Drug research in India faces a setback with the Union Budget proposal to withdraw the service tax exemption on clinical trials or technical testing of new drugs on humans. The proposal has resulted in a stir among clinical research organisations (CROs) and both multinational and domestic pharmaceutical companies. The cost of conducting clinical trials is set to go up by 12.3 per cent, including the surcharge, once the Budget gets Parliament's approval. Research-oriented companies such as Biocon, Lupin and Glenmark have started eyeing places abroad to shift their trials. Many say the move would significantly impact the domestic CRO industry, which conducts clinical trials for drug firms, primarily for multinationals.
Lupin had moved some trials to the US and Europe. And, Cadila Healthcare is considering shifting some of its trials to the US. "Withdrawing the exemption on service tax for clinical trials will act as a further disincentive to doing clinical research in India. Given the fact that a sixth of the world's population lives in India and we have the highest disease burden in the world, we need to foster an environment and ecosystem that encourages clinical research," says Suneela Thatte, president of the Indian Society of Clinical Research. While the industry says it supports the government's move to bring in regulatory guidelines for guarding a patient's interest and ensuring ethical practice, they strongly oppose a regulatory uncertainty. And, say the latest withdrawal of tax exemption which would make trials expensive. "India is losing its competitive edge in the global market. Malaysia, Bangladesh and Singapore are emerging as new hubs for conducting trials. Moreover, expensive trials would ultimately translate into an increase in cost of medicines," says Indian Pharmaceutical Alliance's secretary-general, D G Shah. However, some also feel the current regulatory environment and overall review and approval process of the health ministry is more detrimental to the future of innovative research.