Budget 2023 may offer Research Linked Incentive scheme for Indian pharma

The much awaited Research Linked Incentive (RLI) scheme for the pharmaceutical industry may find mention in the forthcoming Union Budget 2022-23, it is learnt.

Modelled on the lines of the existing Product Linked Incentive (PLI) scheme, RLI is expected to provide an extra financial cushion, in addition to the existing R&D sops available to pharmaceutical and biotech companies operating in India.

According to a government official, the broad contours of the policy have been shared with the industry for their feedback. The draft policy has also been circulated by the Department of Pharmaceuticals among the research oriented departments of Health and Science and Technology ministries also.

"We have broadened the scope of the scheme with the inputs we have received from the industry. We were talking about six moon shot areas (biosimilars, complex generics, orphan drugs, precision medicines, vaccines, and antibiotics) that were identified by Niti Aayog. After industry consultations we brought in more areas under the scope of the scheme. We have circulated the draft with other departments that deal with research. We are hoping to finalize it very soon," the official said.

The pharmaceutical industry has been expecting a scheme to cushion R&D costs for innovative drugs for some time now. "Look at how the US government is working with the industry and research institutions in the anti-microbial space or in orphan drug designation space today. They provide benefits to pharmaceutical companies to develop a drug. The RLI of the central government could be something similar, though much more broad based that just focused on some orphan disease," an industry expert says. According to him, all these years the government has been providing a 150% tax incentive for investments in pharma R&D. "Things like that may continue. But the conventional tax benefits are not helping the kind of investment that innovation needs. We hope the new scheme will take some of the risk elements associated with R&D investments," he explains.

The industry is also keen to see some clarity on the post development opportunity it has for a new drug. "If I am investing a couple of hundred crores in R&D, what is the price point at which I can sell it when I get it to the market? How long do I have the benefits of putting an innovative molecule in the market? There are multiple strands in which the discussions are happening now. The end result should be that the government is benefited in terms of the improvement of the general health system and the pharma companies should be benefited by a lower risk which motivates them to put a lot more money, effort, into innovation," the expert adds.