SPV with cover for drug R&D soon

NEW DELHI: In a bid to promote new drug research in the country, the government is mulling creating special purpose vehicles (SPV) with insurance
cover which will be used to fund new drug research. The department of pharma is also toying with the idea of creating drug research facilities and centres that can be used by private companies for such research work on a pay-and-use basis. The suggestions are part of the initiatives proposed by pharma secretary Ashok Kumar in a recent meeting with the industry. The meeting was held in view of the government’s plan to make the country a hub for drug research and development (R&D). While a successful drug development project will provide lucrative returns, it is a risky investment and chances of failure are very high. “One possibility could be operate through a SPV route and the risk be covered through the insurance plan,” Mr Kumar said. But as the government has other priorities that are of social importance, financial help may not be viable. However, the department has sought the industry’s view to explore the proposal. Presently, the government provides 150% tax exemptions for investment made by drug companies in drug R&D.Globally, it takes up to a $1 billion to successfully develop a drug and funding is largely done by the companies themselves. In India, it is much lower. Indian companies have mastered the art of reverse engineering or developing low-cost version of off-patented drugs. But the industry is at a nascent stage in terms of developing new original drugs. Many big home grown companies are now making attempts to move to the second stage of drug research. Companies such as Ranbaxy, Glenmark, Dr Reddy’s, Sun Pharma, Biocon and Piramal Life Sciences have several new drugs in their pipeline but most don’t have the financial muscle to entirely fund the investment. Some of these drugs target diseases like Malaria which are widely prevalent in India and Africa, that have been neglected by global MNCs as the market for such is not lucrative enough. But as per SME Pharma Industries Confederation (SPIC) senior vice chairman Lalit Kumar Jain Indian companies should continue to focus on developing generic drugs as medicines made from 350 APIs (active pharmaceutical ingredients) can treat of more than 90% of the diseases in India. Unlike in western countries, there are thousands of small and medium drug makers in India and the government should also support research in small companies which focus on generic drugs.