The local pharmaceutical industry has done well. Its bulk drugs segment has grown annually at 25 per cent and formulations at 15 per cent during the last 2 to 3 years.
By 2003, the market is expected to be worth between Rs 28,000 crore to Rs 36,000 crore. A number of major changes in terms of the price structure of products , brand takeovers and business restructuring marked the industry in 1997-98.
Yet India, with about Rs 31 billion worth of pharma exports, has a miniscule presence in the global pharma market worth over Rs 10,000 billion. A major reason is that the pharma industry does not have a Research and Development (R&D) base to support the manufacture of reasonably priced competitive drugs.
Desh Bandhu Gupta, CMD, Lupin Laboratories, says, "As we approach a new millennium , the need of the hour today is to innovate through R&D. However, the industry does not have adequate financial muscle to invent its own molecules and place them in the global market. The government needs to support basic research activities through fiscal and tax incentives and by playing the role of a supportive facilitator in collaborative arrangements between the industry and academic fraternity."
He expects the 1998-99 budget to include measures towards setting up of a research fund to provide the industry with soft loans matching their own research investments, with repayments spread over a period of the next 7-10 years, with an appropriate moratorium.
He suggests further that such assistance could be either for individual companies or through collaborative research with CSIR.
The argument makes sense. R& D spending rose by 15.6 per cenr to Rs185 crore (Rs160 crore) in 1996-97. In 1994-95 the growth was 12 per cent to Rs 140 crore (Rs 125 crore). Obviously the industry has spent a very insignificant portion of its revenue on R&D
R&D is critical because of the high obsolescence rate of drugs. The global pharma industry is marked by breakthroughs in cell and molecular technology that will determine new drugs in the future. India has yet to make a start in bio-tech products. The challenge before the industry is to gear up to face the post-2005 patent regime.
Rationalisation of fiscal structure is another issue. R L Shenoy, finance director, E Merck, says, "A differential slab of 10 per cent of the duty structure between bulk drugs and drug intermediates would facilitate the indigenous production of bulk drugs from imported drug intermediates to provide impetus to local production and make it competitive."
The Indian Drug Manufacturers' Association (IDMA) has asked for "a uniform excise levy of eight per cent as against the current 15 per cent on pharmaceutical formulations and 13 per cent on bulk drugs and intermediates as well as chemicals to eliminate the unintended disputes and anomalies in the system." IDMA feels prices will not go up because of the availability of the set-off against 13 per cent (currently at 18 per cent) duty on bulk drugs.
As for custom duties, IDMA said that there should be a single slab of duty of around 10 per cent on all drugs and formulations, irrespective of certain categories enjoying nil duty or concessions hitherto.
But according to the Indian Merchants' Chamber (IMC), "The current 35 per cent import duty on raw materials & drug intermediates should be slashed to 15 per cent, whereas duty for bulk drugs from 35 per cent to 25 per cent." The chamber feels that this will enable production of bulk drugs from imported raw materials and make it more competitive.
Yet the basic drug manufacturers feel that the list of items attracting nil rate of custom duty should be done away with. The industry feels that customs duty on bulk drugs and formulations, manufactured from basic stage fermentation, should not be reduced as lowering custom duty may hamper the growth of domestic players. There is a demand for the current anti- dumping duty to be suitably enhanced to protect the affected domestic industry, specially after a heavy dumping of bulk drugs from China.
The pharma industry produces nearly 85 per cent of the total domestic basic drugs requirement, whereas in the case of formulations, barring a few life saving drugs (required in small quantity), the rest are indigenously produced.
Production of bulk drugs is estimated to grow by 20 per cent to Rs 2,623 crore and that of formulations to Rs 12,068 crore in 1997-98. Imports during 1997-98 (April-January) rose by 29 per cent to Rs 1050 crore and exports grew by 18 per cent to Rs 4098 crore (including fine chemicals).
The issue of pricing still remains a thorny one. The government instituted the National Pharmaceutical Pricing Authority (NPPA) , effective from September 1,1997, to deal with the complexities of prices. All along the industry has asked for freeing of drug prices, which is seemingly difficult. The industry supports the government's expectation that it should ensure supply of essential and life-saving medicines at reasonable prices in a developing country like India. Yet it feels the drug pricing policy since 1979 has not been realistic as it does not take account of the rising costs. It wants prices of medicines based on actual costs and not on normative costs. It believes low-priced drugs compromise on quality.
The future of the pharma industry is linked to health care. Unfortunately health care has received a low priority during the planned period. The actual expenditure on health care as percentage of total plan outlay has gradually declined from 3.3 in the first FYPlan to 1.7 in the eighth FY Plan. The trend needs to be reversed to ensure healthy population and economic growth.
