Bulk Drugs and Katoch Committee Recommendations

The Indian Pharmaceutical Industry is endowed with enough potential to transform the public healthcare system and to make country the leader in Global Generics. Currently, the industry supplies nearly 20% of global generic medicines making it the largest supplier in the world. But the major problem for the industry is Bulk drugs or APIs (Drugs used as raw materials to manufacture other drugs), which India has to import mostly from China. To attain self-sufficiency in bulk drugs and reduce dependence on China, the government had set up a committee headed by V.M. Katoch. The committee submitted its report in February 2015.

Major Recommendations of the Committee

The major recommendations of the Katoch Committee are:

• The committee suggested setting up of mega parks for API or Bulk drugs manufacturing. Since setting up API or Bulk Industry requires large tracts of land, water and electricity facility, effluent treatment plants, testing facilities, etc; therefore, government should ensure availability of all these facilities at reasonable cost.
• The bulk drug industry is known as one of the major polluting industries. Currently, the cost of the pollution control is very high in the country due to lack of capital intensive technology. Therefore, it is necessary to have proper rules and regulations to have check on the pollution level and the quality of the output.
• Innovative ideas and products should be promoted and awards to the scientists/industry should be given for contribution to the industry. Further, protecting innovation through patents will also help to prompt further innovation in the sector.
• There should be provisions for easy soft loans to the Industry through interest subvention upto 7.5%, and Capex loan to the manufacturers of APls.
• Income Tax rebates on up gradation of the existing R&D facilities should be doubled to 400% from existing 200% and Income tax benefits for manufacturing companies for an initial period of 10 years.
• Creation of advance testing lab infrastructure at all Indian ports/air ports for easy import and export.
• Tax free status to cluster developers and cluster participants for 15 Years
• Measures should be adopted to encourage foreign direct investment in green field as well as brown field projects
• Incentives should be provided to the manufacturers for setting up large plants and for importing of technology so that they can reduce the cost of production.
• Financial investment from the Government in the form of dedicated equity funds for the development of clusters.
• In order to ensure single window clearance to manufacturers and to provide common facilities and other support, units of various departments of government should be located at the manufacturing cluster or site.
• Revival of public sector units for starting the manufacture of selected and very essential critical drugs and vaccines
• Committee expects six large API intermediate clusters in five to six states would be able to transform the industry. As of now, it proposes to start with two fully financed clusters (one focused on fermentation and other on APls), while other clusters would be set up in future as per requirements.
• The committee suggested that states like Gujarat, Andhra Pradesh, Tamil Nadu and Odisha which are most suited to manufacturing sector should come forward to participate in this sector. The States may also establish their own manufacturing zones for this purpose.

Conclusion

The recommendations of the Katoch committee are commendable, and no doubt will play an active role in transforming the “bulk drug” industry in the country. In fact, based on recommendations, government has took first step in this regard by proposing financial assistance of Rs 200 crore to state governments for developing common facility at “bulk drug” park. Government is also planning to implement the complete recommendations of the Katoch Committee Report on the Bulk drugs very soon. But the major concern for Indian Pharmaceutical Industry is the government regulatory framework for Pharma industry which still seems untouched. The government regulatory framework for Pharma industry provides that all drugs which qualify as “bulk drug” must have an end-price regulated by the government. This is not only refraining the domestic industrialist from investing in this sector but also reduced the FDI in this field. As per current FDI policy, 74% FDI is allowed in Brownfield Pharma sector under automatic route and beyond 74% is permitted with government approval. In Greenfield Pharma, 100% FDI is permitted under automatic route. But most of the foreign investment takes place in Brownfield projects and Greenfield projects seem neglected. Therefore, there is also need for certain regulations in drug price mechanism adopted by the government.