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As Budget day nears, industry associations start putting in their demands from the finance ministry. For the Indian pharmaceutical industry, one demand on the wish list for many years is increasing the research funding.

In several Union Budgets previously, small mention has been made about growing the industry and a thrust given to aiding research. Pharma is still a miniscule part of the Budget speech, while fortunately, healthcare has got the right level of attention in the last few Budgets.

For the drug industry, a corpus fund of Rs 150 crore was announced at least five years ago for new drug discovery research. There is no clarity on how that fund has been utilised, who the beneficiaries are or what has been the progress on the projects using those funds, though that amount is only a small token given the spiralling costs incurred for fundamental research.

There is a renewed demand now from large industry associations to increase that corpus to Rs 300 crore, which can also be used by smaller companies.
Many industry insiders say that the procedures to avail those funds are extremely tedious and do not enable seamless use. That may be true as government funds are always difficult to obtain anywhere in the world. Thorough scrutiny is a must to justify correct utilisation of taxpayer money.

But the argument that companies have to depend on government funding to carry out research has to be faulted. In fact, for the right and serious candidates, the government has been granting financial assistance through its department of science and technology. There are several other schemes worked out by the department of biotechnology to assist startup firms in advancing their compounds through lead identification and pre-clinical stages. Sadly, it has come to notice recently that the number of proposals has been extremely low and qualitatively inferior.

Many reputed Indian companies, however, have a different point of view on research funding. Some say they can do without the government funding for fundamental research, but they do not like to be taxed on critical research equipments. The government can therefore take a conservative stand by not increasing research grants but reducing tax span on research equipment.

In case the government feels Rs 150 crore is a pittance (which no doubt it is) and if it does intend to double that figure, there must be accountability clauses to disbursement of the amount.

The finance ministry can do well to pick up clues from the funding model adopted by private equity and venture investment companies. Most private equity players have international experience in dealing with the needs of funding discovery research.
Their rules of picking up the desirable companies are extremely stringent.

From evaluating a company’s product pipeline to doing audit on people, they do a complete scan before letting the purse strings loose. Funding is done on a stage-by-stage examination and often one official from the private equity firm is embedded into the discovery research team of the company seeking funds. Some may dismiss this as too much involvement, but others say there is no evil intent in getting an outsider to scrutinise progress.

Many European and US-based biotech companies which claimed to have a miracle lead have wilted due to the present economic stress situation. They are in crying need of funds, but may not have gone to the government. In India too, the right thinking companies will knock at the government’s doors at the last stage.

At the moment, bigger Indian companies are restructuring their business to make research more productive and self-sustained. Dr Reddy’s has tied up its discovery programmes with Aurigene, its collaborative research arm, and despite recent setbacks, Glenmark is working on identifying new leads. For them, research has evolved without any government support. That is the lesson for others to learn.