By Kiran Mazumdar Shaw
In light of the worst health catastrophe faced by humanity in a century, India’s bioeconomy grew by more than 12% to $70.2 billion by 2020. The biotech industry defied the challenges of Covid-19 to develop innovative solutions such as diagnostics, therapies and vaccines at speed and scale to save countless lives.
India leveraged its significant strengths in research, innovation and production scale to fight Covid-19. The Atmanirbhar Bharat framework strives to build on these inherent strengths while collaborating internationally to make a global impact. Our ability to adapt to the changing global realities with the right resources, plans and policies will enable us to evolve from the ‘pharmacy to the world’ to the center of advanced biomedical innovation and research. It will also enable us to achieve our ambitious goal of creating a $150 billion bioeconomy by 2025.
The government, through the Department of Biotechnology (DBT), has made tremendous efforts to promote life sciences research, translational education, and entrepreneurship. This, coupled with a burgeoning start-up ecosystem, is unleashing biotech innovation in the country. India needs to build on this momentum by building a comprehensive biotech strategy that includes investment, R&D, exports and a strong start-up culture.
Investments: fine-tuning the PLI scheme
India is strong in the production of generic drugs and now uses this capability to produce specialty drugs, vaccines and biologics. To achieve global leadership in biologics, we need to improve the capacity, competence and infrastructure available in the country.
The PLI scheme has introduced several incentives to promote self-reliance in the local production of bulk pharmaceuticals, while also encouraging the biopharmaceutical industry to move up the value chain through innovation.
Rather than a one-size-fits-all approach, government should tailor the PLI scheme to the unique needs of the biopharmaceutical industry. For example, the development of biological molecules is costly and time-consuming, requiring complex clinical studies over 5-7 years. In comparison, development costs and gestational age (1-2 years) are much lower for small molecule generics. Therefore, the weight given to regulatory submissions for biologics should be higher than for generic formulations. A well-designed PLI scheme will give biopharmaceutical production a much-needed boost.
Exports: Incentives for Global Competitiveness
The expansion of the local production scale should not only focus on serving the domestic market. Companies need to be able to tap into global markets, for which India needs a strong export policy. Under the SEZ regime, units were eligible for a tax holiday until March 31, 2020. In order to boost export-oriented industries, the SEZ tax holiday benefits should be reintroduced with a 50% deduction of export profits for the next five years. year for existing units.
Research: incentives for risk investing
Research-related incentives can be an incentive to increase R&D investment and establish much-needed links with academia for cutting-edge research. The government will first need to identify key new research opportunities for innovation and reduce the 200% weighted tax deduction for all R&D expenditure related to the lab to market journey, including patent costs.
The government should grant a five-year tax exemption to products resulting from research-led efforts in selected areas of innovation. It should extend the scope of the patent box (10% tax rate u/s 115BBF) with royalties and revenues from India-based R&D leading to global patents. Commercial income from patented products must also be included.
‘Virtual’ biotech companies that generate revenue through innovative R&D with no manufacturing facility or commercial products on the market should be eligible for tax incentives. The introduction of a PLI-type scheme to enhance capabilities and incentivize clinical trial service providers will restore India’s position as a global clinical trial destination.
Start-ups: easier access to capital
Government support has led to the creation of a robust biotech start-up ecosystem. India had more than 4,200 biotech startups in 2020, about 25% more than in 2019. It needs to create an environment in which these startups can scale.
Since capital is the lifeblood of start-ups, the government should increase funding to BIRAC to `3,000 crore per year so that it can provide start-ups with the necessary funds to scale up. The government should also abolish the 51% Indian equity requirement for the use of grants from BIRAC/DST.
To supplement funding opportunities, India Inc should be able to reserve a portion of their CSR funds to support grants at BIRAC. CSR contributions to support ignition grants at incubators and academic research institutions should also be allowed. The government should set the both short- and long-term capital gains tax at 5% for angel and VC investors in life sciences start-ups to encourage more players to bet on biotech. In addition, it should deliver a 10% weighted advantage for start-ups in government procurement. Regulations must be adapted to give biotech and other start-ups access to capital markets.
To seize the huge opportunities in biotech, India will have to act quickly and the government will have to play a facilitating role by creating an appropriate physical, financial, legislative and regulatory infrastructure.
The author is chairman, ABLE (Association of Biotechnology Led Enterprises)