An Assessment of the National Policy on Research & Development and Innovation in the Pharma-Med Tech Sector in India

[SpicyIP]

On the National Policy on Research & Development and Innovation in the Pharma-Med Tech Sector in India and its implementing scheme, we are pleased to have this post by Pranav Aggarwal, discussing the crucial aspects of this policy and scheme and highlighting their shortcomings. Though the post is a bit dated and was pending from our end for a while, it's extremely important especially in the light of the discourse over public-private collaboration in the pharma sector. Pranav is a third year student pursuing B.A.LL.B.(Hons) at Rajiv Gandhi National University of Law, Punjab. He has a keen interest in commercial laws, especially in IP and allied fields. His previous posts can be accessed here.

An Assessment of the National Policy on Research & Development and Innovation in the Pharma-Med Tech Sector in India

By Pranav Aggarwal

In the Budget speech 2023-24, the finance minister, Ms. Nirmala Sitharaman announced: 

“A new programme to promote research and innovation in pharmaceuticals will be taken up through centres of excellence. We shall also encourage industry to invest in research and development in specific priority areas.”

This provides the immediate propellant to the National Policy on Research & Development and Innovation in the Pharma-Med Tech Sector in India (“NPRIP” or “Policy” ). The Department of Pharmaceuticals (DoP), under the Ministry of Chemicals and Fertilisers, notified the aforesaid Policy in the Official Gazette on 16th August, 2023, and published on 18th August, 2023.  To operationalize the Policy and explain the road map for further implementation, the DoP published the Scheme for Promotion of Research and Innovation in the Pharma-Med Tech Sector (“PRIP” or “Scheme”) along with the Operational Guidelines via Gazette notification on 17th August, 2023. However, both NPRIP and PRIP were officially launched by the Union Minister of Chemical and Fertilisers, Dr. Mansukh Mandaviya on 26th September, 2023. 

In the press release,  it was announced that the intent was to focus on not just high volume but also high value of the pharma industry in the coming decade. With a market share of around USD 50 billion, India is third in the world with regard to volume, but is  14th when we account for the value (as provided here). The Policy mentions that in the coming decade, the Indian pharma industry could potentially grow to USD 120-130 Billion. To achieve this, several steps from facilitation to execution have been envisaged. Readers can also have a look at a short video released by the department for a brief background of the Policy and the Scheme.

In this blogpost, we will seek to explore the rationale behind the Finance Minister’s budget announcement and how that promise has been converted into the aforesaid Policy and the Scheme. Firstly, we will explain what the Policy and the Scheme entails for Research and Innovation in India’s pharma sector. Then, the post will highlight the possible shortcomings that we feel cannot be ignored if effective implementation of the Policy and the Scheme is warranted.    

Understanding the Policy & the Scheme  

The Policy and the Scheme broadly mentions that over the last two decades now, India has been at the forefront of the production and distribution of generic medicines globally. However, as explained in the Scheme, the ‘Pharmacy of the World’ could not remove its dependency on imports for mostly patented medicines. 

The reason for such disparity is the lack of required R&D in the pharma industry. For generic medicines, substantial R&D was not necessary. That’s why, in India, only around USD 3 Billion is being spent on pharma R&D. This lacuna, as the Scheme highlights, is also reflected by the fact that the top ten Pharma Companies invested only 7.2% of their sales in R&D in the financial year 2021. Additionally, with the increasing demand of high value products such as bio pharmaceuticals, complex generic drugs, cell based or gene therapy drugs, the required innovation to meet the global standards has increased substantially. 

Additionally, the Scheme provides that in 2020, the share of Indian medical devices in the Global market was just 1.5% which is approximately 11 billion USD. If we go back a little in the memory trail, we can easily recall the catastrophe that was caused by the unmet scarcity of medical devices during the COVID-19 pandemic which even led to black marketing. 

It is under such a backdrop that the Policy and the Scheme attempt to introduce certain major reforms. Broadly, from incentivising the private sector to invest to providing seamless regulatory frameworks and facilitating stronger industry academic collaboration, the Policy plans to fill the abyss that the pharma industry has been experiencing for long. 

Major Focus Areas of the Policy

Interestingly, the policy makers have also underlined the idea of animal health and the required pharma innovation to avoid consequent disease outbreak. Therefore, it enforces the WHO’s idea of ‘One Health’ in the Indian medical sphere wherein an unifying approach to balance and optimise the health of people and animals are to be undertaken to avoid pandemics like COVID-19. Cumulatively, due to all these measures, the Policy also envisages creation of white collar jobs in the health and allied sector in the coming decade. (Refer to the picture below)

Excerpt from the Policy

Policy Implementation and the Scheme 

Under the Scheme, the implementation has been divided into two components, A & B. Component A focuses on the development of the required research infrastructure. For this, the scheme allots Rs. 700 cr. over a period of five years to establish the Centre of Excellence (CoEs) in the seven National Institutes of Pharmaceutical Education and Research (NIPER). They will work as specialised institutions focusing on specific target areas such as bulk drugs, medical devices, etc. Hopefully, strengthening such public institutions will contribute to the required academic research for market relevant innovations.

Component B, through three other sub categories, this will promote industry players to invest in pharma R&D over a period of five years. Notably, they focus on the six priority areas that includes phyto pharmaceuticals, complex generics, precision medicines, medical devices, orphan drugs and drug development for Antimicrobial Resistance. These three categories are:

1. Category B I:  Nine established pharma companies may be selected to carry out research in six priority areas with academic collaboration in Govt. institute of national repute. Along with the companies, the government will invest at the rate of 35% of the total cost incurred or 125 Cr, whichever is less, on milestone basis which varies from Technological Readiness Level (TRL) 1 to TRL 9. Higher the level of TRL, faster the chances of actual commercialisation of the innovation.
2. Category B II: The government will fund 30 research projects in six priority areas which are at successfully validated level (TRL 5) to reach TRL 9 @ 35% of the cost or ₹ 100 Cr whichever is less. This will focus on the undergoing projects to expedite their prospective commercialization. 
3. Category B III: Indian startups and MSMEs will be provided funding for 125 projects  at Rs. 1 cr per research projects in six priority areas. This will be done to encourage  R&D and innovative products in such new but potential entities. 

Handling the Intellectual Property 

The Scheme brings certain clarity as to how the IP generated from such collaborations will be regulated. It clearly defines the benefit sharing mechanism through either royalty or equity between the innovators (private companies, national institutes, Startups) and facilitators (government) on further commercialisations of such innovative products. The benefit sharing mechanism has been such that after the DoP gets back what it has invested, it shall relinquish its rights over the developed product.  

Under Category I and II, the government shall recover its financial aid through either 10% royalty on net sale of the product/technology till the patent is effective or equity of not less than 100% of the DoP support provided. Although a clear mechanism for benefit sharing through equity has not been provided, the Scheme does provide that DoP may seek payment by way of one-time transactions when the commercialization of the product has been successfully done by the fund recipient. Also, some conditions have been enumerated in the Scheme before the companies can sell/ assign these rights. For instance, the fund recipient will have taken prior written permission from the DoP before selling/ assigning the rights to any third party.

Under Category B III funding, the government will either take 5% royalty till the royalty amount paid becomes equal to the amount of the assistance disbursed and that was not returned as unutilized fund or in case of foreclosure or termination of Project. Therefore, through such arrangements, the Policy via the Scheme ensures that the financial interest of the government has been well secured along with suitable IPR for the innovators. Summing up all the funding mentioned above, the total outlay under the scheme is of Rs. 5,000 crore over next five years.

Interdepartmental Ecosystem

Importantly enough, the Policy focuses on creating a better regulatory mechanism for innovative products. In the next two years, it aims to minimise the time taken in the regulatory procedures by 50%. To achieve this, an ecosystem within different departments under various ministries are to be formed to create a seamless network wherein they can provide a single window for the innovators for the regulatory compliance. 

Analysis 

1. Lacked focus on Traditional Medicines 

The government has been promoting traditional medicines whether it is establishing a different ministry, AYUSH, or opening the Global Centre of Traditional Medicine (GCTM) with WHO in Jamnagar, Gujarat or the even recent initiative for the nutritional improvement in adolescent girls through Ayurveda Interventions However, the Policy does not focus on it much except for a few references. On top of that, the Scheme and the operational guidelines are completely silent on it. It can be understood that huge proposals regarding traditional medicines could have gone outside the department’s ambit. However, if such was the case, the policy should have completely removed this or if it did mention it, it should have provided a clear and substantive idea as to how they plan to bring innovation in traditional medicines. 

2. Inclusion of Doctors & Public Health Experts

There are clearly three stakeholders in the policy namely, the bureaucracy, the academic institutions and the private pharma-medtech entities. However, in this whole process of promoting innovation, the inclusion of doctors and public health experts as stakeholders has been negligible. There is nothing to indicate that either previously or prospectively, public health experts and doctors have been or will be consulted while operationalising the Policy.  It must be noted that at the end, the academic institutions as provided under the Scheme are all government run.  Due to this, ultimately, it will be a two player game: government and private companies. To argue and protect the larger public interest during implementation of such Policy, public health experts have to be included as stakeholders. 

3. Ambiguity in Selection Criterion

Under the Category B1, the Scheme provides that the nine willing pharma companies may be selected for collaboration with the government institutions. However, no specific criterion has been laid down as to how such companies shall be selected. Such ambiguity leaves unnecessary discretion in the hands of the government officials to select companies that have ‘good relations’ with the officials.

4. Inadequate Funding 

According to Pharmaceuticals Global Market Report 2022, the average cost of developing new drugs can be around 4 billion USD and may go up to 10 billion USD. Under Category B III, the government has provided only Rs. 1 cr (~USD 120,000) per project to the MSMEs and startups for innovative projects. This clearly indicates towards the substantially less aid being provided by the government in comparison to what is the current requirement. It has to be addressed by the government because such inadequacy may lead to high failure rates on the funded projects, the termination of which yield nothing to the government.

5. IP Handling without Public Interest

The Scheme has ensured that the government’s financial aid shall be safely recovered back after receiving amounts equivalent to what was invested. However, they ignored the prospective public interest that may get compromised due to such a mechanism. Such a similar issue has arisen earlier as well (as discussed here and here). When public funds and infrastructure are utilised for such innovations, the long term interest of the people’s health should have been taken care of. For instance, the recently released guidelines by the Department of BioTechnology (DBT) planned to introduce ‘march-in-rights’ to certain extent. (A detailed analysis of  aforesaid DBT guidelines will be done separately) Such similar measures are well required in such an elaborative Policy to safeguard the primary interest, the Public Interest as the government cannot relinquish its IP rights for such innovative products which could not have been possible without public money.  

Conclusion  

Image from the interim budget 2024

All round the year, whether it was the Anusandhan National Research Foundation Act, 2023 or other schemes as well, the government assured that it cares for innovation and R&D.  However, what it ended up doing was that it just incentivised the production and could not even utilise half of its allocated budget for the development of the pharma industry in the financial year 2023-24.

Whether the Policy and the Scheme too will fall prey to such under-utilisation of allocated resources is for us to observe and comment on in the times to come. But what can be said definitely is that the government has surely given a great thought on the Policy to actually imagine a bigger and sweeter picture of the pharma industry in the coming decade.

Please click here to view the post on SpicyIP and leave a comment.