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Indian Pharma Sector witnessed 386 billion in 2008 to 775 billion in 2012 & Surging For A Double Digit Growth

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If there’s one industry that was left disappointed with the last couple of Budgets, it’s undoubtedly the pharma industry. Considered to be one of the few sectors that has been registering positive annual growth at about 15-20 per cent, despite turbulent economic environment, the pharma sector’s wishlist remained unattended.

“A multi-fold increase in the R&D fund should be earmarked for the industry,” said Dr P Bhaskara Narayana, Director & CFO, NATCO Pharma adding that the sector should be given complete exemption from the customs duty and other levies on imports of life-saving active ingredients.

Exports from the sector increased from `386 billion in 2008 to `775 billion in 2012 and are poised for a double digit growth.

The industry’s others recommendations include enhancement of weighted deduction on R&D expenses, including those outsourced and expenses on clinical trials. Besides, exemption of service tax, IT-related spend on development of processes and products are also sought.

Importantly, pharma companies sought early implementation of GST. “We are optimistic that the government will resolve issues related to amendment of the Constitution and other issues with the states to meet the industry’s request for early implementation of GST. We hope that the government will announce date of implementation of GST in the forthcoming Budget,” said Suchitra Ella, President, CII and Joint MD, Bharat Biotech International.

Besides, expanding the horizon of compulsory licensing to include new generation drugs, reimbursement of fee paid for regulatory approvals, creating a special scheme, like DEPB, to boost exports from the industry are some important elements the industry has sought.

The pharmaceutical sector isn’t enthused about the Union Budget. The Indian Pharmaceutical Alliance (IPA), a group representing 18 major domestic drug makers, including Ranbaxy, Sun Pharma, Dr Reddy’s Labs and Glenmark, has not even given a memorandum on the issue to the government.

The reason given is that the sector has not got any incentives in recent years. Pharma industry officials and associations say the sending of suggestions for the budget is a futile exercise.

“We have stopped making any suggestions or demands since last year. Earlier, we used to give proposals to the finance ministry and the department of pharmaceuticals. We even used to seek appointments and meet officials to submit our demands and needs but we have realised nothing comes of it. Domestic players have not received anything substantial from the government for years,” said IPA Secretary General D G Shah.

No expectation from Budget, says pharma industry

Disappointed with past experience, domestic majors even skip giving any memorandum

The Rs 69,000-crore Indian pharmaceutical industry caters to not only the domestic market with low-cost generics but is also a major exporter of such drugs to countries over the world. According to government data, the  industry is the fourth largest exporter in value and could soon become the third largest exporting. India exported medicine worth $13.2 billion (Rs 71,300 crore) in 2011-12 and this is estimated to grow 25 per cent this financial year, according to the Pharmaceuticals Export Promotion Council Of India. However, the industry complains the government has not realised its value.

“We put India on the global map as the pharmacy of the world. We are the largest generic producers and the whole world is today running after generics to reduce healthcare expenditure. If our own government would condemn us and not support us through incentives and benefits, how would the industry command respect outside?” says Shah.

Says Ramesh Swaminathan, chief financial officer, Lupin “We are not only one of the most promising growth markets globally but the third largest manufacturer of drugs worldwide. More important, we stand recognised as a leading manufacturer of quality drugs worldwide, arguably the best in generics.” It is imperative the government help the industry address and capitalise on this opportunity, he said.

The Indian Drug Manufacturers Association (Idma), another producers’ body, has given its demands for the budget but is not hopeful of anything coming across. “There are various issues and though we have raised these in our memorandum, past experience shows the government is very unlikely to give any discount in taxes or any other incentives to the sector,” said S K Arya, joint director, Idma. “We only fulfil an exercise because they invite our comments.”

The industry says the government must realise the importance of healthcare for the country’s growth and give it a “priority sector” status. “With a mere two to three per cent of the total GDP allocated and spent on healthcare, India is clearly behind most developing and developed nations, where the average is in the range of six to eight per cent. Additionally, the overall consumption of life-saving drugs is very low in India. The government must increase healthcare spend and focus on the creation of requisite infrastructure therein,” says Swaminathan.

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