Pharma: Expectations not met

According to the Economic survey 2008-09, the Indian pharmaceutical industry has grown from a mere Rs 1500 crore (Rs 15 billion) turnover in 1980 to over Rs 78000 crore (Rs 780 billion) in 2008.

High growth has been achieved through; the creation of required infrastructure, capacity building in complex manufacturing technologies of active ingredients and formulation, entering into drug discovery through original and contract research and manufacturing services (CRAMS).

Budget provision

• Excise duty on nine life saving drugs like Abatacept, Daptomycin, Entacevir, Fondaparinux Sodium, Ixabepilone, Lapatinib, Pegaptanib sodium injection, Suntinib Malate &  Tocilizumab and Influenza Vaccine is totally exempted.
• Excise duty on bulk drugs, which are used for manufacture these drugs are also completely exempted.
• Custom duty on these drugs and bulk drugs, which are used to manufacture, are reduced from 10% to 5%.
• Custom duty on two specified life saving devices Artificial Heart (left ventricular assist device) and Patent Ductus Arteriosus/ Atrial Septal Defect occlusion devices reduced from 7.5% to 5%.
• Excise duty on these devices is totally exempted.
• Introduced GST in Pharmaceutical industry will reduce transaction cost.
• Extended weighted deduction of 150% on expenditure incurred on in-house R & D.
• Completely abolished FBT.

Industry expectations not met

Custom duty on certain formulation and bulk drugs in life saving medicines like Antibiotics, Anticancer, Anti-HIV to exempted. But only nine drugs are exempted.

Scrips to watch

Biocon, Ranbaxy Laboratories, Ipca Laboratories and Cipla

Outlook

As we expected there are no change in excise duty and custom duty rates on formulation and bulk drugs expect to nine drugs and one vaccine. Overall the impact of Union Budget 2009-10 on pharmaceutical industry is neutral.

The Excise duty on nine life saving drugs like Abatacept, Daptomycin, Entacevir, Fondaparinux Sodium, Ixabepilone, Lapatinib, Pegaptanib sodium injection, Suntinib Malate & Tocilizumab and Influenza Vaccine and the bulk drugs which are used for manufacture these drugs are completely exempted. This should help frontline domestic pharma producers as well as some MNC pharma companies.