The Association of Biotech Led Enterprises (ABLE) submitted a set of suggestions to the Department of Biotechnology (DBT) that can make India a leading global biopharmaceutical manufacturer and supplier. Though India has gained recognition as one of the leading suppliers of generics (it produces and exports $11 billion worth of generics to a large number of countries), it managed to garner only a 1.4 percent share of the $138 billion biosimilars and biopharmaceuticals market opportunity. In biopharmaceuticals space, developed nations such as the US, EU and Japan maintain a leadership, with no competition from India or other emerging economies. Biosimilars are biopharmaceuticals that are becoming important since they are similar versions of the important patented innovator drugs such as Herceptin and Enbrel, patents of which are due to expire shortly. Global sales of biosimilars is expected to reach $1.9-2.6 billion by 2015.

Biosimilars are now considered as a key macroeconomic drivers of growth, attracting foreign capital by creating manufacturing and R&D centers of excellence in Brazil, India, and South Korea. India's healthcare outlay in the 12th five-year plan, which is expected to treble from one to three percent, which may enable free drugs for some chronic diseases like diabetes, cardio-vascular diseases, cancer, and immune-mediated diseases. Most therapy solutions in these disease areas are provided by biopharmaceuticals.

Dr MK Bhan, secretary, DBT, observed that India has the potential to be a world-class player in biomanufacturing; enablers for which would be, fiscal and regulatory policies that would need to be followed by robust action and demand generating efforts.

According to Dr Panchapagesa Murali, president, ABLE, “As an industry association it is our duty and responsibility to support Government of India's efforts in fulfilling its healthcare mandate following which our executive committee strategized and has come up with a set of recommendations to enable India to become a leader in biopharmaceutical manufacturing. India has done it before in generics and will do so in biologics as well.�

“Biomanufacturing is a capital intensive activity where infrastructure costs are high. Biosimilars is an opportunity that India cannot afford to miss. Many countries such as Argentina, Korea, Malaysia, Singapore, Turkey, and Taiwan are finalizing their guidelines for biosimilars. South Korea is actively expanding its world-class clinical trials and production infrastructure, cultivating bio-specialized manpower, building R&D, legal and system support strategies. India too should come out with its biosimilar policy and encourage biomanufacturing in a big way. We are appreciative of the Indian government asking the industry for recommendations,� noted Kiran Mazumdar Shaw, CMD, Biocon and executive committee member, ABLE.

Among the set of recommendations, Dr Murali said the more important ones are those of finance (up to `5,000 crore biomanufacturing fund for soft loans at 4-6 percent with a two-year moratorium and five-year tax holiday from date of commercialization); larger SEZs specifically meant for biologics, including biotech drugs under the Free Medicines Scheme being contemplated by the Indian government; preference to 100 percent indigenously manufactured biotech drugs for various government schemes; simplified procedures for obtaining various approvals; and inclusion of biotech medicines like insulin, monoclonal antibodies (Mabs) and recombinant proteins in the list of essential drugs.

BioSpectrum presents the detailed recommendations submitted by ABLE to strengthen the industry.

Drawing success from pharma industry
India has attained global acceptance as a key pharmaceutical manufacturing hub with the largest number of USFDA and EMEA approvals outside the US and EU. Good technical expertise combined with an increasing number of drugs turning generic has enabled the Indian pharmaceutical industry to emerge as one of the world's largest producer of generic drugs with annual exports worth $11 billion in 2010.

Drawing from this success, the Indian pharmaceutical sector is now aiming for the next big opportunity in pharmaceutical manufacturing-biologics, especially biosimilars. India, therefore has the opportunity to become the global biomanufacturing hub thus enhancing its stature as the world's apothecary.

The biopharmaceutical market is currently worth nearly $137 billion, and growing rapidly. Industry experts estimate that it could be worth $319 billion by 2020. Moreover, at least 48 biologic products with combined sales of nearly $60 billion are due to come off patent over the next decade. Today, India's share of the biopharma market is a mere 1.4 percent but the potential for India to become a manufacturing hub for biopharmaceuticals is enormous.

If India is to address this opportunity, it will have to act expeditiously and the Government of India (GOI) will have to play an enabling role by creating suitable physical, financial, legislative and regulatory infrastructure. The private sector on its part will have to invest in building the necessary manufacturing capacity, provided that the enabling infrastructure is in place. In addition, the government needs to provide roads and ports that support cold chain transportation, fiscal incentives that support the capital intensive needs for bio-manufacturing, laws and regulations that support the long gestational timelines for biomanufacturing and other such features that are essential to put India at the forefront of biopharmaceutical production.

China, India choices for biomanufacturing capacities
The 8th Annual Report and Survey of Biopharmaceutical Manufacturing Capacity and Production indicates that Asia is emerging as a preferred destination for outsourced biomanufacturing. China and India are perceived as the likely choices for expansion of biomanufacturing capacities. The survey had responses from 352 global biomanufacturers and covered issues associated with production bottlenecks, budget trends, use of disposables, downstream production, and quality management.

Destination for global outsourcing
This study indicates the continuing rise of Asia as a global biomanufacturing power. The increasing penetration of biosimilars in global markets coupled with the rapid rise of biologics in drug pipelines as well as many biologics attaining blockbuster status is resulting in a significant demand for expansion of the global biomanufacturing capacity. India, thus, has a unique opportunity of positioning itself as a global biomanufacturing hub.

Asia Pacific is already recognized as a key global biopharmaceutical manufacturing hub. Asia's combined share of 25.7 percent of global biomanufacturing capacity and employment virtually matches Europe's share at 26.2 percent and is gaining on North America's share of 37.5 percent.

Physical infrastructure
Biomanufacturing demands basic high quality infrastructure which includes the following:

• High quality, uninterrupted power supply (since power failures can result in the contamination or death of the production organism or other process deviations)
• Potable water to produce sterile water that is vital to maintain sterility and yields
• Common effluent treatment plants so that individual sites need only invest in primary treatment (rather than being zero discharge)
• Good road and rail freight links that support cold chain transportation to ports and airports. More specifically, a distribution network for the temperature-controlled transportation of biologics throughout the supply chain, supported by continuous power supply and temperature monitoring and data loggers.

Common effluent treatment plant: State Governments must set up common effluent treatment plants (CETPs) that carry out secondary and tertiary treatment of effluent to support biomanufacturing. Industry's project and operating costs can be significantly lowered if this is implemented thus enhancing the global competitiveness for the sector. Alternatively, Industry may be provided with weighted average tax deductions on both investments and operating expenses incurred in zero discharge effluent treatment plants.

Flexible pollution controls: Under the current rules for controlling pollution, a biopharmaceutical manufacturer must secure approval from the local pollution control board whenever it changes its product mix or yield, even if there is no net increase in the total amount of effluent. However, biopharmaceutical products typically generate easily biodegradable, aqueous effluents. The regulations should therefore be revised to allow for flexibility in terms of changes in product mix, especially when those products use the same process flows and generate the same amount of effluent.

Biopharma parks and SEZs: Build more biopharma specific parks and special economic zones (SEZs) with supporting infrastructure such as continuous power supply, good transport connectivity, common effluent treatment plants, water for injection (WFI) systems, and steam and compressed air supply. Such SEZs should also support ancillary industries that manufacture HVAC systems, sterilization equipment, and clean panels by providing special investment incentives to expand the country's biomanufacturing capabilities.

Regulatory infrastructure
Biomanufacturing requires a robust regulatory system that can enable and expedite rather than hinder and impede industrial production. We will need to provide bandwidth in terms of human resource as well leverage electronic and IT-enabled audit and regulatory systems that can provide speed and efficiency.

Establish single-window system for approvals and clearances: Currently, any biopharmaceutical company that wants to establish a manufacturing site in India requires to secure multiple approvals and clearances governing land use, access to power and potable water and pollution control, both from the Central Government as well as from State Government. Often these approvals are at variance to each other. The GOI should ensure that the format, content and interpretation of all such regulations is common throughout the country and introduce a single-window system for securing all clearance and approvals from the various central and state agencies.

Create an independent inspection facility: The GOI should establish a separate inspection body both at the DCGI and state drug controllers' level to audit the manufacturing and containment facilities of all companies involved in the production of recombinant drugs. This will help to ensure that Indian biopharma products are acceptable in the global marketplace. Establishing strong agencies in the private sector for providing GLP and GCP accreditation, and monitoring compliance with the rules would likewise help to create a reliable network of service providers, which would in turn help to lower costs and attract foreign investment in domestic product development and manufacturing facilities. Such accrediting agencies can also play a supporting role to the central and state regulatory bodies.

Modify the regulations on process validation: Under the current system, there is an inherent contradiction in the regulation that governs manufacturing and clinical development. Presently, process validation batches are required to be produced prior to the clinical development phase. Commercial-scale batches are also required to supply representative samples for clinical trials and export registration. These commercial-scale production lots are taken prior to receipt of a local manufacturing license, which is issued only once a drug has been approved. The regulations should therefore be changed to permit the use of product from commercial scale, validated batches for commercial launch in India through an automatic manufacturing license upon drug approval, provided that the product is within its established shelf life. This would reduce development costs and time-to-market, and make the products more affordable.

Harmonization of environmental regulations: The current pollution control rules mandate local board approval every time there is a change in product mix or yield even though there is no net increase in total effluent. The environment regulations enforced by the local pollution control boards must allow flexibility in terms of changes in product mix, especially when the different products adopt the same process flow and generate the same quantum of effluent. This is all more applicable to biopharma products which typically generate easily biodegradable, aqueous effluents. Fiscal incentives
Biologics manufacturing has a number of challenges to address in order to be globally competitive.

Capital intensive: Unlike generics manufacturing, biologics manufacturing units are much more complex and capital intensive to set up. Biologics require extensive and expensive research and clinical testing to ensure their safety profile. Moreover, the processes required to manufacture biologics are inherently much more complex than plain vanilla generics. Additionally, since biologics are mostly injectable products, all processes need to be performed under sterile conditions.

High cost of infrastructure: This industry is also infrastructure intensive requiring captive uninterrupted power supply, potable water to address sterility, high quality steam and compressed air to support fermentation and zero discharge effluent treatment facilities. Shortages of these have negative impact on the efficiency of the plant and quality of output. Economies of scale can provide a global competitive advantage to Indian biomanufacturing. However, Indian manufactures have resisted these large scale investments due to lack of financial assistance and assured supply of utilities in India.

Recommended enablers

Indian firms have strong technological capabilities and huge manufacturing appetite, but this needs to be supported by a national policy for the sector if it is to meet the challenges. The reforms call for financial and non-financial aid for manufacture of biologics, public-private partnerships in the sector, establishing synergies between all the stakeholders from research and academic institutions to manufacturing and selling companies, dedicated SEZ policies with tax rebates for the bio-pharmaceutical sector, and broadening and strengthening the enabling infrastructure. These reforms can catalyze a boom in biologics manufacturing, technology, employment, and growth. India has the potential to capture significant share of the global market for biologics by 2020, and be one of the top five producers in the world.

The three pillars of these reforms are fiscal incentives, regulatory freedom and world-class infrastructure. The proposed suggestions also revolve around the current Indian policies governing special economic zone and technology parks.

Biologics-friendly SEZ policies: The dynamics of the biopharmaceutical industry are very different from other sectors. It must be highlighted that biomanufacturing projects have inherently long gestational time lines first in constructing the facilities and then in obtaining regulatory approvals before the final product goes to the market and generates revenues. For example, the country's first biopharma SEZ established by Biocon in 2004, could only commence exports in 2009 because of the lengthy approval processes involved, especially from USFDA and EMEA. Whilst Biocon's five-year tax holiday was effective between 2006-11, the realistic benefit is between 2009-14. Hence, the full potential of the tax holiday was denied to Biocon wherein the tax holiday is notionally only two years (2009-11). Thus, we suggest that tax holidays should to be applicable only when the site is registered and approved by a major regulatory body such as USFDA or EMEA that enables exports to commence. In China, tax holidays are applicable only after the unit starts generating peak revenues which help manufacturers take full advantage of these incentives. In Malaysia, the incentives are even more attractive as the tax holiday commences upon profit generation. It is also recommended that more biomanufacturing SEZs be encouraged to be established with a sector-specific set of norms and incentives.

Customized tax rebates: ABLE proposes that tax rebates for the industry be weighted on the basis of a company's involvement in forward looking initiatives.

• Tax rebates for green manufacturing which reduces the waste burden on the environment would be an excellent way to ensure sustainable pollution free manufacturing in the coming years. An accelerated depreciation for green technologies may be considered


• Tax rebates should also be applicable to the R&D expenditure of the company to encourage new drug development. Whilst the 200 percent weighted average deduction may apply to non-novel drugs, it is worth considering a 250 percent weighted average tax deduction for novel drugs


• A matching grant for setting up of pilot plants for pre-commercialization manufacturing, The Malaysian Government provides $30 million matching grant for pilot plants. The Indian Government may offer a 50 percent matching grant up to `50 crore for pilot plants required to support biologics manufacturing


• Grants for training programs for the development of skills. It may be prudent to consider a stipend grant of `10,000 per trainee per month subject to a maximum of 100 trainees per company


• It is also worth considering a 50 percent matching grant for advanced overseas training of personnel up to `1 crore per company. This advanced skill development grant could also include hiring of international consultants or trainers


• Tax holiday for indigenously developed biopharma drugs. Several countries are mandating the manufacturing of drug product to be eligible for participation in Government tenders and for tax exemptions extended to local drug companies. It is prudent to provide a 5-year tax holiday to companies that have a 51 percent Indian shareholding. Additionally, it is worth mandating that only drug products that are manufactured in India will be eligible for weighted premium for Government tenders. Additionally, all indigenously produced life saving drugs, especially those that are used to treat cancer, diabetes, HIV, malaria and hepatitis should be exempt from GST. This will enable greater access to affordable healthcare.


• Expanding BIRAP to include patent filings and prosecution. Many emerging economies are taking proactive steps in this direction - Brazil has enacted an “Innovation Lawâ€? which provides tax incentives for R&D, deductions on expenses related to patent filing and prosecution, and partial payment of the salaries of R&D scientists employed by biotechnology companies.

Soft loans: Looking at the capital intensive nature of the plants, government can provide long-term soft loans to setup biomanufacturing plants. A 10 year soft loan bearing a five percent simple interest with a two-year initial moratorium on capital repayment would be a good incentive to attract investment in biomanufacturing. This model has helped a large number of entrepreneurs in the 1990s especially in the high technology sector. SIDBI was a major provider of such funds.

Israel, has announced a number of innovative fiscal incentives to the life sciences industry, biotechnology in particular, which was declared a preferred sector as early in 2005. Investors were offered one of two incentives: 1. Government participation of up to 32 percent in capital investments linked to creating jobs in export industries; or 2. Accelerated depreciation and a tax holiday of up to 10 years on undistributed profits.

Biomanufacturing fund in 12th Five Year Plan: In order to provide the fiscal support and incentives sought as described above, it is proposed that the 12th Five Year Plan allocate a `5000 crore budget.

Other enablers
End-to-end support systems: In order to achieve economies of scale and scope, large bioparks and SEZs with integrated infrastructure like power, water supply, steam and compressed air and effluent treatment would enable biomanufacturing clusters that could collectively create critical mass. This could be created through services companies that would have captive users. It is also imperative to attract ancillary companies like clean room panels, automation instrumentation, piping contractors, and design consultants, in order to achieve economies of scope. With the right way forward, these dedicated biopharmaceutical SEZs can turn up into world class technological superior biologics technology and manufacturing clusters. China, Singapore and Korea have already created several biopharma manufacturing clusters along similar lines.

Preferential treatment to Indian companies in government tenders: Many emerging market economies such as Argentina, Brazil and Mexico give preference to indigenous manufacturers by providing 10-15 percent premium advantage on the quoted rates submitted to Government tenders. This not only encourages the local industry to improve scale and efficiency, but it also provides employment to large number of people who are involved in R&D and manufacturing of such products. Furthermore, it also helps the country to be self-sufficient in drug supply and reduce their dependence on MNCs which often take undue advantage of their near-monopolistic stature on certain drugs.

Common ancillary units on PPP model: A captive zero discharge effluent treatment facility is a major roadblock in project viability given the high capital investment required. The need for a central effluent treatment plant can be addressed through a PPP model which several state Governments have already authorized. Last year a common effluent treatment plant was set up at a cost of Rs80 crore in the Baddi-Barotiwala-Nalagarh industrial area in Himachal Pradesh's Solan district to check industrial pollution. Similar to common effluent plants, SEZs can also have shared analytical laboratories, pilot production facilities, and laboratories. The Bangalore Helix, a Biotech Park promoted by the Government of Karnataka has been designed along these lines.

India has tremendous potential to be a world leader in the development and manufacturing of biologics and with the active support of government in providing simplified regulations, better financial support and seamless infrastructure. India can be a preferred choice for biopharmaceuticals across the globe.

 BIOPHARMACEUTICAL MANUFACTURING ENABLERS 

Infrastructure	200% weighted average tax deduction on Infrastructure expenditure: captive power plant, effluent treatment plant etc.
Tax incentives	5 year tax holiday for biomanufacturing plants. GST exemption on all life saving drugs
Misc. incentives	Preferential 15% weightage for indigenously manufactured products in all Government tenders. SEZ tax holiday to take effect from date of international regulatory approval. Present sunset clause to be extended by 3 years for biopharma sector
Human resource	Training grant at `1.2 lakh per head p.a. up to 100 trainees per centre
Pilot plant	50% matching grant for pilot plant up to `50 crore
Advanced skill development	50% matching grant for advanced overseas training up to `1 crore p.a. or towards hiring consultants or external trainers