Tax incentives to key sectors have played a central role in pharmaceutical, biopharmaceutical, and other export industries.
R&D expenditures in these industries are often eligible for 150% deductions, and there are liberal incentives for export profits.1,2
The Department of Biotechnology (DBT), set up under the Ministry of Science and Technology in 1986, has also been a factor
in the economic revitalization. In the 1990s, the DBT began funding vaccine and other biotech research. The DBT now also provides
grants and loans to Indian companies to cover international patent and other R&D costs, and has set up biotech industrial
parks with special economic zone privileges.
Another sign of India's economic adjustment was its 1995 agreement to the World Trade Organization's TRIPS (trade related
aspects of intellectual property rights) regime, committing the country to a reform of its patent law. Previously, Indian
companies were encouraged to reverse-engineer western drugs, and devise and patent new production processes. India adhered
to TRIPS. In 2005, its patent law was extended to cover product patents, including those for new drug molecules.4
One major effect of the new patent law has been to shift the focus of India's pharmaceutical companies away from generics
and process optimization towards innovative drug research, including R&D on biopharmaceuticals.
The new patent law, India's friendlier tax regime, its skilled labor force, and its evident seriousness about building a biotech
industry, has helped to bring about western investment. Many Indian companies now conduct contract research and manufacturing
for major multinationals and use the earnings to fund their R&D efforts.
ROOM FOR IMPROVEMENT
India remains weak in a number of crucial areas. There is only a limited system for attracting postdoctoral students who are
a key research workforce in the west. Most Indian postdoctoral students go abroad and rarely return. In India, the academic
research that normally leads to the development of biopharmaceuticals is largely carried out by young students working towards
Partly for this reason, and also because the industry is still so young, India's expertise in standard R&D techniques remains
weak. Cell culture development, biochemistry, toxicological assays, and animal tests—all are areas where Indian laboratories
traditionally have less capability. That is likely to change soon, but India's strengths lie presently on the chemistry side
of the industry.
Another drag on India's ability to innovate is its IP environment, which shows room for improvement despite the 2005 patent
law reform. There is a taint of the old attitudes in India's business and regulatory culture, and western companies complain
of intellectual property rights (IPR) abuses. Citing "unfair commercial use of undisclosed test and other data submitted by
pharmaceutical companies seeking marketing approval for their products," and "procedural barriers and delay," the Office of
the US Trade Representative kept India on its IPR watch list in 2006 and put India on its priority watch list in early 2007.4
In November 2007, the DBT announced the approval of its National Biotechnology Develop-ment Strategy,5 which increases the DBT's budget to more than $300 million annually, and includes promotions in the following areas:
- The establishment of more university-linked research centers, with facilities and teaching standards of international quality.
- The rapid expansion of biotech-related PhD and postdoctoral programs.
- Incentives for the repatriation of Indian-born scientists currently working abroad.
- Support for academic laboratory and private biotech partnerships.
The world market for biopharmaceutical drugs is approaching $100 billion, and many first-generation products have lost or
will soon lose their patent protection. India intends to take advantage of the opportunity. It aims at nothing less than a
world-class, end-to-end biopharmaceutical capability in the next decade.
1. Kulkarni N. A window into India's biopharma sector. In: Langer E, editor. Advances in Biopharmaceutical Technology in
India. Gaithersburg, MD: Bioplan; Jan 2008.