Budget 2024: Healthcare and pharmaceutical sectors push for reforms and incentives

As Finance Minister Nirmala Sitharaman prepares to present her seventh consecutive Budget on July 23, healthcare and pharmaceutical sectors are eagerly awaiting significant changes.

Stakeholders are calling for, among other things, increased spending to strengthen healthcare infrastructure, tax incentives to promote research and development, and measures to promote digital health solutions.

Experts emphasise the need for wide-ranging reforms aimed at making India a leading global centre for healthcare and research.

Shuchi Ray, Partner, Deloitte India, highlights, “Key focus areas of the budget should include encouraging research and manufacturing in India, government-private sector collaboration, encouraging private sector participation through appropriate policy measures and fiscal incentives, developing infrastructure in terms of hospitals, clinics, medical and diagnostic centres (especially in smaller towns and rural areas), leveraging technology such as digital health solutions and telemedicine services to make facilities accessible to all, promoting medical tourism, etc.”

Immediate actions that could be considered include addressing tax issues related to business expenses and extending the eligibility period for claiming favourable tax rates for new manufacturing units.

These steps are aimed at promoting research, innovation and development in India. Shuchi Ray also advocates reintroduction of weighted deduction for research and development (R&D) expenses.

It also suggests extending the eligibility for these deductions to companies that have opted for the new tax system, which offers a lower tax rate of 25.17%, which covers most companies.

The industry is also looking for ways to bridge the gap between doctor and patient and meet growing demands, for example by encouraging younger generations to choose careers in medicine and providing ongoing training for healthcare workers to improve the quality of care.

Shuchi Ray praised the Ayushman Bharat-Pradhan Mantri Jan Arogya Yojana (PMJAY), which offers health insurance to citizens covering a wide range of diseases and treatments. However, she noted that PMJAY currently does not cover some modern treatments and technological advances.

The Insurance Regulatory and Development Authority of India (IRDAI) has included 12 such modern treatments in Chapter V of the Guidelines on “Standardisation of Exclusions in Health Insurance Contracts”.

Ray suggested that incorporating modern treatments into the AB-PMJAY programme could enable economically disadvantaged groups to access better health care.

A similar view was expressed by Anil Matai, director general of the Organisation of Pharmaceutical Producers of India (OPPI).

“To accelerate R&D and innovation, we urge the government to explore methods to encourage investment in R&D, such as R&D expense deductions, research-related incentives for MNCs and corporate tax relief. Recognising the high risk and long lead time for R&D, we suggest extending the scope of Section 115BAB of the Income Tax Act, 1961 to companies engaged exclusively in pharmaceutical R&D and providing 200% deduction rate for R&D expenses,” he said.

Another proposal that Matai put forward was the establishment of an effective intellectual property rights regime, which is crucial to drive growth and encourage global and research-based Indian pharmaceutical companies to bring innovative therapies to India to address unmet medical needs.

“We recommend introducing incentives for centres and companies that offer specialist training programmes for pharmaceutical workers, promoting growth and supporting continuous professional development in this sector,” Matai said.

OPPI also called for incentives to develop treatments for rare diseases. In addition, improving the management of rare diseases through more CoEs, increased budgetary resources to encourage research and development of treatments for rare diseases, and import duty exemptions are essential.

“To attract investments and help build a more resilient and future-proof pharmaceutical industry under Atma Nirbhar Bharat, the government should provide incentives for investment in bonds issued by pharma companies,” Matai added.

The MedTech industry is also looking forward to the incentives. Chandra Ganjoo, Group CEO, Trivitron Healthcare, said, “We look forward to a MedTech-focused Budget that highlights ‘Make in India’ initiatives and supports R&D. Stakeholders are looking forward to streamlined regulatory processes and support for domestic manufacturing to boost innovation and global competitiveness.”

Pranav Bajaj, Co-founder, Medulance Healthcare added, “The upcoming budget is a key opportunity to strengthen India’s emergency services. We urge the government to prioritize strategic investments in these areas to improve response time and overall efficiency of emergency care. A key expectation is a revision of the GST structure for ambulance procurement. Currently burdened with 28% GST, we propose a significant reduction to 0%. This move not only eases financial constraints but also encourages nationwide improvement of ambulance fleets, contributing to faster and more effective response to emergencies.”