In spite of being a developing country, India gives tough competition to world’s most powerful economies when it comes to pharmaceuticals and health care growth. Indian society, the government and private & public sector companies collaboratively have made this industry a blockbuster worldwide.
While India has already proved its potential in the generics market, some crucial reforms by the government coupled with smarter initiatives by the Indian pharma giants have contributed towards rising R&D spend in India seeking the attention of MNCs for their R&D investments.
Factors Contributing to R&D in India
- India is highly cost effective on terms of setting up R&D facilities. It costs around one-seventh to set up the R&D facility in India than most of its western counterparts.
- Clinical Phase III trials require human subjects. Because of the ethnic diversity and widespread occurrences of various diseases amongst vast Indian population MNCs are investing billions of dollars in setting up clinical phase trials of their ongoing R&D in India.
- The availability of large pool of English speaking research talent in India contributes significantly towards reducing the cost of R&D.
- India is a one of the fastest growing markets in the world. This makes it a lucrative bet for the MNCs to justify their R&D investments with the huge revenue potential from the Indian market.
Government Reforms to boost R&D
- The liberalization period around 1991 was a leadership shift in pharmaceutical industry from public sector companies to private companies. This ensured that private Indian companies are free to join hands with MNCs for R&D competence building and technology collaborations.
- Patents (Amendment) Act 2005 made sure that companies innovating new drug molecules gain full protection for 20 years thereby incentivizing the R&D investments in India.
- The government exempted price control on innovative products, numerous financial schemes like soft loans were made available for undertaking R&D projects, also the processes for granting approvals for technology collaborations were expedited and refined thereby enabling increased employment and increased investments in R&D
In light of these initiatives the R&D spend in India is on the rise. The average spend on R&D by Indian companies is around 2% of their sales turnover as compared to 0.5% in the 90’s. It is still far less than the average R&D spend of MNC pharma giants whose average is close to 15%. Nevertheless, this can be the beginning of something dramatic happening to the future of Indian Pharma R&D.