Union Budget 2016-17: Impact on Pharmaceuticals Sector

An amount of Rs. 850cr allocated over next few years for several animal wellness programs

Mar 01, 2016 02:03 IST India Infoline News Service

Weighted tax deduction on R&D will be reduced from current 200% to 150% from FY18 and to 100% from FY21. The reduction of benefits on account of R&D was anticipated to kick in from current year (FY17). Although a delay in phasing out is better than anticipated, this is still a long-term negative for the sector. 

3,000 medical stores will be opened under Pradhan Mantri Jan Aushadhi Yojana to make generic medicines available. Pharma companies market branded medicines in India and improving access to generic medicines by the government will directly compete against branded players. This is a slight negative for the sector.  Higher impact for companies which have large share of primary care and which don’t charge a price premium.

Benefit of section 10AA to new SEZ units will be available to those units which commence activity before FY20. Dr. Reddy’s, Aurobindo, and Divis are setting up new manufacturing facilities in SEZ areas.

Pharmaceuticals – Neutral
Key announcement Impact
Reduce weighted R&D deduction to 150% from April 2017 and 100% from April 2020 Negative for all pharma companies
10% tax rate for global income accrued from patent developed and filed in India To benefit players like Dr Reddys' which can commercialize patents on global basis
Customs duty on import of Molybdenum-99 has been removed Positive for radio pharma players like Jubilant and Poly Medicure
An amount of Rs. 850cr allocated over next few years for several animal wellness programs Positive for animal health players like SeQuent Scientific and Omkar Speciality
Health cover of Rs.1lakh for BPL families with additional Rs.30,000 cover for senior citizens Positive for healthcare providers like Apollo as it expands coverage market

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