Union Budget 2023: Union Finance Minister Nirmala Sitharaman will be presenting the Union Budget 2023-24 on 1st February 2023. Ahead of the upcoming budget, experts from the pharmaceutical industry urge the government to give adequate importance to the industry, keeping precautionary measures in mind to prevent further damage caused by the COVID-19 pandemic.
The year 2023 holds a positive outlook for India’s pharmaceutical industry. Interestingly, the segment has experienced significant growth during the past two decades, and pharma revenues worldwide totalled $1.42 trillion in 2021.
Industry experts told Financial Express.com that the Indian Pharmaceutical sector is expecting an increase in the budget outlay and fund allocations for the pharma sector in the upcoming Union Budget (2023-2024).
Last year, while the healthcare sector got a 16 per cent hike in the budget allocation due to the pandemic crisis, an increase in the share of healthcare and pharma spending in the upcoming budget is crucial.
Impact of Recent Surge in COVID-19 Cases in China
Sanjeev Jain, Managing Director, Akums Drugs & Pharmaceuticals told Financial Express.com that in light of the recent surge in COVID-19 cases in China, pharmaceutical companies are concerned that they will face adverse impacts again.
“Since China is the epicentre of Active Pharmaceutical Ingredients (APIs) manufacturing, pharmaceutical companies across the world heavily rely on APIs from it for the production of their medicines. The recent outbreak of corona has already started disrupting the availability as well as the prices of APIs imported in India. We are currently observing the COVID-19 situation in China, not just epidemiologically, but also in terms of supply of drug raw materials from China. As the situation becomes more clear, we may start maintaining stock of fast running and critical APIs,” Jain told Financial Express.com.
‘Encouraging innovation and increasing expenditure on R&D’
According to a recent EY FICCI report, in the wake of a growing consensus over providing new innovative therapies to patients, the Indian pharmaceutical market is estimated to touch $130 billion in value by the end of 2023. Meanwhile, the global market size of pharmaceutical products is estimated to cross the $1 trillion mark in 2023.
Industry experts told Financial Express.com that it is essential to allocate separate funds for R&D, formulation, and Active Pharmaceutical Ingredients (APIs).
“From quickly boosting up production to help satisfy local and global demands for therapeutics and vaccines to fueling research and development in the field, the pandemic has emphasised the pharmaceutical industry’s capabilities and capacity in meeting the country’s healthcare needs. The upcoming budget will play a pivotal role in sustaining its growth and momentum. Additional budget should be allocated by the government to the Production Linked Incentive (PLI) scheme which will encourage investments, attract core knowledge competency, promote employment and make the country a competitive player in global markets. Additionally, budgetary allocation for R&D in bio-pharmaceutical sector must also be increased,” Nikkhil K Masurkar, CEO, Entod pharmaceuticals told Financial Express.com.
Masurkar also emphasised that the government could explore various options to augment innovation in the sector such as through innovation bonds and R&D incentives.
Masurkar told Financial Express.com that while the government has been very supportive to aid the growth of the industry through various schemes and policies, further support is required to establish R&D and innovation ecosystem in a country.
Masurkar also emphasised that to establish India as an innovation-based economy, it is crucial to provide risk-free and affordable funding support because innovation in the industry has a long lead time and depends largely on capital-intensive R&D.
According to Shyamakant Giri, Managing Director & President, India Business and Emerging Markets, Amneal Pharmaceuticals, Indian pharmaceutical companies have encountered significant headwinds in the global markets over the last few years.
“However, the industry is expected to grow rapidly with increased consumer focus on health. This calls for favorable policies for the pharmaceutical sector focused on strengthening its production and research capacities, with an emphasis on self-sufficiency in active pharmaceutical ingredients (APIs) and value generation through cutting-edge R&D and innovation. Effective models are required to promote investments in R&D and to provide faster approvals for setting up of new facilities, to support the industry expanding its production capacity and introducing new products,” Giri told Financial Express.com.
He also maintained that the recent development about the possibility of the Union Budget proposing a research and development policy for the pharmaceutical sector is exciting and a step in the right direction.
“In addition to this, focused initiatives such as tax incentives/incentives for the development of medications and therapies for rare diseases, that are eligible for clinical trials and grants to encourage drug and therapy development will go a long way in supporting the industry growth. To capitalize on growing prospects for global value creation, strategic steps should be introduced. Measures to make conducting business easier will enhance investment and aid to the industry’s long-term success,” Giri told Financial Express.com.
Facilitating Ease of Doing Business
Masurkar told Financial Express.com that additional steps should be taken in the direction of “Ease of Doing Business,” with a focus on simplification and making the procedure industry-friendly, and with provisions specifically designed to remove bottlenecks and other practical difficulties experienced by taxpayers.
Sudarshan Jain, Secretary General, Indian Pharmaceutical Alliance told Financial Express.com that the budget should outline supportive policies, simplified regulations, and simple GST norms to aid in the development of the pharmaceutical industry.
“…the Union Budget 2023-2024 should help fuel innovation and R&D, which will set the pace for propelling the pharmaceutical industry forward. The budget should outline supportive policies, simplified regulations, and simple GST norms to aid in the development of the pharmaceutical industry. Measures to facilitate the ease of doing business will increase investment and contribute to the industry’s long-term growth. In accordance with the “Vasudhaiva Kutumbakam” principle, the industry is poised to shift from “Make in India” to “Discover and Make in India” (One Earth, One Family, One Future). We are looking forward to the Government of India’s support in this,” Jain told Financial Express.com.
According to Nikhil Chopra, CEO and Whole Time Director, JB Pharma, the Union Budget 2023 should specifically look at encouraging innovation and increasing expenditure on R&D to a minimum of 1% of the GDP, along with further streamlining the landscape and further moving up notches on the ‘ease of doing business’ in India.
“Specific focus should be on enhancing India’s competitiveness as the pharmaceutical industry’s R&D and manufacturing hub,” he added.
Green Chemistry
Naveen Kulkarni, CEO, Quantumzyme told Financial Express.com that while India’s efforts to be the leading Pharma exporter are laudable, there is an urgent need to consider the environmental impact and support Green Chemistry initiative.
“More specifically the contribution of biotechnology to reduce the environmental impact of chemical manufacturing. This convergence of chemistry and biology in developing biocatalysts has already proven in providing clean industrial processes across the globe. India has to incentivise chemical companies to adopt these new technologies and support homegrown R&D efforts,” Kulkarni told Financial Express.com.
He also pointed out that fiscal incentives to consider R&D expenses of large pharmaceutical and chemical companies who partner with Indian MSMEs on this front will boost not only the MSME economy but also create awareness of technology adoption for a cleaner and greener environment.
“India has no dearth for finance. Who better than Government to develop and strengthen the internal ecosystem by offering the right incentives. A lot of efforts have gone into promoting start-ups; it is time the upcoming budget incentivises large enterprises for technology adoption from home grown startups and demonstrates atmanirbhar bharat at least in their R&D expenses. MSME revenues through this program could be exempted from tax and expenses made by companies towards ESG contribution, Green and Clean technologies can be claimed similar to 80GGA towards these spending and not just limited to Section 35(xx) organisations,” Kulkarni said.
‘Increased Expenditure on Public Healthcare’
According to Raheel Shah, Director of Business Development, BDR Group, there is a need for an increase in spending on public healthcare.
“Pre-budget expectations survey showed an increase in demand for making pharmaceutical investments more attractive. The COVID-19 pandemic has put our healthcare system’s resiliency to the test. There is still work to be done, beginning with an increase in spending on public healthcare,” Shah told Financial Express.com.
The industry gained significant momentum in the previous year, particularly in securing access to COVID-19 vaccines and medications, and this year’s budget will be essential to accelerating sectoral growth and ensuring access to cutting-edge medical solutions for a variety of diseases, not just COVID-19, Shah said.
Focus on Preventive Healthcare and Strengthening Infrastructure
According to Sanjeev Jain, Managing Director, Akums Drugs & Pharmaceuticals, the upcoming budget is also likely to focus on preventive healthcare, given the significant rise in non-communicable and lifestyle diseases in the country.
“Government incentives and grants for cost-intensive research are also anticipated. Moreover, offering incentives to domestic API manufacturers and bringing about a reduction in GST and import duty on APIs is the need of the hour. The 2023-24 budget needs to continue focussing on strengthening the infrastructure of the healthcare sector and shift direction towards promoting Make in India pharmaceuticals for making India truly ‘Atmanirbhar’. We must work together to ensure that Indian pharmacopoeia is acknowledged and appreciated worldwide. The government should make a roadmap and move forward so that more countries accept Indian pharmacopoeia,” Jain told Financial Express.com.
Amit Choudhary, Co-founder and CEO, Dawaa Dost – Budget told Financial Express.com so far it has been a longstanding hurdle in the development of health infrastructure in India. We hope the upcoming budget addresses the challenge, and the allocation limit would be raised from 1.2 – 1.3% of GDP to at least 2.5% of GDP, which is the internationally accepted norm.
Mediflation in India
Choudhary also emphasised that the industry has high expectations with respect to the budget allocation for healthcare.
“We hope the upcoming budget addresses the challenge, and the allocation limit would be raised from 1.2 – 1.3% of GDP to at least 2.5% of GDP, which is the internationally accepted norm,” he said.
According to Choudhary, for a country that is also called the ‘Pharmacy of the World’, India’s mediflation rate is at a staggering 14%, the highest in Asia.
“The government must consider eliminating GST on medicines which will in turn help reduce the out-of-pocket expenditure on health for Indians, which currently stands at 63%. This has a massive impact on the overall health outcome and any revenue loss will be compensated with healthier Indians. Parallelly, incentives around generic medicines are a good way of promoting affordability and awareness with respect to medicines, and encourage them to switch to generics,” he said.