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The Government of India can think of exempting the Clinical Research Organisation (CROs) services from the goods and services tax (GST) to address the current uneven playfield for the pharmaceutical companies of Indian origin, among other steps to grab the global CRO market opportunity, according to a study arranged by the Department of Pharmaceuticals (DoP).
The Study on CRO Sector in India, conducted by the DoP by engaging Biovantis Healthcare Private Limited (Biovantis) to prepare the report, noted that the pharmaceutical innovation is risky and capital intensive and the Indian pharmaceutical companies, which primarily comprise of generic companies have limited risk appetite and therefore have very limited research and development budgets. Top ten global pharmaceutical companies on the other hand spend about 18.56% of their annual revenues on new research and development.
According to the existing taxation regime of India, global companies working with Indian CROs do not have to pay the goods and service tax on the CRO services as the services offered by CROs are considered to be for export purposes. However, if Indian pharmaceutical companies have to outsource any services to Indian CROs, they have to pay the GST at 18 per cent.
"This creates an uneven playfield for the pharmaceutical companies of Indian origin. In order to promote the domestic CRO sector, the government can think of exempting the CROs services from GST. This will reduce the R&D associated financial burden on the pharmaceutical companies making more funds available for CROs," recommended the study.
It also called for further streamline the regulatory approval process for early-stage research projects to reduce timelines and bureaucratic hurdles and provide research grants, financial incentives, and funding support to encourage the domestic CROs working in the field of early discovery and clinical research.
"Most of the regulated markets like the US, Europe, Australia and Japan have a well-defined and stable regulatory environment for clinical trials and drug development. The Food and Drug Administration (FDA) sets clear guidelines for drug testing and approval, providing a streamlined process for conducting clinical trials and bringing new drugs to market. This predictability is appealing to pharmaceutical companies seeking CRO services," it said.
Post 2014, there have been important regulatory reforms in the Indian pharmaceutical and CRO sector which have simplified and expedited the regulatory approval process for clinical trials and bioequivalence studies while ensuring that ethical considerations are not compromised at any level. An efficient ethics approval registration and approval system has also been implemented in India.
"More regulatory clarity on the regulatory processes and creating a conducive regulatory environment for clinical research is the need of the hour," it added.
The pharmaceutical global contract outsourcing market has been picking up after the Covid pandemic. During the years between 2022-30, the global contract research outsourcing market is expected to grow at Compound Annual Growth Rate (CAGR) of 7 per cent and reach $90.4 billion by 2030. Out of this about $61.2 billion will be contributed only by the outsourcing done in the domain of clinical development.
"The CRO sector in India has been growing at a CAGR of 10.75 per cent and will reach $2.5 billion by the year 2030. Hence, it is imperative to identify the emerging opportunities for the Indian CRO sector beforehand, draft and implement strategies which will help in promoting the Indian CRO business," said DoP.
The DoP took the initiative to conduct the independent study under the Pharmaceutical & Medical Devices Promotion and Development Scheme (PMPDS) on the CRO sector/market in India to identify and understand the real issues faced by CROs operating in India and work out a proposed roadmap to resolve those issues and make the necessary policy revisions.
The study also recommends international collaborations for regulatory harmonisation, creation of a dedicated CRO cluster in government funded Drug and Medical Devices Parks, global positioning of India as destination for drug discovery and development, investment in research infrastructure, commercialisation of the government-funded research infrastructure, skill development and training of manpower, intellectual property protection, academic and industry collaborations and patient data privacy protection to grab the global CRO market opportunity.
The study also recommends that the CROs need to explore the Tier II and Tier III cities for clinical development, need to recalibrate quality management systems and further emphasize on adherence to international quality and compliance standards in contract research, and involve patient advocacy groups, regulators and healthcare professionals in order to build a trust.
The government funded research parks such as the four medical devices parks and various bulk drug parks which are being established by the Centre, should have dedicated space for the CROs operating within their boundaries and theses CROs should be given incentives like concessional tax rates, export subsidy and other subsidised service rates for availing the common services. The government further needs to bring together CROs, academic institutions, and sponsors of contract research. These CROs clusters can foster collaboration, knowledge exchange, and collaborative resource sharing.
The government should take marketing initiatives to position and market India as a preferred destination for pharmaceutical discovery, preclinical and clinical research. Instead of being only a market for the global pharmaceutical companies, the focus should be to create sizable opportunities for CROs to partner with global pharmaceutical companies in the field of early discovery, preclinical and clinical research.
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