Indian Drug Companies Hope for Tax Breaks to Offset Lower Prices
The Indian pharmaceutical industry is hoping for some good news in next week’s budget to offset some of the recent bad news that has been hurting the industry.
Executives say they need tax breaks because the government’s decision to slash the controlled prices of some pharmaceuticals in India is forcing them to stop making some of the most popular drugs.
“Many companies have basically stopped manufacturing certain key antibiotics, older antibiotics. They feel the prices are so low it does not make sense to make them anymore,” said Kiran Mazumdar-Shaw, chairman of biotechnology firm Biocon Ltd. “Now we’re actually importing many of these drugs from China.”
The new government has dropped hints that it wants to increase the number of medicines whose prices are capped to make them more affordable. Last year, the Congress-led government expanded the list to cover roughly 30% of the drug market, dropping prices of medicines to treat diseases such as cancer and HIV between 5% and 30%.
The Indian pharmaceutical industry has also been hit by a crackdown by the U.S. FDA. Last year, the U.S. barred drug shipments from 21 drug-making facilities, up from two in 2012. The restrictions have hurt sales in the U.S., the largest export market for many drug companies.
With the $15 billion Indian domestic drug industry already struggling, now is not the right time for more price caps, said Satish Reddy, chairman of Dr. Reddy’s Laboratories Ltd.
“They’re not sending the right signal to industry,” he said.
If the government wants to encourage the companies to continue developing low-cost drugs for India, the budget should include a bigger tax incentive for doing research and development.
Right now pharmaceutical companies are allowed to reduce their taxes by an amount equal to twice their R&D budget.
“We want an increase of that and certainty that those benefits will be permanent,” Mr. Reddy said.
Drug makers also want streamlined bureaucracy to promote the creation of new medicines. Too often the government is getting in the way of development with a slow and complicated approval process, he said.
Indian pharmaceutical companies also want restrictions on clinical trials to be lifted to speed-up development of new drugs. @The Wall Street Journal-INDIA.
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