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FM plans major thrust for pharma sector

The 2001-02 has brought cheer to the domestic pharmaceutical industry, with stock prices of several majors nearing upper circuit limits.

Finance Minister Yashwant Sinha announced a substantial reduction in the Drug Price Control Order's (DPCO) exposure in the industry and an extension of 150 per cent weighted tax benefits from R&D to other segments like biotech, clinical trials and the new patent filings. These announcements are expected to be a boost to the sector.

The minister's announcement to impose import duty on some formulations is also being seen as a positive step from the government's side to protect the domestic pharma industry.

D B Gupta, Lupin Labs' chairman and managing director and a member in the DPCO committee, said this time the finance minister has taken steps in the right direction.

N Israni, President, Indian Drug Manufacture's Association (IDMA), said that as far as the sector is concerned, it is heartening to receive the repeated assurance of the government to soon reduce the span of price control substantially and to extend the benefit to weighted deduction applicable to R&D to biotech and clinical trials.

It is clear that the fiscal constraints have not allowed the minister to give any major incentives to pharma R&D, and the industry will have put up with gradual process of encouragement in the future course of action, Israni said.

According to analysts, the extended benefit of weighted deduction applicable to R&D to the other areas will certainly benefits the domestic pharma firms.

Players such as Ranbaxy, Dr Reddy's, Zydus Cadila, Nicholas Piramal, Wockhardt and Lupin are expected to be the most significant beneficiaries. Similarly, firms such as Ajanta Pharma and Zandu are in the process of filling new patents abroad for new drug delivery systems and new chemical entities.

The Budget also suggested imposing import duty for some formulations. However, the minister was silent on which formulations are considered.

However, industry sources said the government may introduce import duty for life-saving drugs which are also being produced by domestic pharma industry. It may be noted the Indian Pharmaceutical Alliance (IPA) has been lobbying for this for the last one year.

Source: Business Standard

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