Kiran Mazumdar asks PM to heal pharma sector

Asserts NPPA cap on 348 drug prices is detrimental to industry, could deter R&D

Kiran Mazumdar-Shaw, chairperson of the Confederation of Indian Industry’s national committee on biotechnology, has written an open letter to the Prime Minister asking him to intervene to cure the pharma sector of its ailments.

Mazumdar-Shaw, also CMD of Biocon, said in the letter that the National Pharmaceutical Pricing Authority’s (NPPA) decision to impose a ceiling on pricing of 348 essential drugs under the National List of Essential Medicines (NLEM) has been to the detriment of the industry and could deter investments in R&D and high quality manufacturing.

She wrote: “The forced price discounting imposed by NPPA has done collateral damage to our indigenous industry which has only strengthened our external competitors, especially China. For example, the Indian manufacturers of Active Pharmaceutical Ingredients (APIs) or bulk drugs have found it difficult to compete with Chinese API producers and Indian drug companies are now increasingly importing APIs from China. This has led to the shutting down of many API plants and discontinuance of many important APIs, especially antibiotics.”.

Asking for corrective steps, she wrote: “Additionally, the drastic price discounting imposed on a number of antibiotic drugs have led to their manufacturing being discontinued by Indian companies on the ground of non-viability. This has resulted in drug shortage, which will eventually result in the importation of Chinese antibiotics. This is an extremely dangerous situation that is evolving and must be corrected urgently.”

She has further urged the PM to explore options in supporting capital investment for upgrading and expanding manufacturing infrastructure also involving the augmenting of investment in the sector, and making low-cost funds accessible for future investments.

On R&D investments, she emphasised urgently allowing for tax exemption on the 200 per cent weighted tax deduction on R&D costs which does not permit inclusion of international patenting and overseas drug development expenses.

The letter also has called for a computation of drug pricing based on an equitable formula which ensures like-for-like comparisons and which factors in the quantum of investments. If the return on investment is denied, she said, any such price formulae will erode huge value for this all-important sector and make business unviable.

She has also suggested some exemptions on pharma exports from SEZs. She added, unlike other sectors, the pharma industry is not permitted to export drugs and APIs without obtaining International Regulatory Approval. This process takes on an average two years which denies all pharma units in SEZs nearly two years of 100 per cent tax holiday. Hence, she wrote, the sector should be compensated by allowing it to choose the starting year of the five-year tax holiday based on obtaining the required regulatory approval. Besides removal of Minimum Alternate Tax, the government should consider exemption of duties and taxes on domestic sales of essential drugs from SEZs.

She has also called for a relook at the present moratorium on clinical trials as it is severely hampering drug development and is instead strengthening external competition. Hence, she has called for the lifting of the moratorium.

THE DRUGS FOR PHARMA SECTOR

• Supporting capital investment for upgrading and expanding manufacturing infrastructure. To augment investment in the sector, low-cost funding needs be made accessible for future investments
   
• Urgently allow for tax exemption on the 200% weighted tax deduction on R&D costs
   
• Computation of drug pricing based on an equitable formula which ensures like-for-like comparisons and factors the quantum of investments. If return on investment is denied, any such price formulae will erode huge value for this all-important sector and make business unviable
  

 

The pharma industry is not permitted to export drugs and APIs without obtaining International Regulatory Approval. This process takes on an average two years which denies all pharma units in SEZs nearly two years of 100 per cent tax holiday. Hence, the sector should be allowed to choose the starting year of the five-year tax holiday based on obtaining the required regulatory approval.
 

Besides removal of Minimum Alternate Tax, the government should consider exemption of duties and taxes on domestic sales of essential drugs from SEZs
 

The present moratorium on clinical trials be lifted