growth of the industry.

The industry is seeking a full exemption for life-saving drugs from

customs duty. At present, they attract 5-12% of customs duty. The

reduction in excise duty to 8% from the present 16% has been a long-

pending demand of the industry.

Ranjit Shahani, president, OPPI says, " With Indian economy getting

globalised, it is essential to harmonise our transfer pricing

regulations with OECD countries. The current penalties of 100% to

300% for transfer pricing adjustments are too harsh and need to be

reduced to international levels of 0% to 40%. "

" Also there is no advance pricing mechanism at the moment. This

should be provided in the transfer pricing mechanism. This will go a

long way in minimising long-drawn litigation and provide certainty of

business, " he added.

The Indian Drugs Manufacturers Association (IDMA), which represents

the majority of the medium-sized pharmaceutical companies has

suggestions that the bulk drugs and formulations falling under

categories of anti-AIDS, anti-cancer, anti-TB and immune

suppressants and other life-saving drugs may be totally exempted from

excise duty.

Considering the long term benefits of R & D to the economy at large,

the industry demands that all excisable goods used for R & D purposes

should be exempt from central excise duty and specific excise duty

exemption notification should be issued to medicines supplied free

during national calamities. If the central excise duty is paid in

such cases, refund of duties should be granted.

The migration of manufacturing units to tax-free zones like Baddi in

Himachal Pradesh makes life difficult for other units. They are

almost on the verge of closure.

Dara B Patel, secretary, IDMA, says, " The pharma industry is likely

to face a tremendous turmoil leading to massive exodus of

manufacturing from existing manufacturing units to tax-free zones "

As a solution, the industry recommends a reduction in excise duty,

which will have the these benefits: survival of small and medium

enterprises all across the country (nearly 7,000 SMEs); preventing 7

lakhs people from job losses; avoiding NPAs of nearly Rs 10,000

crores, avoiding loss of revenue to the states on account of income

tax and sales tax.

They also want the government to lower the excise duty on allopathic

and ayurvedic drugs from the present level of 16 % to 8 %.

The industry also wants full exemption of import of capital goods,

raw materials, reference standards for R & D purposes from the customs

duties.

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