The Department of Pharmaceuticals (DoP) is awaiting the approval from the Planning Commission and allocation of at least Rs.500 crore to launch the ambitious venture fund to the tune of Rs.10,000 crore which has been pending for long now.

The venture fund, mooted two years back to incentivize the pharmaceutical drug discovery and innovation in the country, is still under the 'proposal stage'. “The Department is waiting for the in-principal approval from the Planning Commission and has also sought an allocation of Rs.500 crore to launch the fund,” DoP sources said.

The working group on pharmaceuticals, set up by the Planning Commission as part of preparing the final Plan document, has also backed up the proposal for the venture fund, but 'a clear picture will emerge only when the final Plan is approved,' sources added.

The proposed funding, which includes substantial contribution from the private pharma industry under the public private partnership model, is aimed at creating a favourable environment for drug innovation in the country and to make India a hub for new drug discoveries. The DoP had even put out tenders seeking to appoint advisor to the fund twice last year, but without any results.

“The growth of the Indian pharmaceutical industry over the past few decades has predominantly arisen from manufacturing generic drugs for exports and domestic use. R&D in the pharmaceutical industry has witnessed no success in creating a new drug, despite its efforts for the past sixteen years. This is mainly due to lack of venture fund industry in India as compared to developed countries for the pharma sector. After consultation with the industry, it has been felt that it would be appropriate to harness the venture capital industry technical and financial acumen for the delivery of public resources into drug design, discovery and development. Venture capitalists (VC) have the expertise in handling all aspects of a high risk undertaking; as they raise funds for such investment and are professionals with specific industry experience,” according to the proposal sent to the Planning Commission.

“The DoP proposes to consider investment of identified funds into a newly created specialised private equity/venture capital fund (IPIF) that undertakes R&D investments into companies in the pharmaceutical industry. This investment will be subject to a market test at the level of the private equity / venture capital funds where the fund under question would have raised a large substantive portion of capital venture fund themselves wherein investment decisions are taken by impartial, experienced, and highly competent, motivated and trained fund managers,” it said.

The National Institute of Public Finance and Policy (NIPFP) under the Ministry of Finance is assisting the DoP for creation of such a fund and the mechanism for its implementation. It is proposed to invest about Rs.500 crores in the fund for the 11th Plan so that the same could be leveraged with the support of the private sector.