The global active pharmaceutical ingredients (API) manufacturing landscape will not remain the same any longer as India, one of the major importers of API especially from China, has embarked on proactive measures to provide the much needed boost for manufacturing of APIs in the country to reduce the over dependence of Indian pharma companies on Chinese imports and save the industry in the long run.
That the Indian government is serious on its efforts to boost the API manufacturing industry on a bigger scale in India is evident from the fact that under its much campaigned ‘Make in India’ programme the central government had declared the year 2015 as ‘Year of API’. Under the Make in India initiative, the government will simplify many existing policies and also provide incentives to give a major thrust to the growth of Indian bulk drug industry to make it a formidable force globally. Government also aims to create dedicated pharma industrial parks with proper infrastructure to provide sustained growth for this sector.
In order to formulate a long-term policy and strategy for promoting domestic manufacture of APIs/bulk drugs in the country, a high level committee headed by Dr. V.M. Katoch, the then Secretary, Department of Health Research (DHR), was set up by the government.
The Katoch committee, which has submitted its findings recently, has made sweeping recommendations for revival of API manufacturing in India including tax free status to cluster developers and cluster participants for 15 years.
Immediate financial investment will be required from the government for development of clusters which may be in the form of a professionally managed dedicated equity fund for the promotion of manufacture of APIs.All central and state duties, taxes, levies etc in creating the entire community cluster infrastructure and individual unit infrastructure should be zero. If a unit promises more than 50 per cent capacity utilized for NLEM products then at least these benefits should be given, the panel recommended.
The panel also recommended soft loans to the industry through interest subvention upto 7.5 per cent, at least at par with interbank lending rates. Capex loan to the manufacturers of APIs for high priority identified drugs, with a moratorium of 10 years for repayment was recommended. Alternatively debt instruments should be long term ie 3+5 years for APIs/intermediates and 3+7 years duration for fermentation.Margin money for strategic projects should be cut down, preferably to 15 per cent equity and 85 per cent debt.
To encourage foreign investment, the committee recommended that faster clearances, funding for green field/brown field areas should be appropriately analyzed and support should be encouraged for the brownfield technologies.
Income tax rebates on upgradation of the existing R&D facilities should be doubled to 400 per cent from the existing 200 per cent so as to encourage new development. Income tax benefits should be given for manufacturing companies for an initial period of 10 years for each product from the date of launch of the product, the committee further recommended.
A long-term strategy keeping a goal of strengthening API sector by involving Ministry of Commerce as well as other regulatory authorities is required, the committee recommended and suggested judicious and liberal use of measures like anti-dumping, safeguards/duties, reciprocation and application of rules of origin.
In yet another major recommendation, the Katoch committee recommended establishment of Large Manufacturing Zones (LMZs)/ Mega Parks for APIs with common facilities maintained by a separate Special Purpose Vehicles (SPV).
To begin with, such facilities will need to be provided at a concessional rate and preferably free of cost. This will help "in competing with the other countries and also generating large employment. Such mega parks need to be provided with common facilities such common effluent treatment plants (ETPs), testing facilities, captive power plants/ assured power supply by state systems, common utilities/ services such as storage, testing laboratories, IPR management, designing, guest house/ accommodation, etc, the panel recommended.
These zones should be attached with power plants and solvent yards. These zones could be set up in National Manufacturing Investment Zones/ Petroleum, Chemicals and Petrochemical Investment Regions (PCPIRs) in states that have the requisite facilities/systems in place. The states like Gujarat, Andhra Pradesh, Tamil Nadu and Odisha could be consulted and they could allocate the land and provide other facilities. Parks could be set up in the vicinity of mega complexes where chemicals meant for further stages in producing APIs could be produced, the panel said.
On the controversial pollution issue, the panel said that the bulk drug industry including those involved in the production of APIs is one of the major polluting industries. The cost of the pollution control is very high as it requires highly capital intensive technology to treat pollution. It is, therefore, necessary to have proper rules and regulations to have check on the pollution level and the quality of the output. But at the same time there is a need to come out with procedures of implementation which are efficient and effective which include aligning the provisions of the Acts and rules regarding pollution, quality control, custom and excise duty, export bodies (DGFT), coal allocating bodies, electricity authorities to have a cell in the mega complexes proposed for the bulk drugs.
Six large API intermediate clusters in five to six states are expected to transform the nation. Keeping in view the urgency it would be necessary to start with at least two fully financed clusters (one focused on fermentation and other on APIs) in the immediate future, this process may be driven by an empowered committee for taking decisions in a time bound manner. An average cluster will require about 1000 to 2000 hectares of land and will require about 750-1000 crore investment for common facilities/ services if all requisite schemes are developed and implemented in near future within 3-6 months.
These parks could be allotted to large bulk, medium and small manufacturers on the basis of a formula to be specified in the guidelines which may be prepared by the Department of Pharmaceuticals. Because of similarities in technologies for chemical or fermentation technologies, separate parks for such manufacturers will be desirable. One such functional cluster can bring benefit of around one billion dollar/ Rs 60 billion per year. It is felt that three clusters may succeed in wiping out dependence in the area of APIs, the panel recommended.
The Katoch committee also recommended to the government the revival of public sector units (PSUs) for starting the manufacture of selected and very essential critical drugs like penicillins, paracetamol etc.
In its recommendation, the panel said that revival of public sector units for starting the manufacture of selected and very essential critical drugs (e.g. penicillins, paracetamol etc.) /vaccines or lease the plants/ assets possessed by these units is suggested as one of the options for consideration.Where feasible, it would be necessary to evolve ways and means of utilizing the resources available in public sector units such as IDPL for setting up API industry. Infusion of capital (about 500 crores each) is recommended to these units to start manufacturing important APIs in the very near future.
To facilitate ease of business in the API sector, the Katoch committee further recommended that in order to ensure single window clearance to manufacturers and provide common facilities and other support, the Department of Pharmaceuticals should have an institutional mechanism which could work in synergy with other important Departments such as Ministry of Environment and Forests, Ministry of Coal, Department of Financial Services, Department of Revenue and others have units co-located at the site.
On the research and development (R&D) front, the committee recommended stronger industry-academia interaction by facilitating the to-fro movement of scientists between industry and academic institutions. It also stressed on institutional mechanism for Ministry of Human Resources and various science departments/agencies like DST, DBT, CSIR, ICMR etc to work together/ in synergy on R&D relevant for best procedures of production.
Innovation should be measurable and awards should be given to the scientists and industry who contribute to the development of improved processes relevant to bulk drug industry. Technology development financing should be repaid. It also recommended import duty exemption on import of capital goods in respect of R&D and manufacturing of vaccines/APIs.