A progressive healthcare budget focusing on innovation, digital health, & upskilling future workforce

Ramesh Swaminathan, Executive Director, Global CFO and Head-Corporate Affairs, Lupin and Rishabh Bindlish, Managing Director and Partner & Co-lead-healthcare practice, BCG India talks about budget 2023

The Union Budget 2023 emerged as a forward-looking budget with innovation, infrastructure strengthening, and skill development as key priorities. Total allocation for health stood at Rs 88,956 Cr, up 2.7 per cent YoY, while allocation to pharma increased by 40 per cent YoY to Rs 3,160 crore due to a higher allocation to the development of bulk pharma and medical devices parks.

The budget incentivised ‘Discover in India’, for the Indian pharmaceutical industry with two policy initiatives focused on pharma R&D – one, a program to promote research and innovation in pharmaceuticals through dedicated Centers of Excellence (CoEs) and two, allowing private players to access ICMR facilities. Innovation led growth is necessary for the industry and hence these are positive moves. Additionally, providing wider access to start ups for research facilities will foster greater public-private collaboration and unlock latent value.

The government continues its focus on making India self-reliant in pharma manufacturing with an allocation of Rs 1,250 crore to establish bulk drug parks, medical device parks, technology upgradation, and setting up of common facilities in public-private partnership. This is an increase of 1,150 per cent over the previous year, where the Center allocated only Rs 100 crore for the development of bulk drug and medical device parks.

Digital health infrastructure emerged as a key focus with a 70 per cent YoY increase in allocation to the National Digital Health Mission (NDHM), which has a suite of initiatives such as the unique health ID, Unified Health Interface, health registries, etc. A robust digital backbone bodes well for all healthcare stakeholders by breaking the current siloed infrastructure, improving interoperability across providers, and working towards universal health coverage. The government has also announced plans to establish 100 5G labs and 3 CoEs for Artificial Intelligence (AI) to enable AI-based research at educational institutions in partnership with industry players in various sectors, including healthcare.

Towards the goal of Universal Health Coverage, the government increased the allocation to its cashless health insurance scheme, PM-JAY, by 11.5 per cent and allocation to the Jan Aushadhi Scheme by 60 per cent. The scheme provides generic medicines at affordable prices through dedicated Jan Aushadhi Kendras and higher capital outlay could potentially improve access to generic medicines.

The budget has also focused on disease prevention initiatives and announced a program to eradicate Sickle Cell Anemia (SKA) by 2047. The program aims to achieve this through smart public health management by conducting universal screening in tribal areas along with awareness and counseling initiatives. SKA is a genetic condition that is widely prevalent in tribal populations in India and the program is aligned with the government’s focus on ‘inclusive development’ in the budget.

Skill and capability development are imperative drivers of growth and will play a key role in enabling the government to achieve its ambitious goals with regard to stimulating innovation and expanding health access. In order to increase the availability of trained nurses, the government has announced a plan to establish 157 new nursing colleges. Further, recognising the need to build a technological edge in medical devices in India, the government has announced multidisciplinary courses at existing institutes to upskill the future workforce in advanced medical device technologies and high-end manufacturing and research. The government has also laid a focus on skill development in the pharmaceuticals sector with a higher allocation of Rs 550 crore, up by 57 per cent YoY, to the National Institute of Pharmaceutical Education and Research (NIPER).

Overall, the budget has a futuristic outlook aiming to deliver outcomes in the mid-to-near term in its prioritised areas of innovation R&D, digital health, universal health coverage, and creating a pool of skilled manpower. However, the modest allocation towards healthcare, at 2.1 per cent of GDP, continues to be below the OECD average of 8.8 per cent. A Viability Gap Funding (VGF) scheme was announced in 2020 to incentivise private capital expenditure in tier 2 and 3 cities. However, it failed to gain industry traction since it did not address prevailing challenges pertaining to working capital expenditure requirements and the lack of trained manpower. The latest budget misses out on re-jigging the scheme to make private investments attractive in hospital infrastructure creation. Further, in pharmaceuticals, GST restructuring has not been addressed in the budget. Specifically, due to the difference in the GST rate of APIs (18 per cent) and finished formulations (12 per cent), there has been an accumulation of input tax credit which needs rectification by reducing the GST on APIs.

Altogether, the Union Budget 2023 has focused on strengthening the core fundamentals of infrastructure and skilled manpower in healthcare and pharma and the initiatives are a welcome move towards the long-term sustainability of the industry.

finance ministerhealth investmentshealthcare revenueUnion Budget 2023
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