Budget elicits mixed reaction from pharma and healthcare

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There was mixed reaction to the budget presented yesterday by Union finance minister Arun Jaitley.

Biocon chairman and managing director Kiran Mazumdar-Shaw said she is disappointed as the Union Budget 2014-15 has no takeaways for the biotech and pharma industry.   “This Budget is positive but largely directional and aspirational. I was expecting bolder reforms for boosting investor sentiments. The long-pending GST issue needed a stronger messaging with a commitment to time-bound implementation, however the FM has only assured to arrive at a decision by end of the year,” she noted.

The finance minister has given the necessary directives to the respective ministries for action and implementation, and it now needs to translate into tangible outcomes.  The reluctance of the FM to articulate Big Bang reforms received an initial thumbs down from the markets, but the smart rally later signals a resounding acceptance of Budget 2014.  The pronouncements on the retrospective tax issue, easier FDI rules, jobs creation in manufacturing sector and improving predictability in India‘s tax regime will improve the investment sentiment in the country. As will measures for addressing the funding needs of small entrepreneurs. Also welcome are the proposals to shift to e-governance, which is expected to improve efficiency and stem administrative leakages. Disappointingly, however, Budget 2014 did not have much for the pharma & biotech sector. We welcome the intent to establish more biotech clusters but most of the proposals are tokenism at best. Implementation timeline for GST and abolition of MAT for SEZs could have been positive moves for our sector, which has been long ignored. I expected more. I would rate the Budget between 6.5- 7 out of 10, stated the Biocon chief.

Sujay Shetty, leader pharma and life sciences, PwC India pointed out that some good initiatives were announced in the budget across capacity and infrastructure building. The main one is hike in insurance investment limit to 49 per cent. This will help both the patients and the pharma industry. Free drugs and free diagnostics for all, sounds potentially promising for patients. We will have to see more details on this.”

Dr Rana Mehta, Leader- Healthcare, PwC India said that this budget provisions to enhance both financial and physical access of healthcare for the country. Through broadband in rural area, telemedicine will increase the accessibility of qualified doctors and specialist into rural area and increased FDI in health insurance to 49 per cent will help increase financial accessibility of population.  Opening up of 4 additional AIIMS and 12 government medical colleges will ensure improvement in quality of medical education and a step towards covering the shortage of one million doctor in India. It will also enhance access to tertiary care for patients who need to travel from far flung areas to reach AIIMS in Delhi.

According to Charu Sehgal, senior director, Deloitte India on Life Science and Healthcare, “The almost negligible focus on healthcare in this budget was disappointing. There was hope of the government increasing  Health Expenditure closer to the 2.5 per cent of GDP as well as of announcing initiatives that would encourage private investments aimed at improving healthcare availability in underserved areas.

While the setting up of twelve new government medical colleges is welcome, given that we have a shortage of one million doctors currently, there was a need for a major thrust to enable and facilitate private investment in Medical education to bridge the huge gap. The setting up of fifteen Model Rural Health Research Centres sounds interesting and has potential, although the exact framework of its operations needs to be examined. It will be excellent if it can provide the much needed impetus and support to collaborative innovations aimed at increasing access and affordable healthcare for the poor. Although the decision to set up several more AIIMS will provide high quality tertiary care in these towns, the more urgent need is for the government to tackle primary and secondary care so that the pressure on tertiary and quaternary facilities can be reduced,” said Seghal.

According to Dr PM Murali, president, Association of Biotechnology Led Enterprises (ABLE), overall, the budget seems to have delivered in line with market expectations, with adequate focus on infrastructure and measures to boost financial savings. Though, more clarity on the roadmap to GST would have been welcome. ABLE welcomes the focus on strengthening of institutions as Technical Research Centres as this will strengthen the skill gaps and boost productivity. The emphasis given to start-ups, entrepreneurship, innovation and incubation is also a welcome initiative to boost technology and product innovation. It is also heartening to see the focus on the agriculture and biotechnology sector. The scaling up of agri-biotech clusters will help enhance competitiveness and innovation capacity.

Union budget for the financial year 2014-15 has shown encouraging signs for the growth of healthcare entrepreneurs in India, hailed Gopi Gopalakrishnan, president of World Health Partners (WHP) which is an international non-profit organization that provides health and reproductive health services in developing countries across the world.  The NGO has hailed the Indian budget as an encouraging sign for the growth of healthcare entrepreneurs in the country.

This year’s budget has been a deviation from the trend, where healthcare has been mentioned quite often, and in a positive framework.  The finance minister, although walking a tight rope on the fiscal front, has initiated a substantial amount of measures which directly or indirectly affect the healthcare of the citizen, said Zahabiya Khorakiwala, managing director, Wockhardt Hospitals Ltd.

Right from macro issues of sanitation, malnutrition and safe drinking water, to the caring of differently abled and the ageing, he has tried to touch the long standing sore health issues of India. The mention of free drug service and free diagnostic service for the poor are sentiments in the right direction, although they carry the risk of execution, given the federal structure of the country, she added.

For healthcare delivery industry, the setting up of 12 more medical colleges, and 4 AIIMS would be a welcome move as it would augment the very critical medical manpower in the country which is in very short supply. REIT’s entry in the real estate space may indirectly ease the woes of hospital industry, and e-visas would be a hassle-free tool for medical value travel. While saying this, there have not been mentions of any SOPs for the healthcare industry, or under National Health Assurance Mission. Government could also have promoted health insurance coverage for citizens by bringing it in the negative list for Service Tax. We still have to analyse if the healthcare spends suggested in this budget have achieved a desirable level of percentage of GDP. The healthcare industry would also have been overjoyed, if it was included in the list of Infrastructure sector, as it would have then availed several pushes designed in this budget, added Khorakiwala.

Dr Pavan Kumar, consultant cardiac surgeon at Lilavati Hospital & Head of Cardiac Surgery Department and Telemedicine Center at Nanavati Hospital in Mumbai said the Union Budget of 2014 is totally uninspiring and pedestrian.  A lot was expected from the Namo Budget, but after the budget was announced, no difference can be seen between the current and the earlier government. There are no new reforms for the health or pharma sector, he said.

Amol Naikawadi, joint managing director, Indus Health Plus says, “Overall, the health market players may not be too happy since there aren’t any major reforms announced for the entire health industry. We have again failed to make government realize that it is importance to address the increasing health issues. Various non-communicable and communicable diseases are taking toll which affects the nation’s health and overall growth.”

“The free diagnosis services under Health for All will encourage more people to undergo healthcare checkups which will further help in early diagnosis and treatment of diseases. The opening of AIIMS and 12 medical colleges will ensure better medical facilities, tertiary care and trained medical professionals but this however may solve sectorial problem only. Nationally the concern for health can’t be addressed with this number. Increased GDP allocation on healthcare will make good healthcare services almost affordable to the lower income groups. This would also include spending more on public health services and making health insurance available to all.  The tax benefit offered in general will be of a great help for the disposable income earners to invest in preventive healthcare” says Amol Naikawadi.

The budget lays a lot of emphasis on spurring growth in the manufacturing sector. The investment allowance linked to the new investments in plant and machinery are likely to benefit pharma companies also. The Government has hinted at supporting SEZs. Pharma companies setting up export units should be enthused by this intent, although the devil lies in the details, said Anand Mehta, Partner (pharmaceutical and healthcare sector group), Khaitan & Co., a law firm based in Mumbai on the pharmaceutical and healthcare sector.

The budget as proposed will encourage R&D. The Government has proposed to strengthen biotech clusters. Innovator companies are also likely to benefit from the proposed provision for refund of customs duty on the import of scientific and technical instruments. Investigators in clinical trial programmes may now be subjected to service tax with the exemption proposed to be withdrawn. These had been included in the negative list of exempted services. This will make clinical trials more expensive, he said.

“With regard to the healthcare sector, the government appears to have recognised the need to address critical shortages of qualified doctors and medical staff and announced setup of more AIIMS, government medical colleges and institute for higher dental studies as well as establishment of model rural health research centres for undertaking local health research.  We expect that the commitment to providing Smart Cities and digitising India through broadband connectivity at village level could result in a boost for models such as telemedicine, which can provide significant impetus to healthcare delivery in rural areas”, said Gagandeep Bakshi, Associate Director – Investment Banking, Intellecap.

However, we are disappointed with the absence of targeted incentives such as infrastructure status to hospitals and increasing tax exemption for setting up hospitals which would have provided access to affordable and quality healthcare in Tier II and Tier cities. This should be addressed by the government in the near future to enable rapid health infrastructure growth,” he added.

Source: PharmaBiz

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