Budget 2022: How the previous budget fared in the light of on-going pandemic

The Government has already announced the Productivity Linked Incentive (PLI) scheme for basic and innovative pharmaceutical manufacturing which is an encouragement for the industry to become more ‘Atmanirbhar’.

Budget 2022, Union Budget, Healthcare Budget, pandemic, Production Linked Incentive, PLI schemes
Union Budget 2022: The government should not only increase the public healthcare expenditure but also focus on these key areas to lead the next year well.

By Nikkhil K Masurkar,

Amid the ongoing pandemic and increasing vaccine requirements globally, the pharmaceutical and medical devices sector played a crucial role in 2021. The sector is further looking ahead to strengthen the partnership with the government and sustain the momentum in 2022. The pandemic has brought the need for constant innovation, robust manufacturing capabilities and a seamless supply chain to the forefront for the pharmaceutical sector.  The healthcare and pharmaceutical industry are eagerly awaiting reforms from Union Budget 2022-23 to battle the challenges as the new COVID strain, Omicron continues to spread like wildfire across the country and worldwide. The Union Budget 2022 is expected to build on the Production Linked Incentive (PLI) schemes and encourage continued investments in capacity expansion of sensitive APIs, drug intermediates, complex excipients, biopharmaceuticals and medical devices.

Key Areas to Focus On

The government should not only increase the public healthcare expenditure but also focus on these key areas to lead the next year well.

Incentives in R&D 

The pharmaceutical sector is research-intensive and spends a significant amount on R&D efforts. The Government has already announced the Productivity Linked Incentive (PLI) scheme for basic and innovative pharmaceutical manufacturing which is an encouragement for the industry to become more ‘Atmanirbhar’. Providing higher tax deductions for R&D expenses will further support higher investments in the creation of new drugs. Also, investments in specialty and novel drugs are subject to a higher risk of failure, leading to risk averseness. If the government provides higher tax incentives for R&D spending, it will incentivise Indian players to spend more, thereby providing the impetus for further research and development activities. Currently, R&D investments are 100% tax-deductible, which can be increased to 200 per cent, especially for novel drug discovery.

The government should also look at lowering the GST rates for all life-saving drugs and move them under the nil slab while moving other drugs to the 5.0% slab will increase affordability and thereby lead to higher demand and consumption. Presently, GST on drugs is taxed under four categories – nil, 5%, 12% and 18%. While a few life-saving drugs are taxed at nil rates, some are taxed at 5 per cent and the majority fall under the 12 per cent GST slab.

Attract Global Investment

Similar to the electronics sector where the government has not only attracted worldwide players but also provided an ecosystem to augment growth, the pharmaceutical sector needs to be supported with an ecosystem of identical nature. Interaction with global and industry players would do well to make India move from a generic manufacturer to an innovator developer and manufacturer for the world.

Digital Transformation

In the pharmaceutical industry, digital transformation is crucial for better patient care, greater transparency, cost-effectiveness, improved production and drug discovery. The digital transformation in the Indian pharmaceutical industry will enable pharma businesses to manufacture counterfeit-proof medications, which will guarantee the medicine’s authenticity. Digital transformation/technology would be the building block for the much-expected universal healthcare in the country and requires special attention in the upcoming budget. 

Looking Ahead

The Union Budget 2021-22 was a reassuring budget with no negative surprises. Healthcare and well-being received top priority in the budget, with more than doubling of the outlay to INR 223,846 crore, including the allocation of INR 35,400 crore towards COVID-19 vaccination and INR 64,184 Cr for a new scheme to strengthen the country’s primary, secondary and tertiary health infrastructure. Other positives included the higher spending on infrastructure, increased funding for strengthening the public sector R&D, the push for bank privatisation and innovation ecosystem, as well as increasing the FDI cap in insurance from 49% to 74%. It is expected that the government will build momentum on these initiatives and contribute more towards fortifying the health of the nation that is the cornerstone of development.

(The author is Executive Director, Entod Pharmaceutical. Views expressed are personal and do not reflect the official position or policy of the Financial Express Online.)

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