Budget 2022 – Will it be a booster shot for the healthcare sector?
3 min read . Updated: 01 Feb 2022, 09:42 AM IST
Premium- In line with last year’s budget, it is expected that health and well-being will be on the top of the list in the Budget 2022
The pandemic period has been very pertinent and aspiring for the country’s pharma sector. As of 2021, the nation dominated about 60% of global vaccine production, served over 71 countries and has been established as the biggest vaccine producer worldwide. Various policies and packages such as production linked incentive scheme for APIs / KSMs and medical devices, recent scheme for pharmaceuticals, and Promotion of Bulk Drug Parks, were introduced. The announcement of these schemes, in line with Atma Nirbhar Bharat, encouraged domestic and international players to invest in the sector.
From the perspective of healthcare facilities, Ayushman Bharat Pradhan Mantri Jan Arogya Yojana (a national public health insurance fund of the Government of India that aims to provide free access to health insurance coverage for low-income earners in the country) has been received very well. However, it is pertinent to strengthen the healthcare infrastructure i.e. availability of hospitals to the persons in need. Reintroducing tax holidays for rural hospitals with a flexibility to select beneficial years and viability gap funding by the government for setting up hospitals, would make this area an attractive space for investment and strengthen country’s healthcare infrastructure. Further, a weighted deduction of expenses incurred on skill development in the healthcare sector would facilitate government to achieve its aim of WHO recommended doctor patient ratio of 1:1000 by 2024.
Besides above, there are a few measures expected to be taken to increase the affordability of healthcare services for everyone. Health care services are currently exempt from GST except a few elements of the services, due to which the procurement taxes (whether for inputs, input services or capital goods) form a significant part of the operational costs. Zero rating of healthcare services will achieve the twin objectives of keeping the credit chain intact and will ensure that tax is not loaded on to the cost of healthcare services. Refunds on this account will enable the service providers to pass on the benefit in terms of affordable health care services. Further, in respect of traded supplies made to the Government hospitals / department, full exemption from BCD could be a welcome move. This will reduce the cost for Government and make the healthcare services more affordable.
Another ask in relation to GST reforms is to increase the time period for closure of sale on approval (SOA) transactions from 6 months to 12 months for medical supplies. Medical device suppliers supply various lifesaving goods such as implants and stents, etc., to hospitals on SOA basis. As these goods come in various sizes/ types and are expensive, the hospitals do not upfront buy the same and get the goods on SOA basis. The invoice is issued by supplier only once the goods are consumed by hospitals. At times, this period may extend upto a couple of years. In view of this, it is recommended that prescribed period of 6 months for closure of SOA transactions be increased to 12 months, especially for implants, stents and other similar goods.
Towards research & development (R&D), everyone is eagerly waiting for final research & development policy and schemes. Companies are desirous of improving their investments in R&D, and considering at investing in Novel drug delivery systems (NDDS) across various medical therapies ranging from HIV to Cancer to Covid-19 treatment. More new products from biotechnology and products having less side effects, could hit the market. In the age of digitisation, the companies are investing in technology, data analytics for R&D and manufacturing. The usage of artificial intelligence and machine learning tools is becoming more popular for better predictability and outcome in drug discovery and development programs, aiming at reducing entire discovery and development process by 3-5 years. The industry players are working towards achieving speed, efficiency, quality, compliance, safety, and transparency in business operations. Having regard to opportunities for investment in R&D and related technology, the schemes aiming at providing Research Incentives can provide the impetus to industry. Certain incentives focusing on investment in R&D having linkages with academia to co-innovate, could be introduced. The said steps will align to what Prime Minister Narendra Modi, spoke in the recently held Global Innovation Summit through which he invited everyone to ideate in India, innovate in India and make in India and make for the world, and assured that India is committed to enhance the ecosystem for innovation.
Overall, in line with last year’s budget, it is expected that health and well-being will be on the top of the list in the Budget 2022. The announcements fulfilling the expectations of industry would act as a booster shot and make the sector attractive for investors leading to availability of affordable healthcare facilities to all in near future!
Shuchi Ray and Gulzar Didwania are Partners with Deloitte Haskins & Sells LLP
