Budget 2022: Key expectations of healthcare and pharma industry

From scaling up production in a short time which helped meet global and domestic requirements for therapeutics and vaccines to spurring R&D in the sector, the COVID-19 pandemic has highlighted the sector's capacity and capability in addressing the healthcare needs of the country. 

The upcoming Union Budget 2022-23 will be key to sustaining this momentum thus accelerating sectoral growth and consolidating India's position within the global pharma value chain. 

Expectations from the Union Budget 2022-23 

Production Linked Incentive Scheme: Further budgetary allocation should be made for Production Linked Incentive (PLI) scheme for pharmaceutical sector which will encourage investments, promote employment, attract core knowledge competency and make India a competitive player in global markets. 
 
Increased Budgetary Allocation:  There should be an increase in public spend in health care from 2.5-3% of GDP envisaged in the National Health Policy 2017, and budgetary allocation for R&D in bio-pharmaceutical sector.  

Dedicated Fund for Health Crises: A separate dedicated central fund should be maintained to meet expenses of drugs, equipment and other essentials to control and respond to future health crises which may or may not be drastically different from COVID -19. 

Research & Development: Government support and favourable policies is a must to establish R&D and innovation ecosystem in a country. Given that innovation in the sector has a high lead time and is also heavily dependent on capital intensive R&D, it is important to offer risk free and low-cost funding support to position India as an innovation-based economy.   

Also, with the global pandemic and various other outbreaks, there is a renewed focus for the pharmaceutical companies to come up with new drugs, new chemical entities and/ or new biological entities (NBEs) to combat such outbreaks.

The government could explore various options to augment innovation in the sector vide Budget 2022 such as:-

• Innovation Bonds: One of the attractive and innovative ways could be to notify Innovation Bonds similar to the existing NHAI and REC bonds which enjoy a tax-free status (ie. interest income being tax free in the hands of the investor) tailored to meet the requirements of the pharmaceutical sector 
•  R&D Incentives: Another innovative and attractive way to augment R&D investment could be the introduction of R&D Linked Incentive Policy ('RLI') similar to the PLI scheme. The government could also explore at providing a 200% weighted deduction for companies making investments to undertake research for new drugs, new chemical entities and/ or new biological entities (NBEs) to combat outbreaks. 

There should also be special Budgetary Provisions for Rare Diseases, viz. 

1. Separate funds to help treat patients with Rare Diseases.  
2. Funds for R&D in Rare Diseases in order to spur innovation to help bringing down costs of treatments/therapies.  
3. Tax incentives/ incentives for the development of drugs and therapies for rare diseases, such as tax credits for qualified clinical trials and grants to support development of drugs and therapies.  
4. Import duty exemptions for innovator drugs developed abroad, as proposed by the NPRD. 

The existing Customs Duty Concessions should be continued: Government should continue with the existing Customs duty concessions/ benefits for medicines as any discontinuation thereof in the current scenario will impact the accessibility of such medicines at affordable price. 

Taxation on vaccination/ medical supply for employees: The cost of COVID-19 vaccination and provision of medical supplies for the employee and his dependent family should not be taxable to employees as a perquisite. Such expenses are allowable as deductible expenditure in the hands of the employer under Section 37 of the Income Tax Act, 1961. 

Ease of Doing Business: Further measures should be implemented towards 'Ease of Doing Business' with emphasis on simplification and making the process industry friendly, with specific provisions for eliminating bottlenecks and other practical challenges faced by taxpayers. Such measures would also encourage further investment.  

Withdrawal of Equalization Levy: Equalisation levy should be withdrawn, and measures should be taken for ease of compliance and reduction of tax litigation. 

It is crucial for public and private entities across the pharma and healthcare value chain to collectively work towards making the sector future ready and the Union Budget 2022 is the first step in this direction.   

(The author is President, Organisation of Pharmaceutical Producers of India (OPPI) and Managing Director, Pfizer Ltd.)