Healthcare sector seeks budget boost for R&D, infrastructure

With the Interim Budget 2024 set to be presented on February 1, the Indian healthcare sector is abuzz with expectations. From boosting research and development (R&D) expenditure to strengthening infrastructure and bridging the accessibility gap, industry leaders have laid out a comprehensive wish list for the government.

“The healthcare sector is to be perceived as an ecosystem. While delivery of care is at the core, it is closely intertwined with other facets like nutrition, sanitation, safe drinking water, reduction in pollution, primary education etc.,” said Dilip Jose, Managing Director & CEO, Manipal Hospitals. “Therefore, the expectation from the Budget is for continuity of that framework and adequate focus as well as funding support for all components of the ecosystem to ensure that we progress on the goals of prevention and wellness.”

A 2023 report by the World Health Organization (WHO) states that chronic diseases like heart disease, diabetes, and cancer account for 71% of global deaths. In India, these diseases are estimated to contribute to 62% of all deaths as per an Indian Council of Medical Research, 2023 report. A 2022 study by the Public Health Foundation of India found that the National Health Mission (NHM) has led to a significant increase in healthcare utilisation, particularly among women and children in rural areas. However, the study also highlighted the need for strengthening primary care infrastructure and manpower.

Chronic diseases are on the rise globally and in India. Investment in R&D for long-term benefits, a 2021 report by the McKinsey Global Institute, estimates that increased investment in R&D could lead to $3 trillion in annual cost savings for the global healthcare system by 2040. India’s potential as a pharma hub: India is already the third-largest producer of pharmaceuticals by volume and has a strong track record of generic drug manufacturing. However, the country lags behind in innovative drug discovery. Increased R&D investment could help India become a global leader in this area according to Invest India, 2023.

“The launch of National Policy on Research and Development and Innovation in Pharma-MedTech Sector and Scheme for promotion of Research and Innovation in Pharma MedTech Sector (PRIP) last year has given a boost to pharma innovation in the country,” said Shweta Rai, Bayer Pharma Managing Director of Bayer Zydus Pharma Private Limited and Country Division Head for Bayer’s Pharmaceuticals Business in South Asia.

“We hope that the upcoming budget also focuses on research and development in the country. This is a critical need in the background of rising incidence of chronic diseases. Investment in R&D is a long-term investment in the future of healthcare in the country,” added Rai, emphasizing its potential to provide affordable drugs for people who suffer from chronic diseases and require long-term treatment. It would empower India in its journey to becoming a global hub for end-to-end drug discovery.

The NHM has shifted its focus towards preventive healthcare in recent years, launching initiatives like Rashtriya Swasthya Mission (RSM) and Kayakalp program. These initiatives have shown promising results in improving health outcomes and reducing healthcare costs according to the Ministry of Health and Family Welfare, India, 2023. Another 2023 report by the Indian Pharmaceutical Alliance predicts that the Indian consumer health market will reach $30 billion by 2025, driven by rising disposable incomes and increased awareness of self-care.

“There is an urgent call for the budget to channel more funding towards promoting responsible self-care practices. Additionally, there’s a need to bolster the primary care infrastructure in India. This strategy is key as the country continues to pivot towards a preventive healthcare model,” said Sandeep Verma, Country Head, Bayer Consumer Health Division. “Ensuring that health solutions are both accessible and affordable becomes even more crucial, particularly as Indian consumers become more health-conscious and their priorities evolve. This approach not only aligns with the current health trends but also promotes a sustainable and healthy future for all Indians.”

A 2022 report by the NITI Aayog estimates that India needs to invest an additional $1.2 trillion in healthcare infrastructure over the next five years to achieve universal health coverage. Blended finance models have been successfully used in other sectors, such as infrastructure and renewable energy, to attract private sector investment.

“The FY23 budget laid the road map for using blended finance for sunrise sectors. This interim budget should add healthcare to the list and implement the much-awaited ‘fund of funds’ that mobilises further commercial capital in debt and equity for the sector and helps fill the gap,” said Himanshu Sikka, Practice Lead – Health, Nutrition and WASH, IPE Global Limited.

“Enabling the private sector and commercial capital could go a long way in achieving universal health coverage in the country. The government should also look at specific allocations for investments in health technology that prepare the country better for future pandemics and make the country self-reliant through investments in deep sciences,” he said, adding that the budget should look at tax breaks for capital investment in the health infrastructure in tier 2,3,4 towns and rural areas.

While Ayushman Bharat Pradhan Mantri Jan Aarogya Yojana (AB-PMJAY) has enabled access to healthcare for the bottom-of-the-pyramid population, Sikka called for a need to address the missing middle. “The government should look at enhancing the coverage of AB-PMJAY to cover tax-paying individuals and their families with annual salaries below Rs 15 lakh and all senior citizens, irrespective of income strata,” said Sikka.

“The government should also initiate a Special Mission for climate-proofing the health sector that helps mainstream climate change into mitigation and adaptation strategies and programs. Such a mission will not only help the nation prepare for future climate-related and other pandemics but also help manage the impacts of the health sector itself on the climate,” Sikka added.

In the budget 2023-24, key initiatives were introduced, such as establishing centers of excellence for artificial intelligence to enhance manpower skills to develop cutting-edge applications and scalable problem solutions in critical areas including health, announcement of programme to promote research and innovation in the pharma sector through centres of excellence and encouraging collaborative research and innovation by public and private medical college faculty and private sector R&D team through select ICMR labs.

“To further support research to develop innovative pharma product, the concessional tax rates under Section 115BAB of Income Tax Act, 1961 should be extended to companies solely engaged in R&D of pharma as well, beyond those related to manufactured articles. We also hope for the elimination of import duties on life-saving drugs, recognizing that individuals should not bear substantial taxes during health crises,” said Anil Matai, Director General, Organisation of Pharmaceutical Producers of India (OPPI).

Private hospitals have cited low reimbursement rates under PMJAY as a barrier to participation, highlighting the need for tariff rationalization to enhance access for the underserved. “Government may bring incentives in the budget to promote private investment. Without having basic health infrastructure, we will not be able to have effective universal health coverage. Rationalizing of reimbursement tariffs under PMJAY needs priority attention to bring tertiary care hospitals under the scheme,” said Dr Girdhar Gyani, Founder Director, Association of Healthcare Providers (AHPI). Business Today