In an effort to drive innovation in domestic pharma sector, the government is seeking applications for a scheme with an outlay of Rs 5,000 crore (around $600 million) over next five years, to shift the life sciences economy from a volume-driven, cost-based generics hub to an innovation-centric global competitor.
The Scheme for Promotion of Research and Innovation in Pharma MedTech Sector (PRIP) - years in the making - will aim to address the structural challenges of low domestic R&D spend in India. At around $3 billion, the amount of investment by India significantly lags behind major economies such as the USA, which spends $50-60 billion.
Why is it Needed?
Except for a handful of companies, India’s pharma sector is largely into the manufacturing of generic medicines. However, despite that, India only has 3.4% share in the global pharma market, and experts see the advantage slowly eroding as competition from other countries intensifies.
Estimates puts two-third of the global pharma’s value in innovative drugs, and India risks missing out on a projected $3.2 trillion global pie by 2030, given the low R&D spend. Indian companies spend just ~$3 billion on pharma R&D, compared to $50-60 billion in the USA and $15-20 billion in China.
India’s medical devices industry too is underdeveloped, with India holding only a 1.5% share of the global market, importing almost 70-80% of its requirements through imports.
What the PRIP Scheme Offers?
The scheme is open for registration and the deadline for application on the PRIP portal is November 10, 2025.
By using a new scheme to encourage innovation, the Centre hopes to enable Indian businesses to capture a 4-5% share of the global pharmaceutical market. The PRIP scheme has two key components.
The first component provides Rs 700 crore to set up Centres of Excellence (CoEs) at 7 PERs (National Institutes of Pharmaceutical Education & Research). Each CoE will specialize in a frontier area like - antiviral/antibacterial drug discovery (Mohali), medical devices (Ahmedabad), bulk drugs (Hyderabad), flow chemistry (Kolkata), novel drug delivery (Raebareli), phytopharmaceuticals (Guwahati) and biological therapeutics (Hajipur).
The second component, with a budget of Rs 4,200 crore, is geared toward promoting R&D and innovation among industry players and startups. It offers financial assistance for both early-stage and later-stage projects. Early-stage projects - those in the initial phases of development - can receive up to Rs 5 crore, with full funding for projects under Rs 1 crore. Later-stage projects, closer to commercialization, can receive up to Rs 100 crore, with government funding up to 35% of the project cost.
For strategic innovations addressing public health needs but with limited market potential such as orphan drugs or treatments for antimicrobial resistance, the funding support can go up to 50%.
Projects involving reputed government research institutions will be given preference, as per the scheme, especially if they demonstrate strong potential for product development and commercialization. The scheme also encourages licensing of intellectual property, shared use of research infrastructure, and joint development of technologies.
Priority Areas
The scheme identifies three key areas for funding - new medicines (chemical, biological, and traditional systems like Ayurveda and Unani), complex generics and biosimilars, and novel medical devices such as AI-enabled diagnostics, robotic surgery tools, and telemedicine platforms.
No Free Money
Unlike pure grants, the Centre is maintaining a ‘Benefit-Share’ right in the commercial realization of successful projects through the scheme, positioning itself as an early-stage investor. Companies receiving government support can choose between fixed or tiered royalty payments on net sales, or offer equity to the government. For example, companies must repay 150% of the total financial assistance disbursed for later-stage projects, which can be done via a fixed 10% of net sales per year, a tiered payout (4-12% of net sales), or a share allotment equal to the assistance amount.
For early-stage projects, the repayment obligation is discharged once the total payments equal the total financial assistance disbursed. Payout options range from a 5% fixed rate of net sales to a tiered rate (2% to 6%).
Governance and Oversight
A dedicated Project Management Agency will handle implementation, monitoring, and disbursement of funds, while an Empowered Committee chaired by the CEO of NITI Aayog, supported by a Project Appraisal Committee and a Technical Committee comprising experts from government, academia, and industry will provide oversight.
Industry Response
The industry has welcomed the PRIP scheme, stating that it will encourage innovation and help India pharma move up the value chain. "Innovation accounts for 2/3rd of the global pharma market wherein India's presence is limited," said Sudarshan Jain, Secretary General, Indian Pharmaceutical Alliance, the industry body that represents large homegrown pharmaceutical companies.
"This initiative will spur innovation and accelerate the industry’s aspiration to move up the value chain - from volume leadership to value leadership," Jain said.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
