For the pharmaceutical sector looking for a strong statement of support on research and innovation, all it received was a give and take on sops.
Budget 2016 proposed a special patent regime with 10 per cent tax on income from the worldwide exploitation of patents developed and registered in India.
This will help drug companies like Lupin, Sun Pharma, Dr Reddy’s and Zydus Cadila, says an industry veteran. Companies selling their locally researched products in export markets would otherwise have paid the regular tax of 30 per cent, said DG Shah with the Indian Pharmaceutical Alliance.
But the joy over this move has been blunted by the statement to phase out research support by 2020. “The benefit of deductions for Research would be limited to 150 per cent from 1-4-2017 and 100 per cent from 1-4-2020,” the Budget said. At 150 per cent, down from the present 200 per cent, the benefit should have either been maintained for an indefinite period or increased, says Sujay Shetty, Partner and Pharma Leader with PwC India.
Even in low tax economies like Israel, there are a considerable number of research sops, since it involves high risks, intellectual property and can bring in high rewards, he points out. Besides, such initiatives would have also fed into the Prime Minister’s Skill India initiative and Start Up programmes, he adds.
What’s even more disappointing is that industry’s demands for support on clinical trials, filing of patents overseas etc, have not been addressed. (A patent granted in a country to an innovator allows the patent holder an exclusive period to market the product.)
Novartis India chief Ranjit Shahani puts it eloquently. “The Budget is a journey and one year does not tell the entire story.” However, he adds, this is Budget Number Three from this Government and should have shown more big ticket initiatives. The proposals for healthcare for example are inadequate compared to the actual requirement. The much awaited increase in Government’s healthcare spending was not visible either, he observed.
The Budget’s push on less expensive generic drugs through its Jan Aushadhi stores too is really old wine in a new bottle, as the Department of Pharmaceuticals has revised this existing programme and stated its intention to ramp up across the country. An industry expert points out that it may not result in major sourcing from local drug companies. But what it could do by making more affordable medicines accessible to people, is ease the price pressure on medicines sold in the regular retail market.