The Union Budget 2014-15, especially for healthcare, needs to be analyzed against the backdrop of what the common patients have been going through in the healthcare space of India, over a period of time.
In that context, I would quote new sets of data from a consumer expenditure survey carried out reportedly by the National Sample Survey Organization (NSSO) in 2011-12, capturing the following disturbing facts for a period between 2000 and 2012:
- Total family spend on medical bills increased by 317 percent in urban areas and 363 percent in rural areas for institutional care, while ‘at-home’ medical expenses increased by about 200 percent in both urban and rural areas.
- For institutional care in hospitals and nursing homes, costs of tests increased by a hopping 541 percent in urban areas. Even for the at-home patient, costs of diagnostic tests increased by over 400 percent in the same period.
- Increases in doctors’ fees in hospitals were 433 percent in rural areas compared to 362 percent in urban cities,
- Hospital charges went up by 454 percent in rural areas compared to 378 percent in urban areas.
- Medicine costs in hospitals went up by 259 percent in rural versus about 200 percent in urban areas.
- The number of families that reported expenditure on hospitalization dipped from 19 percent to 14 percent in urban areas and from 19 percent to 15 percent in rural areas. Lack of proper facilities at accessible distances was reported to be a key factor in dipping cases of hospitalization in rural areas.
- Conversely, families that spent on patient care at home increased from 61 percent to 75 percent in urban areas and from 62 percent to 79 percent in rural areas.
Against the above backdrop, within 45 days after coming to power, in his maiden Union Budget Proposal for 2014-15, the Finance Minister of India has ticked most of the right boxes of national health priorities for India. It may not be a dream budget covering everything and all expectations; nonetheless, the budget reflects the intent of the government for the coming years.
Without going into minute details of the Union Budget in general, in this article, I shall dwell on its impact on the healthcare arena of India, in particular.
Key focus areas for healthcare:
Broadly speaking in the healthcare space what impacts the stakeholders most, besides others, are the following and no responsible government can afford to wish these away:
- Access
- Affordability
- Capacity Building
- Innovation
- Ease of Doing Business
Within these five key areas, the Finance Minister appears to have focused on the four, namely – ‘Access’, ‘Affordability’, Capacity Building and overall ‘Ease of Doing Business’ in India.
I shall deliberate on each of these points briefly in a short while.
An example of pre-budget expectations of a pharma industry association:
With the current healthcare issues of India in mind and the above priority areas in the backdrop, I read recently in a business magazine, the expectations of one of the pharma industry association’s from the Union Budget 2014-15. Without being judgmental, I am now quoting those points for you to evaluate any way you would like to.
The key expectations of that pharma association were reportedly as follows:
1. Weighted Tax Deduction on Scientific Research:
“Currently there are no specific tax benefits available to units engaged in contract R&D or undertaking R&D for group companies. Benefits should be provided for units engaged in the business of R&D and contract R&D by way of deduction from profits”.
2. Clarity on taxing giveaways to doctors:
“The ambiguity of the CBDT circular in this regard has created widespread concern in the industry. As an interim measure, the CBDT may consider constituting a panel with adequate representation from the industry and Departments of Revenue and Pharmaceuticals to define expenses as ‘ethical’ or ‘unethical’ and lay down guidelines for implementation”.
3. Tax holiday for healthcare infrastructure projects:
“It is necessary to extend the tax holiday benefit to hospitals set up in urban areas to enable companies to commit the substantial investments required in the healthcare sector”.
4. FDI – Ambiguity on coverage (e.g. whether allied activities such as R&D, clinical trials are covered):
“Currently, there are no specific guidelines laid down on whether the FDI provisions are applicable to pharmaceutical companies undertaking allied activities e.g. R&D, clinical trials etc”.
5. Excise Duty on Active Pharma Ingredients (APIs):
“The excise duty rate of APIs be rationalized and brought on par with pharma goods i.e. excise duty on the inputs (API) should be reduced from 12% to 6%. Alternatively, the Government may introduce a refund mechanism to enable Pharma manufacturers to avail refund of excess CenVat Credit”.
Other issues that this particular pharma association had penned in its pre-budget memorandum of 2014-15, were as under:
- Adoption and implementation of uniform marketing guidelines (e.g. the Uniform Code of Pharmaceutical Marketing Practices circulated by the DoP)
- Rationalization of clinical trial guidelines
- Updating of governing laws such as Drugs & Cosmetic Act to reflect the current industry scenario
- Stakeholder consultation while introducing and implementing drug pricing guidelines
Interesting?
This memorandum is indeed interesting…very interesting, especially when it is taken as comprehensive and well-publicized expectations from the Union Budget of a pharma association in India. This pre-budget memorandum is just an example. Other pharma associations also had put on the table, their respective expectations from the government in the budget.
I gave this example, just to highlight what the new government has actually delivered in the charted priority areas in its warm-up maiden budget proposal, for the benefit of all concerned.
Pragmatic healthcare push in the Union Budget 2014-15:
I felt good to note, within a very short period, the new government could fathom the real healthcare issues of the country, as mentioned above, and proposed to deploy the national exchequers’ fund, probably following the good old saying “put your money where your mouth is”.
Initiates a major step towards ‘Health for All’:
In that direction, the government in its budget proposal has given a new thrust towards ‘Health for All’. For this purpose, two critical initiatives have been proposed:
Free Drug Service:
Free medicines under ‘Health for All’ would also help addressing the issue of poor ‘Access’ to medicines in the country.
Free Diagnosis Service:
Besides ‘Access’, focus on diagnosis and prevention would consequently mean early detection and better management of diseases.
Thus, free medicines and free diagnosis for everyone under ‘Health for All’ would help reducing Out of Pocket (OoP) expenditure on healthcare in India quite significantly. It is worth reiterating that OoP of over 70 percent, which is one of the highest globally, after Pakistan, pushes millions of people into poverty every year in India. This proposal may, therefore, be considered as a precursor to Universal Health Care (UHC).
Increase in FDI cap on insurance sector:
The Finance Minister has proposed an increase in the limit of Foreign Direct Investment (FDI) in the insurance sector from the current level of 26 per cent to 49 per cent. However, the additional investment has to follow the Foreign Investment Promotion Board (FIPB) route. Though this change is not healthcare sector specific, nonetheless, it would ensure deeper penetration of health insurance, improving access to healthcare.
Other key 2014-15 Union Budget proposals:
Other key proposals include:
- Universal access to early quality diagnosis and treatment to TB patients
- Two National Institutes of Aging (NIA) at AIIMS, New Delhi, and Madras Medical College, Chennai. NIA aims to cater to the needs of the elderly population which has increased four-fold since 1951. The number of senior citizens is projected to be 173 million by 2026.
- Four more AIIMS-like institutions in Andhra Pradesh, West Bengal, Vidarbha in Maharashtra and Purvanchal in UP, for which Rs 500 Crore has been set aside.
- Additional 58 government medical colleges. The proposal also includes 12 government medical colleges, where dental facilities would also be provided.
- 15 Model Rural Health Research Centers (MHRCs) in states for better healthcare facilities in rural India.
- HIV AIDS drugs and diagnostic kits have been made cheaper through duty rationalization.
- For the first time, the budget proposal included central assistance to strengthen the States’ Drug Regulatory and Food Regulatory Systems by creating new drug testing laboratories and strengthening the 31 existing ones.
Focus on biotechnology:
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