Budget 2014: Will implementation live up to intent?
I had ended my last edit with the hope that this year, unlike previous years, the pharmaceutical sector’s hopes would not be as fleeting as a shooting star. Going by the initial reactions , this is unfortnunately the case this year as well. There is a clear intention to deliver on certain aspects mentioned in the BJP election manifesto, but there is disappointment that the proposals are not as bold as expected. To that, some say, let’s give them a chance to live up to the manifesto. Here’s my take on a few of the proposals with a caveat that these are but first impressions.
First, the bitter pill. Service tax exemption on technical testing of newly developed drugs on human participants has been withdrawn which means that investigators in clinical trial programmers may now be subjected to service tax. This will definitely make clinical trials more expensive and be a disincentive. Added to the regulatory knocks which the sector has already taken in the past two years, this is sure to invite many recriminations from the industry.
Another negative is that while the FM has promised that the Government will take effective steps to revive SEZs, he refrained from giving MAT relief for SEZs; a sign of a tough stance moving away from tax sops. This will no doubt disappoint in the short and mid term but will prove to be better in the long term.
Possibly only the second reference specific to the drug industry was the allocation of funds to strengthen the states’ drug regulatory and food regulatory systems by creating new drug testing laboratories and strengthening the 31 existing state laboratories. This is a long over due measure given the import alerts received from global drug regulators.
The proposal to establish a Rs 10,000-crore venture capital fund for start-ups, incubators and accelerators should hopefully benefit pharma and biotech start ups like drug discovery firms, medical device companies, stem cell research, and nano technology. These projects require a long gestation period to show results and are also more capital intensive than most sectors. Hopefully, this support at the start up stages will propel deserving companies to the stage where they can attract other investors as well.
Another welcome inclusion is that biotech clusters will be set up in Bengaluru and Faridabad; however, the first is already an established (and some say, already over crowded) biotech hub so I hope the FM does a check on which are the promising upcoming biotech hot spots in the country.
Let us hope that these measures will not just invigorate pharma and biotech R&D but will also hopefully stop the brain drain. We have to start building a research base for the future in our country so that we can address healthcare needs specific to our populations.
The Government will also take up two key initiatives on a priority basis: providing free drugs and diagnosis services. This is a good move but who will monitor the use of these free drugs? Over use of antibiotics has led to multi drug resistance in diseases like tuberculosis, given the propensity to self medicate.
Of course, free diagnosis facilities will help increase detection levels and hopefully earlier in the course of the disease so that it will decrease the cost of treatment. That definitely gets a thumbs up. In addition, it will spur demand for these test kits and drugs, making manufacturers happy.
This current issue of Express Pharma (dated July 16-31) is a CSR Special so it’s good that the FM has indicated in the budget that slum development programmes will be incorporated under CSR. This is a good move because it builds on existing programmes like health camps and awareness drives already run conducted in such slums in metros by many hospital groups and pharma companies. Hopefully, this will encourage them to scale up these programmes and make them sustained initiatives.
The pharma industry did not get too much special attention and these measures seem like crumbs fallen from the table. The FM has stated his intent, but the devil lies in the details and their interpretation. No doubt, we will see more discussion and debate on these announcements as well as hopefully, rational clarifications from the FM himself in the coming days.
Viveka Roychowdhury
Editor
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