Governance structure: Manufacturing Pharmaceutical Drugs in India
India’s pharmaceutical sector contributes significantly to the country’s exports and has attractive prospects for investment. India also runs a sizable number of facilities that adhere to Good Manufacturing Practices (GMP) standards set by the World Health Organization (WHO) and the United States Food and Drug Administration. Millions of people around the world receive affordable and low-cost generic medications from India (USFDA).
Among nations that produce pharmaceuticals, India has long held the top spot. Medicine spending in India is projected to grow 9-12% over the next five years, leading India to become one of the top 10 countries in terms of medicine spending.
Government Initiatives
- As per the Union Budget 2022-23, Rs. 3,201 crore (US$ 419.2 million) has been set aside for research and Rs. 83,000 crore (US$ 10.86 billion) has been allocated for the Ministry of Health and Family Welfare; Rs. 37,000 crore (US$ 4.83 billion) has been allocated to the ‘National Health Mission’; and Rs. 10,000 crore (US$ 1.28 billion) has been allocated to Pradhan Mantri Swasthya Suraksha Yojana. The Ministry of AYUSH has been allocated Rs. 3,050 crore (US$ 399.4 million), up from Rs. 2,970 crore (US$ 389 million).
- In March 2022, under the Strengthening of Pharmaceutical Industry (SPI) Scheme, a total financial outlay of Rs. 500 crore (US$ 665.5 million) for the period FY 2021-22 to FY 2025-26 were announced.
- India could restart deliveries of COVID-19 shots to global vaccine-sharing platform COVAX in November-December 2021 for the first time since April 2021. The World Health Organization (WHO), which co-leads COVAX, has been pushing India to resume supplies for the programme, particularly after it sent ~4 million doses to neighbours and allies in October 2021.
- In November 2021, PM Mr. Narendra Modi inaugurated the first Global Innovation Summit of the pharmaceutical sector. The summit will have 12 sessions and over 40 national and international speakers deliberating on a range of subjects including regulatory environment, funding for innovation, industry-academia collaboration and innovation infrastructure.
- In August 2021, Union Health Minister, Mr. Mansukh Mandaviya announced that an additional number of pharmaceutical companies in India are expected to commence manufacturing of anti-coronavirus vaccines by October-November 2021. This move is expected to further boost the vaccination drive across the country.
- In June 2021, Finance Minister Ms. Nirmala Sitharaman announced an additional outlay of Rs. 197,000 crore (US $26,578.3 million) that will be utilised over five years for the pharmaceutical PLI scheme in 13 key sectors such as active pharmaceutical ingredients, drug intermediaries and key starting materials.
- To achieve self-reliance and minimise import dependency in the country’s essential bulk drugs, the Department of Pharmaceuticals initiated a PLI scheme to promote domestic manufacturing by setting up greenfield plants with minimum domestic value addition in four separate ‘Target Segments’ with a cumulative outlay of Rs. 6,940 crore (US$ 951.27 million) from FY21 to FY30.
- In May 2021, under Atmanirbhar Bharat 3.0, Mission COVID Suraksha was announced by the Government of India to accelerate development and production of indigenous COVID vaccines. To augment the capacity of indigenous production of Covaxin under the mission, the Department of Biotechnology, Government of India, provided financial support in the form of a grant to vaccine manufacturing facilities for enhanced production capacities, which is expected to reach >10 crore doses per month by September 2021.
Eligibility criteria for application under PLI Scheme
- The project shall be a greenfield project as defined under these guidelines.
- The Net Worth of the Applicant (including that of Group Companies), as on the date of application, shall not be less than 30% of the total committed investment. The Applicant not meeting the said Net Worth criteria shall not be eligible.
- The proposed Domestic Value Addition (DVA) by the applicant shall be at least 90% in case of fermentation based product and at least 70% in case of chemical synthesis based product.
- The applicant should not have been declared as bankrupt or wilful defaulter or defaulter or reported as fraud by any bank or financial institution or non-banking financial company.
Eligibility for Incentive
- The project shall be a greenfield project as defined under these guidelines.
- The Net Worth of the Applicant (including that of Group Companies), as on the date of application, shall not be less than 30% of the total committed investment. The Applicant not meeting the said Net Worth criteria shall not be eligible.
- The proposed Domestic Value Addition (DVA) by the applicant shall be at least 90% in case of fermentation based product and at least 70% in case of chemical synthesis based product.
Amount of benefits
The objective of the scheme is to enhance India’s manufacturing capabilities by increasing investment and production in the sector and contributing to product diversification to high-value goods in the pharmaceutical sector. One of the further objectives of the scheme is to create global champions out of India who have the potential to grow in size and scale using cutting-edge technology and thereby penetrate the global value chains.
Target Groups
The manufacturers of pharmaceutical goods registered in India will be grouped based on their Global Manufacturing Revenue (GMR) to ensure wider applicability of the scheme across the pharmaceutical industry and at the same time meet the objectives of the scheme. The qualifying criteria for the three groups of applicants will be as follows-
- Group A: Applicants having Global Manufacturing Revenue (FY 2019-20) of pharmaceutical goods more than or equal to Rs 5,000 crore.
- Group B: Applicants having Global Manufacturing Revenue (FY 2019-20) of pharmaceutical goods between Rs 500 (inclusive) crore and Rs 5,000 crore.
- Group C: Applicants having Global Manufacturing Revenue (FY 2019-20) of pharmaceutical goods less than Rs 500 crore. A sub-group for MSME industry will be made within this group, given their specific challenges and circumstances.
Quantum of Incentive:
The total quantum of incentive (inclusive of administrative expenditure) under the scheme is about Rs 15,000 crore. The incentive allocation among the Target Groups is as follows:
- Group A: Rs 11,000 crore.
- Group B: Rs 2,250 crore
- Group C: Rs 1,750 crore.
The incentive allocation for Group A and Group C applicants shall not be moved to any-other category. However, incentive allocated to Group B applicants, if left underutilised can be moved to Group A applicants.
Financial Year 2019-20 shall be treated as the base year for computation of incremental sales of manufactured goods.
Pharmaceutical drugs are supported by the PLI Scheme to boost domestic manufacturing capacity, including high-value products across the global supply chain.
- PLI Scheme for Key Starting Materials (KSMs)/Drug Intermediates (DIs) and Active Pharmaceutical Ingredients (APIs) (PLI 1.0),
- Production-Linked Incentive (PLI) Scheme for Pharmaceuticals d (PLI 2.0).
Products
- Category 1: Biopharmaceuticals, Complex generic drugs, Patented drugs or drugs nearing patent expiry, Cell based or gene therapy products, Orphan drugs, Special empty capsules, Complex excipients, Phyto-pharmaceuticals
- Category 2: Active Pharma Ingredients (APIs), Key Starting Materials (KSMs), Drug Intermediaries (Dls)
- Category 3: Repurposed Drugs, Auto-immune drugs, Anti-cancer drugs, Anti diabetic drugs, Anti Infective drugs, Cardiovascular drugs, Psychotropic drugs, Anti-Retroviral drugs, Fermentation based 4 KSMs /DIs
The rate of incentive will be 10% (of incremental sales value) for Category 1 and Category 2 products for the first four years, 8% for the fifth year and 6% for the sixth year of production under the scheme. Rate of incentive will be 5% (of incremental sales value) for Category 3 products for first four years, 4% for the fifth year and 3% for the sixth year of production under the scheme.
The duration of the scheme will be from FY 2020-21 to FY 2028-29. This will include the period for processing of applications (FY 2020-21), optional gestation period of one year (FY 2021-22), incentive for 6 years and FY 2028-29 for disbursal of incentive for sales of FY 2027-28.
The Indian Government has taken many steps to reduce costs and bring down healthcare expenses. The National Health Protection Scheme, which aims to offer universal healthcare, the ageing population, the rise in chronic diseases, and other government programmes, including the opening of pharmacies that offer inexpensive generic medications, should all contribute to boost the Indian pharmaceutical industry.
The rapid entry of generic medications into the market has remained a priority and is projected to benefit Indian pharmaceutical companies. Additionally, the focus on preventive immunizations, life-saving medications, and rural health programs bodes well for the pharmaceutical industry.
Ananya Khar
Ananya Khar is a Research Intern at Tatvita. Presently she is pursuing his bachelors in the Liberal Arts department at the Savitribai Phule Pune University.
