Budget provides the right pills, feels pharma industry

A slash in customs duty on nine specified equipments used by the pharmaceutical industry, extension of the weighted deduction of 150 per cent on expenditure on scientific research and development (R&D) by two more years and the announcement to increase the R&D corpus of Rs 150 crore under the Pharmaceutical Development Fund (PDF) has meant that the pharmaceutical industry has more than one reason to cheer the Union Budget.

"It is quite heartening to note that healthcare has been given priority in this Budget. The announcement of a long term policy for pharma and biotechnology is certainly a step in the right direction," said Pankaj Patel, chairman and managing director of Zydus Cadila Healthcare, in a statement.

Commenting on the sops provided to the industry, he said that the extension of weighted deduction on R&D expenditure until March 2007, increasing the R&D corpus, reduction of customs duty on machinery and reduction of corporate tax, will help the pharmaceutical industry.

With many pharmaceutical companies also involved in clinical research of molecules, the industry has also welcomed the finance minister's announcement to bring about a stable policy on clinical research and R&D outsourcing. Gujarat is a hub for pharmaceutical manufacturing, accounting for over 40 per cent of the country's pharma production.

However, the industry feels that there ought to be a sizeable increase in the R&D corpus, as it takes a minimum of Rs 300 crore and a time period of seven to eight years for a new molecule to be developed. Most pharma companies cannot spend such huge sums of money.

Torrent group chairman Sudhir Mehta said that while overall, the Budget is progressive and growth oriented, the reduction of customs duty will benefit the pharma industry, which is poised to see fresh investments in R&D. He added that while customs duty has been slashed on pharma machinery, details are yet to be known on which nine types of machinery are included.

"Presumably, these would help build manufacturing and R&D capabilities in the pharma industry," Mehta said in a statement.

Ahmedabad-based Cadila Pharmaceuticals chairman I A Modi, while welcoming the Budget announcements regarding increasing R&D corpus fund, extension of the weighted deduction of 150 per cent on expenditure on R&D and slashing of customs duty on machinery, said that there is a need to increase the R&D corpus fund sizeably.

"The new patents regime has now come into force and all patented products are going to be prohibitively expensive. To fall in line with many countries of the world, it is high time for the government to come out with a national health insurance. If this is not done, leave alone the poor class, even the high middle class may not be able to afford new investment required for health," Modi said.

J B Chemicals and Pharmaceuticals' executive director Kamlesh Udani felt that while the proposals for the industry deserve to be hailed, the corpus of Rs 150 for R&D is too meager an amount.

"It is good to begin with, but pharma companies would require far more than Rs 150 crore for R&D activities. The pronouncements about a pharma policy coming soon is also heartening," Udani said.