Budget 2024: Will budget allocation for pharma sector increase this year?

Finance Minister Nirmala Sitharaman is set to unveil the interim Budget 2024 on February 1, which will outline the government’s budgetary allocation for various sectors. The pharmaceutical sector is anticipating enhanced fund allocation to strengthen the research and development (R&D) activities in the healthcare and medical devices industry. In the last two budgets, the spending on healthcare was around 2% of GDP, despite the pandemic, which had put the spotlight on the sector as vital for India’s self-reliance and economy.

Yatharth Tyagi, Director, Yatharth Group of Hospitals, says that as India strides ahead as a champion of global welfare and human-centric development, the interim budget must prioritise healthcare - a pivotal pillar for national stability and growth. “We expect an enhanced healthcare spend of 2.5% of GDP to expand access and infrastructure. Backed by technology and innovation, schemes promoting medical tourism and digitisation can position India as a healthcare hub for the world, creating jobs for our youth.”

He further says that progress on GST for affordable equipment and “nil” rates on essential services will drive affordable treatment measures and inclusivity in healthcare. “This budget must unite public and private stakeholders to increase expenditure across the value chain. By investing in preventive healthcare and universal coverage fuelled by medical education and jobs, we can build a future-ready sector while uplifting lives. Healthcare for all will actualise the vision of an equitable India leading global welfare.”

Saransh Chaudhary, President, Global Critical Care, Venus Remedies, and CEO, Venus Medicine Research Centre (VMRC), believes that the Budget 2024 will determine how well India progresses with regard to achieving its stated objectives of becoming the 'Pharmacy to the World' and embracing 'OneHealth' principles.

He opines that the government must continue incentivising R&D and manufacturing to boost growth and innovation in the industry, something which was particularly evident in the Promotion of Research and Innovation in Pharma Med-Tech Sector (PRIP) scheme from the previous budget.

The second component of the PRIP scheme, with an allocation of ₹4,250 crore, focused on research in the pharmaceutical sector, especially in six priority areas including antimicrobial resistance (AMR). A continued emphasis on prioritising antibiotic research is crucial to help address the growing challenge of AMR. 

“We suggest exploring innovative economic models to incentivise antibiotic research, recognising the unique challenges associated with it. Market entry rewards and delinked subscription models could be considered to encourage pharmaceutical companies to invest in the development of new antibiotics. This strategic approach aligns with the goal of fortifying India's position as a global pharma leader and addressing pressing healthcare challenges, including AMR,” he says.

In a bid to address rising input costs, particularly the steep hike in Active Pharmaceutical Ingredient (API) prices, the budget should propose incentives for domestic API manufacturers. Adding to it, a reduction in GST and import duty on APIs, will significantly enhance industry's sustainability. The establishment of Special Economic Zones (SEZs) for research, exempted from GST, merits serious consideration. The continuation of the Research-Linked Incentive scheme and tax exemptions for materials procured for R&D purposes is crucial for creating a conducive ecosystem that enables R&D-driven pharma companies in India to compete globally, he adds.

Chaudhary also proposes that the government must prioritise funds for digital integration in the pharma supply chain, ensuring better access and uninterrupted deliveries in real time, since this is crucial for healthcare transformation.

Sanjay Vyas, Executive Vice President and Managing Director, Parexel India, a biopharmaceutical services company, says, “With the country focusing on research and development and healthcare with much more tenacity than earlier, expectations towards similar allocation of budget towards these areas is expected for FY24-25. Additionally, continued encouragement of foreign direct investment (FDI) in the healthcare sector could be sustained in the months and years to come.”

As the Indian pharmaceutical sector tries to reach the $130 billion target by 2030, there is a renewed spirit of research in the areas of cell and gene therapy, new molecular entities, biologics and biosimilars apart from the already strong generic and vaccine manufacturing sectors of the country. Collectively, the industry is looking forward to the financial budget of 2024 with renewed anticipation specifically about R&D and healthcare focus, Vyas adds.

“In the upcoming budget, the focus can be inclined towards the establishment of Centres of Excellence, with a focus on encouraging research and innovation in the pharmaceutical sector. The budget can also focus on technological advancements such as Gen AI, where the government can boost investments in AI, identify new research areas for the pharma sectors and additionally promote academia-industry collaboration. The budget can also focus on implementing centralised data repositories for the country such as Electronic Health Records (EHR) and a centralised medical record database, to maintain transparency and avoid discrepancies.”

Vivek Shah, CEO, Meril, a homegrown global medical device company, states that the upcoming budget 2024, offers a crucial opportunity to accelerate the growth of India’s medical devices sector. The government of India has been constantly taking several measures to encourage investments and promote the Indian Medical Devices sector with schemes such as PRIP (Promotion of Research and Innovation in Pharma MedTech Sector) and MedTech Mitra.

“In the upcoming budget, the Government could further support the MedTech sector by reducing import duties and lowering GST on locally procured raw materials, particularly for critical medical devices such as stents, heart valves, knee and hip implants,” Shah adds.

In the Union Budget 2023, the budgetary allocation for the healthcare sector was ₹89,160 crore, less than a 3% increase from the previous year's ₹86,606 crore allocation. The FM announced to set up one hundred and fifty-seven new nursing colleges in co-location with the existing 157 medical colleges established since 2014. Adding to it, the government announced a new programme to promote research and innovation through centres of excellence, and collaboration with ICMR laboratories.