Budget 2024: Healthcare sector seeks focus on R&D, tax reforms and improving access

The Indian healthcare sector is anticipating a renewed emphasis on regional healthcare and new initiatives to solidify its global standing as the pharmacy hub in the upcoming Budget 2024.

Finance Minister Nirmala Sitharaman is set to unveil the Interim Budget 2024 on February 1. The general elections are set to take place in April-May 2024. Any significant announcements may be deferred until the full budget for FY25 is presented after the formation of a new government.

The Indian Pharmaceutical Alliance, an association of major Indian pharma manufacturers, has proposed that the 2024 Budget should accelerate the pace of life-sciences innovation & R&D. They noted that the Indian pharma sector aims to achieve market size of $120–130 billion by 2030 and $400-450 billion by 2047. The domestic pharma market is around $50 billion in size currently.

"To achieve this vision, the Union Budget 2024-25 should accelerate the pace of innovation and R&D. Given the high risk, long gestation period and low success rate in research, there is a need for continuous investments. Therefore, the 2024-25 budget should outline conducive policies that provide benefits in terms of both direct and indirect taxes and facilitate ease of doing business for the pharmacos," said Sudarshan Jain, Secretary General, Indian Pharmaceutical Alliance.

In its Budget Expectations report, sector analysts such as Deloitte suggested reintroducing weighted deductions for R&D expenditure to promote research, innovation, and development in India.

Another healthcare stakeholder, NATHEALTH, also advocated rationalising the tax framework. "We are advocating an increase in healthcare spending to 2.5 per cent of GDP and the rationalisation of the GST framework," said Dr Ashutosh Raghuvanshi, MD and CEO, Fortis Healthcare & President, NATHEALTH.

"A key focus should be on building local capabilities to deliver healthcare services even in the most remote regions, alongside the localisation of the healthcare value chain. Equally important is the capacity building and training of healthcare professionals, which is crucial to cater to our nation's increasing healthcare needs," he added.

The medical devices sector also expects tax-related updates in the budget. The AiMED (Association of Indian Medical Devices has requested income tax benefits for investments in Medical Devices, according to Rajiv Nath, Forum Coordinator, AiMED.

In addition, the industry association has also requested a nominal increase in customs duty to 10 percent to 15 percent and a predictable tariff policy, a correction of inverted duty by levying a cess of five percent customs duty on medical devices which are currently not under this purview and trade margin capping by monitoring MRP of imports (if over 10 to 20 times of CIF (Cost, Insurance, Freight).

For the fiscal year 2023-24, the Ministry of Health and Family Welfare allocated a significant Rs 89,155 crore, reflecting a substantial 13 per cent increase from the revised estimates for 2022-23. Notably, the Department of Health and Family Welfare accounts for 97 per cent of the Ministry's expenditure, receiving an allocation of Rs 86,175 crore. At the same time, the Department of Health Research has been allocated Rs 2,980 crore.

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In the preceding budget (2022-23), 33 per cent of the Ministry's budget was directed towards the National Health Mission (NHM), with the second-highest allocation of 19 per cent, totalling Rs 17,323 crore, channelled to regulatory and autonomous bodies. The projected allocation for the PMJAY (Pradhan Mantri Jan Arogya Yojana) insurance scheme is Rs 7,200 crore, reflecting a 12 per cent increase from the revised estimate of 2022-23. Additionally, funding for PM ABHIM (PM Ayushman Bharat Health Infrastructure Mission), aimed at establishing primary health infrastructure, has witnessed a substantial 123 per cent increase from Rs 1,885 crore in 2022-23 RE to Rs 4,200 crore in 2023-24 BE.

The government's initiatives, including production-linked incentive schemes, Ayushman Bharat Digital Mission, CoWIN, health registry, and telemedicine, underscore a robust commitment to digitising healthcare in India. Introducing the Scheme for Promotion of R&D and Innovation in the pharma med tech sector (PRIP) in September 2023 further emphasises the dedication to fostering an ecosystem conducive to innovation and research.

Despite these advancements, India's healthcare spending remains lower than that of many global counterparts. As per National Health Accounts for 2018-19, only 4.8 per cent of the general government expenditure (combined central and state governments) was allocated to healthcare. In comparison, developed economies like the United Kingdom (19.7 per cent), the United States (22.4 per cent), and Germany (20.1 per cent) allocated significantly higher percentages of their expenditure to healthcare.