RUN-UP TO THE BUDGET: PHARMACEUTICALS. Pharmaceuticals: A quick, strong tonic needed

A strategic direction on health is what stakeholders will be looking for from Finance Minister Arun Jaitley’s Budget 2016.

The past 18 months have not seen much happening in healthcare, possibly because of the weak economic situation. But things need to be set right, says Sujay Shetty, Partner and Pharma Leader with PwC India. He expressed hope for bold decisions that impact healthcare delivery, drug manufacturing and research.

Shetty cites the example of China, where, he says, the government first put its might behind getting universal healthcare for its entire population, and then followed it up with a push for innovation. That’s the kind of strategic direction in health that is acutely awaited, he adds.

Echoing a long-standing complaint from the industry and pro-patient groups, he points to the Centre’s low spends on healthcare — it now hovers at about 1 per cent of GDP. Down the years, governments of various political affiliations have failed to deliver on their promise of increasing this to 2.5 per cent of GDP.

In parallel, the Centre should prioritise key focus areas — be it maternal and child health or diabetes and other lifestyle diseases — backed by epidemiological data, he adds.

Shetty further says GST needs to be brought in, since the pharma sector faces inefficient distribution — stockists, wholesalers, Octroi, cascading taxation as products cross borders, etc. The structure adds to the cost, he points out.

Pharma industry associations have been seeking tax sops to support research and innovation. But Shetty says the Centre should rather bring in an enabling environment that makes it conducive for research. A strategic move, rather than a tactical one, he suggests.

Domestic drugmakers face stiff competition from their foreign counterparts, says the Indian Drug Manufacturers’ Association (IDMA), calling for an expansion of tax concessions beyond the R&D for certain drug and biotech products. The sops should extend to the land and building that house research facilities, for drug filing and overseas registration costs, patent consultations etc, says IDMA, which represents small and medium-sized drug companies.

The Indian Pharmaceutical Alliance (IPA) says that for the sector to grow, it has to expand its innovative footprint.

Revenue growth, earlier at 15 per cent, now hovers at about 13 per cent, and is likely to decline to 12 per cent in another 15 years, cautions the IPA, representing large domestic drugmakers.

For the industry to grow from the current $30 billion to $200 billion by 2030, research spends have to more than double from the present $1.5 billion to $3.5 billion over five years. This calls for substantial governmental support, says the IPA. The Organisation of Pharmaceutical Producers of India (representing largely foreign drugmakers) also seeks policy support — for the local manufacture of Active Pharmaceutical Ingredients (API) to reduce “over dependence” on Chinese imports.

With preceding Union Budgets giving insufficient attention to healthcare, the onus now lies on Jaitley to correct the situation.