Intent right, but implementation is key

Finance Minister Arun Jaitley’s first Union Budget had nothing special for the pharmaceutical industry. The biggest takeaway would probably be the proposal to set up three new National Institutes of Pharmaceuticals Education and Research. The government hopes that this would encourage pharma education and research, but all such institutes have a long gestation period, and the industry was hoping for immediate relief in terms of incentives for pharma companies to up their R&D spend. This has been a long standing demand, which successive governments have failed to address satisfactorily. The ‘Atal Innovation Mission’ could be seen as an attempt to encourage innovators but with a proposed investment of just Rs 150 crore, this is being seen as too little to make a real difference any time soon.

All hopes that the nine-month-old Narendra Modi government would prove different were dashed, inspite of promising and much-talked programmes like Make in India, Skill India, Swachh Bharat, which have a direct connect with the sector. The industry was looking for details on how these programmes would be implemented, but this budget was all about broad strokes and laying out a roadmap, rather than getting into the nitty-gritty.

No doubt pharma companies will benefit from other general measures like the proposal to reduce corporate tax from 30 per cent to 25 per cent, rationalise exemptions, increase spend on power generation and infrastructure and the implementation of GST from April next year. (For more budget reactions from the industry, see story, ‘Budget blues’, pages 24-25)

All eyes are now pinned on key policies under review by the Department of Pharmaceuticals (DoP) and the National Pharmaceutical Pricing Authority (NPPA). While the DoP is understood to be finalising a bulk drug policy designed to stimulate investment into the intermediates and bulk drug sector, the NPPA has just released the revised National List of Essential Medicines (NLEM 2015). The NPPA has also launched the Pharma Jan Samadhan scheme, which is an online system designed to allow consumers to register their complaints regarding availability and pricing of medicines online. While industry is still absorbing the finer nuances of the NLEM 2015, this online redressal system is surely a welcome attempt at transparency and accountability.

By March end, we should also hopefully see the release of the new bulk drug policy and if it incorporates all key suggestions put forth by industry associations over the past few months, the policy will go a long way towards making the pharma industry in India self sufficient in key APIs, intermediates and bulk drugs. An IDMA white paper on the ‘Journey towards Pharma Vision 2020 and beyond’, has an annexure listing some of the key fermentation API units that were forced to shut down over the past few decades. As the lead story in our cover story section points out, today we are dependent on China for over 80 per cent of key intermediates, and this reveals a chink in our armour. The government has declared this year as the Year of APIs but will this remain a catchy slogan or translate into tangible results? (See story ‘Light at the end of the tunnel?’, pages 18-22)

We have already faced the brunt of this dependence. In the run up to the 2008 Beijing Olympics, when the Chinese government directed major industries to stop production so that air quality could improve, pharma companies in India were hit by a dwindling supply of key intermediates from China. Today, we have diversified our supply chain to some extent but the reality is that we can still be held hostage to escalating prices of key inputs.

Unfortunately, the impact of these policies will be felt only a few years down the line so the government needs to fast track implementation of such policy initiatives. In a hard hitting article, Nishant V Berlia, Member Management Board, Apeejay Stya & Svran Group, argues how further inaction on this front will force diversified groups like his to divert resources away from their pharma verticals, not merely due to vanishing profits but the risks of trying to manage highs and lows of input prices that cannot be passed on to consumers as well as the uncertainty of the NLEM which is revised every three years. (See article, ‘The domestic underpinning of exports: Troubles in the world’s pharmacy’, page 23)

One cannot but agree that this is certainly not a recipe for Make in India.

Viveka Roychowdhury

budget 2015