Union budget should have Provisions that Incentivize Overall Manufacturing and Investment
The year 2016 has been a challenging year for our economy. With the demonetization effect looming large over the economy and the larger implications still to be seen, everyone expects a populist budget this time around. The ongoing developments in the medical device sector, medical technology sector, health insurance and ppp module of Healthcare call for a special focus in the 2017 General Budget.
Here are few more excerpts from the big shots of the Healthcare industry;
Amit Munjal, CEO & Founder Doctor Insta, “Although Prime Minister Narendra Modi and the Indian government strongly support telemedicine and independent research studies show that 70 per cent of the OPD cases do not require any in-person visit, yet people in India may feel the need of going to OPD. Slowly and steadily people are accepting this fact and soon with increasing Internet/Smartphone penetration and lower data costs, telemedicine will disrupt the status quo of Indian healthcare system. With the whole demonetisation issue still revolving around, it has been made clear by the government that the focus is on “No cash economy”. The coming budget is also expected to encourage cashless transactions and digital payments. In order to encourage digital payments, government should give such incentives to other channels as well for the benefit of both industry and the economy. India has among the lowest spends on public health. The government is embarking on an ambitious project to pro vide free WiFi hotspots at more than 1,000 gram panchayats. Apart from providing internet connectivity for mass use, the programme seeks to enable delivery of servic es like health and education. In addition to free WiFi hotspots, the services that will be provided include telemedicine, tele-education. The focus of the government should be on preventive and promotive care. Accessibility to healthcare in India is predominantly driven by affordability. The National Health Protection Scheme envisaged by the Government will provide insurance to the majority of the people below the poverty line. This will help them access quality healthcare facility.”
Ms. Anika Parashar, COO, Fortis LaFemme “The healthcare industry in India is growing very rapidly in the country and the hospitals are thriving to provide the best to its patients by offering holistic healthcare services and specialized care. The upcoming budget should bring in an acceptance for complimentary alternative medicine to go along with the allopathic treatment. A healthy mix of both would definitely harness positive results and a speedy recovery. We at Fortis La Femme are also building our journey towards a healthcare destination for women and children with world-class clinicians, superlative nursing and empathetic support teams; creating a culture of patient centricity where they feel safe, pampered and nourished in mind, body and spirit.”
Mr Rekuram Varadharaj, Co-founder and COO and Mr Krishna Ulagaratchagan, Co-founder and CEO, healthi, “With the new financial year gearing up, there are rising expectations from the upcoming union budget. Many schemes and policies were rolled out last year to better equip the healthcare sector in India. This sector is undoubtedly witnessing tremendous changes and progress, be it providing access to healthcare in remotest areas or going digital.
This year, the budget will likely focus on improving livelihoods and at putting more money in the hands of the citizens.
Given the focus on increasing money flow, the government would also do well to provision for increasing healthcare expenses. Healthcare expenses are rising at twice the rate of inflation and 70% of healthcare expenses in India are out of pocket, thus taking an increasing bite from people’s finances.
Keeping these in mind, the budget should focus on increasing the exemption on account of medical reimbursement, which should be, to say the least, doubled.
In addition, India is unfortunately burdened with rising chronic disease incidence for diabetes, heart disease, hypertension and cancer. The number of people suffering from chronic diseases is set to double in India by 2020, according to research. Deductions for spend related to preventive health checks, which are an important tool to detect risk of chronic disease early, have been capped at a maximum of Rs. 5000 per family for a long time. In addition, this provision is itself part of the Section 80D deduction for insurance premium and preventive health which is capped at Rs. 25,000.
To encourage families to prevent chronic diseases and to account for rising costs, the government should at least double the deduction available for preventive health checks to Rs. 10,000 per family and increase the Section 80D limits accordingly.”
Dr. Rajeev Boudhankar, CEO, Bhatia Hospital
- Priority sector status to healthcare including hospitals and diagnostics centres along with tax benefits is not enough from investments’ point of view hence budget should make the announcement on providing infrastructure status to the hospital industry.
- Increasing the healthcare expenditure to 5% of the GDP in next 5 years
- Allow weighted deduction of 350% on approved expenditure incurred on R&D activities pertaining to indigenous development of medical technology, biotechnology
- Exempt from Minimum Alternate Tax for Healthcare sector
- Government should plan to set up an Rs.10 billion pharma technology upgradation fund. The specific focus on pharma will help drive the focus on innovation especially in the area where Indian companies have historically had a significant global advantage.
- Greater provision for the National Rural Health Mission and National Urban Health Mission at least 50 thousand crores each.
- Promote Health Insurance penetration throughout the country through local post offices and Aadhar card centres.
- Direct tax benefits for capital expenditure, a 10-year tax holiday for hospital projects
- Exemption from GST Budget Recommendations
- The New health protection scheme of last budget should be extended to provide health cover up to Rs 3 lakhs per family for all families below the poverty line with an additional top-up package up to Rs.1 lakhs for senior citizens.
- Under Prime Minister’s Jan Aushadhi Yojana, 1 lakh Stores should be opened during FY 17-18
- ‘National Dialysis Services Programme’ started under National Health Mission through PPP mode to be extended to all 2 and 3 tier cities and taluka headquarters.
- Indian Council of Medical Research (ICMR) has 32 institutes that are suffering due to lack of funds for upgrading the infrastructure, maintain equipment, buy consumables and to conduct field studies. At least Rs 10,000 crores should be allocated for the same. Many projects are not on track because of this lack of funds.
- Preventive Health Check-ups Tax exemption on preventive health check-up should be raised from the current Rs. 5,000 to a maximum of Rs. 20,000 under section 80-D of the Act.
- Increase the Tax Exemption on Medical Expenses The current tax exemption limit of Rs. 15,000 per annum towards reimbursement of medical expenditure by the employer is inadequate in comparison with the medical expenses incurred by the taxpayer and needs to be increased to at least Rs. 50,000 per annum.
- Tax Incentives for Specified Activities Tax incentives may be provided for the following activities:- (i) Digitization – To boost the ‘Digital India’ initiative of the government, financial incentives/grants should be provided to institutions that are willing to move towards maintenance of Electronic Health Records (EHR) and Health IT Systems. 250% deduction on investment made for the implementation of EHR should be extended.
- Accreditation – To incentivise hospitals and diagnostic laboratories to undergo accreditation, there should be 100% deduction on approved expenditure incurred for securing accreditation from National Accreditation Board for Hospitals and Healthcare Providers (NABH) and National Accreditation Board for Testing and Calibration of Laboratories (NABL) respectively.
- Customs Duty on Finished Products- Customs Duty on import of finished products should be prescribed at a very low level while nil customs duty to be specified for the import of raw materials / parts / sub-assemblies required for ultimate local manufacturing of instruments / devices and consumables.
- Customs Duty on Spare parts- Currently the rate of customs duty on most of the spare parts of medical equipment is higher than the duty rate on equipment. While the basic duty rate on equipment is 7.5%, the basic rate of duty on spare parts is 10%. The compounded duty rate difference is almost above 10%. Since spare parts are used to run the equipment it should be treated like equipment only. The exemption may also be extended to parts, accessories, consumables or assembly components, whether required for manufacturing or to be assembled at site of use.
- Exempt Customs Duty on Blood Glucose Monitoring Strips: Customs duty on blood glucose monitoring strips is 18.94% for Lancet and control solutions it is 25%. Customs duty for strips should be made duty free to encourage self-testing of blood glucose at affordable cost & to improve quality of diabetic patient’s life.
- Reduce Customs Duty on Medical Sterilizers, Biological Indicators and Bio Patch: Customs duty on Medical sterilizers is 26.43%, Biological Indicator is 24.47% and Bio patch is 17.1%. Customs duty on these Advanced Sterilization Products should be reduced to minimum slabs to improve quality of medical treatment & patient safety.
Exempt Customs Duty on Neurosurgery Medical Devices: Customs duty is 18.94% on medical devices used in Neurosurgery. Medical devices used in Neurosurgery should be exempted from customs duty considering that these products are used for treating critical deformities & in lifesaving procedures.
Rationalise Inverted Duty on Phaco Emulsification Equipment: Basic import
duty on phaco emulsification equipment and accessories used in cataract surgeries is 7.5% and CVD is 6%, total duty works out to 18.94%. However, spare parts for this equipment are with basic duty of 10% and CVD of 12.5% the total duty works out to 29.44%. There is a differential of almost 10% in duty between equipment and spare parts of the same equipment. This anomaly needs to be removed. It is recommended to reduce the import duty for import of spares of phaco emulsification equipment to appropriate minimum rate.
Varun Khanna, Chairman, AdvaMed India Working Group and Executive Committee Managing Director, BD India & South Asia
Avoid protectionist barriers and relax import duties: If India wants to be globally competitive and become more self-sufficient, it should send a positive message to global investors that it is “open for business”. While seeding the environment for domestic competitors by increasing demand (expand insurance); the Union budget should have provisions that incentivize overall manufacturing and investment—-including lowest possible tariffs on raw material & components, promotion of research & development, skill development, greater health expenditure or better insurance coverage, low regulatory costs, assurance of predictable policy. This will benefit the cause of Make in India rather than raising custom duty increase that is eventually passed on to the patients.
- For example, the Finance Ministry’s move to raise import tariffs on medical devices in January of 2016 will not only further restrict penetration of medical devices in the country, but also act as a deterrent to the ‘Make in India’ campaign in terms of attracting Foreign Direct Investment in the sector, as India will be seen as a market that does not offer economies of scale. Since the local manufacturing of devices and equipment is still in a developmental phase, the government should not discourage imports by raising the duties as has been done.
- The custom duties should be reduced particularly on devices not currently manufactured in India and diagnostic devices
- In addition, the Department of Pharmaceuticals issued a notice indicating that it is considering a Preferential Market Access policy for medical devices and also thinking of imposing content requirements for medical devices. All these steps send negative signals to the innovative manufacturers and investors.
- Bolster indigenous manufacturing of medical devices and equipment: The manufacture of medical devices should be a special focus under the current ‘Make in India’ program. Financial incentives such as tax holidays should be extended to manufacturers and their products.
- Solution (short-midterm): Rescind import tariff hike (but retain tariff reduction on raw materials and inputs).
- Solution (Mid-long term): Work with global and domestic stakeholders to identify positive incentives and policy measures that will attract investment and innovation.
Enforce Provisions that offer Operational Ease of DoingBusiness: The regulatory policies need better harmonization with global regulatory practices and ensure provisions that do not hinder operational ease of doing business for innovative device companies to invest and operate in the country. For instance, introduction of too many compliance features for increasing scrutiny in the latest draft of medical device rules will lead to delay and increase in procedural cost that will ultimately hamper access to patients. A better approach would be to have checkpoints /systems in place that you are automatically driven to compliance.
In drafting the latest draft medical device rules, the ministry has adopted the GHTF guidance essential principles but at the same time also picked from regulatory practices followed in other countries like FDA, PMDA etc. However, the device sector will have more clarity and predictability, if the time tested vital elements of essential GHTF principles along with risk based classification, form the backbone of rules.
- The additional requirement for clinical investigation of medical devices already approved in GHTF countries and third party audit shall cause unnecessary delay in the availability and access of innovative medical devices to the HCPs and the patient population.
- Moreover, the provisions with respect to labeling of medical devices should be aligned with the Draft rules published in July 2016, and the clause with respect to the shelf life of medical devices should be amended to be in line with global requirements.
- Separate regulatory framework for medical devices and equipment:The Drugs and Cosmetics Act, 1940 treats devices at par with pharmaceutical products and the rules, regulations and policies for pharmaceuticals are applied to medical devices by agencies and government officials that come from a pharmaceutical mind frame and education background.This leads to an unpredictable regulatory environment that is inconsistent with global norms for regulating medical devices.
- Solution (short-midterm): (1) Amend the Drugs and Cosmetics Act to include a new globally harmonized definition of a medical devices and in vitro diagnostics (IVDs) removing any reference to medical devices under the drugs definition (see attached letter from AdvaMed to PMO) and (2) Work with the global medical devices industry and relevant stakeholders to finalize the Medical Device Rules, 2016 ensuring that all provisions are harmonized with global best practices.
- Solution (Mid-long term): Introduce and pass a new Act for Medical Devices that sets out a comprehensive and high-level framework for the regulation of medical devices.
- Drive innovation and attract investment for this industry – The government needs to recognize the role of innovative and quality devices in meeting the overwhelming healthcare needs of India’s population. Therefore, it should consider innovation and new technologies for medical devices depend upon the patients’ needs.
- Promote an Innovative Driven ecosystem – Governments around the world are exploring policy measures to attract investment and promote sustained innovation. The government in India too should take a realistic view and embrace innovation. For this, the union budget should provide diverse solutions from the inside and welcome global medical device manufacturers who can conduct R&D, invest and partner with local innovators.The med tech sector is still in its nascent stage and therefore in order to meet the growing needs of the Indian patients it’s important to build an ecosystem that encourages and rewards medical innovation. If this does not happen, India will go back to the 16th century and struggle to provide what the patients rightfully need.
- Investment for strengthening healthcare infrastructure: To make healthcare more accessible to the patients the focus should be on improving primary healthcare. The infrastructure should be strengthened by investing on more quality tertiary care centers for patients and supply chains for better healthcare delivery.
Dr. Duru Shah President Elect Indian Society of Assisted Reproduction,” Most of the insurance companies cover a wide range of the diseases and conditions under their medical policy however insurance coverage for infertility treatment still remains an extremely overlooked and neglected area.
Today infertility is a growing concern in India, it is estimated that India has over 30-35 million infertile couples and the numbers are only increasing. A large part of the population does not have access to infertility treatments as it is not only expensive but also difficult to avail at every hospital at an affordable cost.
Moreover Infertility is a social burden as women often are ostracized in the society. Infertility often leads to instability in a marriage and the possibility of divorce or abandonment with consequent loss of financial security. Certain customary laws and cultural traditions lead to negative attitudes to infertile women and may potentiate the scourge of gender inequality. Therefore infertility is not just a health problem but a socioeconomic one.
The government should, therefore allocate budgets and take up measures in the following areas
- Brining infertility treatment under insurance coverage
- Creating avenues to spread awareness on infertility
- State – funded and Public-private partnerships to enable infertility treatment options for the underprivileged.
It is important that leaders from this industry are heard in the policy process where they can join hands with the Government to collaborate on planning and implementation of such plans.
Rajeev Kumar, COO, Neurosynaptic Communications , “Government needs to provide assistance to SMEs inhealthcare for certification as it requires infrastructure to carry out certification-related tests. The need of the hour is to promote indigenous products and technologies to enable them against MNCs. Assistance isrequired both financially and infrastructurally to carry out pilot projects. Restrictions should be minimized for SME’s to accessfunds provided by various grant bodies like DBT and DST. To promote ‘Made in India’, tax breaks to domestic medical device manufacturers should be provided to promote indigenous manufacturing. Standards should be defined and implemented to provide level playing field for all players.Insurance cover should be provided for out-patient consultation, including tele-consultation in addition to cover for hospitalization. For getting rapid market outreach there should be easy terms for licensing of medical technologies developed by IIT’s, IISc and other research institutions. Otherwise, lot of these technologies stay hidden and become obsolete without seeing light of the day. The above expectations from the government are in sync with the goals and aims of the country, helping towards By India, For India, To India.”
Mr. Sadanand Bapat, Director, Sahyadri Hospitals, “Healthcare today is one of the largest sectors in terms of revenue. The healthcare sector each year generates huge amount of employment opportunities. While the health sector is predicted to grow $280 billion in size by 2020, there is an immediate need to address the patchiness in the sector. The budget for FY 2017-18 needs to focus towards the prevention of emerging threats and chronic diseases.Even today, a large part of India is dependent on primary health care but the government hospitals still suffer the brunt of budget. There is a need to strategize the investments towards primary health care in order for rural areas to access hospitals and clinics easily. Spreading awareness about the non-communicable diseases in India is also need of the hour which takes lakhs of lives each year. The National Health Assurance Mission needs to be implemented by generating a stronger network which guarantees the accessibility. Other than infrastructure, the budget also needs to invest more in technological advancements which will further.”
Mr. Ashish Girdhar, Director-Enocean Intellectual Solutions, “Govt and State Financial Budget planning needs to consider:
- Include air purification topics in international conventions. Promoting imports of products and technology to gain immediate benefits of time and R&D costs
- Categorizing air purifiers as essential items just like any life saving medical device
- Making Air purififcation deployment mandatoryin healt centers and public places
- Subsidice purchase of Air purifier for home users
- Remove VAT on Air Purifiers