A national innovation system for pharma

Source: The post is based on the article “A national innovation system for pharma” published in the Business Standard on 21st June 2023

Syllabus: GS 3 – Changes in industrial policy and their effects on industrial growth.

Relevance: About making the Indian pharmaceutical industry a world leader in innovation.

News: Recently a closed-door roundtable on innovation in the pharmaceutical industry was jointly hosted by the Centre for Technology Innovation and Economic Research and the Ananta Centre.

Note: This article is an expansion of Towards a National Innovation System article.

About the Indian pharmaceutical industry

From an overwhelming dependence on foreign firms and brands 50 years ago, India today has a vibrant and large pharmaceutical sector with highly entrepreneurial Indian players operating alongside multinationals. The industry is the third largest in volume worldwide, with a 10% share. However, in sales, it is the 14th largest in value, with just a 1.5% share.

What should be done to make the Indian pharmaceutical industry a global giant?

Incentivise investment in in-house R&D: India must start with much greater investment in R&D by the industry. The US, Japan, Germany, Switzerland and the UK have giant pharmaceutical companies, each investing billions of dollars in R&D. So India needs a 10-year ambition for leadership, as foreign giants on average spend much more on R&D ($7 billion) than the turnover of our top five pharmaceutical firms ($1.5 billion). This can be facilitated by initiatives such as providing full tax credit against income tax for increases in R&D spending, etc.

A regulatory system that supports innovation in firms: Few of the regulatory framework officials do not understand what it takes to discover a new molecule. This forced Indian pharma companies to conduct Phase I trials of new drugs in Australia instead of India.

Note: In Australia, the phase I trials costs 10 times higher, but the process is systematic, transparent and sure.

So, by revamping the regulatory system, India could turn our huge population and low labour cost into a major competitive advantage for drug discovery.

Reorient public research: India invests only around 0.4% of gross domestic product (GDP) in publicly funded R&D, just below the world average of 0.5%. A little over half of national R&D is done by the government in its own autonomous laboratories. Defence comes first, then Space, Atomic Energy, CSIR and Agriculture.

Healthcare research comes sixth, at under 6% of government spending on R&D. In the US, healthcare R&D (at 27%) is second only to defence. The same goes for the UK too (at 20%). So, allocating a larger share of government R&D spending to healthcare would be fruitful and spur investment within industry.

Facilitate talent search: Any Indian pharma industry can easily hire fresh graduates from Indian pharmacy courses. But they struggle to get advanced research talent. So, they often set up laboratories in the US and UK to tap into pools of specialised talent.

Almost every other country conducts public research within universities. So, their shift to foreign countries also connects them to well-funded universities that do a lot of healthcare research.

But in India, most of our public research happens in autonomous government laboratories. So, India too should shift public research to our higher education system. Thereby, India would simultaneously train more advanced talent that pharmaceutical firms need.

Follow Chinese approach: Fifteen years ago, the Indian pharmaceutical industry was well ahead of China in innovation. Today it is 10 years behind. This is because of impacts of regulatory changes made in China. These impacts a) Made it easier to conduct clinical trials, b) Facilitated competition between different local governments incentivised firms to expand R&D facilities in their city, c) The Thousand Talents programme attracted experienced technologists, etc.

So, building a broad national purpose will turn the Indian pharmaceutical industry into a world leader in innovation.