All eyes are once again on India’s Finance Minister Arun Jaitley as he prepares to present the Modi Government’s second full budget. He has hinted that it will focus on reforms and growth but will this intention filter down to the pharmaceutical sector?
Once again Express Pharma asked pharma leaders to come up with their laundry list of demands. Once again, the list had quite a few demands from the previous years, pointing to the fact that these are long standing demands. The plea for increasing government spend on public health and tax incentives for R&D top the list. (See cover story in the Feb 1-15, 2016 issue: Wish list for budget 2016, pages:18-22)
Some of the long standing demands have been met but these remain half done. For instance, policy changes in the clinical trial sector over the past two years have introduced some rationale and science into the regulatory framework but the sector is making the case for more incentives like tax exemptions to CROs involved in biomedical research.
Similarly, on the API side, nothing substantial was done besides naming 2015 the ‘Year of APIs’. While the government announced a policy to spur manufacture of APIs and reduce dependence on China, we are yet to see this materialise. Besides an API policy, the industry’s wish list has Special Economic Zones (SEZs) and rationalisation of the inverted duty structure which would make the sector more competitive and see more entrants.
The ruling government is facing its own test, with the opposition digging its heels on key reforms like GST. The impact of GST on the pharma sector will be substantial so companies are looking for clarity on the finer nuances. The sector will also be hit by global tax rationalisation moves like OECD’s BEPS (base erosion and profit shifting) initiative aimed at curtailing the negative impact of multinational companies’ tax avoidance strategies on national tax bases. As these measures will eat into the profitability, so will the increasing span of price control.
Industry analysts have always made the case that the potential of the pharma sector cannot be fully tapped unless the peculiarities of the sector are addressed. The latest salary survey by HR consultancy Mercer supports the claim to fame with a prediction that the life sciences sector in India will see the highest projected salary increase for 2016 for the second year in a row. In terms of jobs creation, one in two companies are planning to increase headcount with hi-tech, shared services and lifesciences in the lead. Salary hikes and head count increases are a sure shot sign of positive sentiment and steady growth. Obviously, the sector is straining at the leash. It remains to be seen if the Union Budget 2016 will ease some of the pain.
After two years of deliberations and suggestions from over 300 industry representatives, India finally got an updated National Biotechnology Development Strategy 2015-2020 and going by initial reactions, most of the sector’s recommendations have been accepted. (See story: Revitalising Indian biotech, pages: 9-11) This could be a hopeful sign that the consultative approach will work in the case of the API and bulk drug policies but unfortunately, the sense is that time is slowly running out for the Modi government. If they want a good shot at a second term, they will have to bring back some of the euphoria of their first 100 days in office. Let’s hope the Finance Minister hits the right note on February 29.