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Adapting to a rapidly changing world!

In the current landscape, business as usual, is no longer an option.
Expenditure by the health and family welfare ministry due to Covid-19 outbreak surged to almost `13,000 crore in April this year. This is three times the `4,327 crore incurred in April 2019 and 19 percent of the allocated expenditure for 2020-21, compared to 7 percent in April 2019, and 3 percent in April 2018. The increase may largely be attributed to protective equipment, medical gear, clinical trials and hiring experts to strategize and build an understanding of Covid-19. Although figures for May are not available, this trend is expected to continue, with 2.13 million real time RT–PCRs, ELISA kits and oxygen concentrators added to the list. As the virus takes root in more places, the ministry has no option but to increase the healthcare expenditure allocation from the present 1.5 percent to 3 percent GDP.
In this backdrop, the hospitals and diagnostic centres however continue to languish. The revenues in H2FY2021 may somewhat compensate the H1 drop, provided both elective, delayed medical procedures and the high-value, high-margin medical tourism rebound. ICRA estimates a first-quarter EBITDA loss of 20 percent, a 50 percent drop in revenues in April and May, and an overall 15–20 percent revenue drop in FY2021. The value of M&A transactions have reduced to a meagre `300 crore in FY2020 from an all-time high of `7000 crore in FY2019, with Fortis and Max India as the two high-value transactions last year. While this may be attributed to the COVID pandemic, the slow progress of Ayushman Bharat will also need to share the blame. Apart from the low package rates dissuading the large private hospitals from empanelling, at least five states have so far not implemented the scheme.
After a year-long battering, Indian big pharma stocks finally had a bull run. Shares of Glenmark, Cipla, Jubilant Life Sciences and Dr Reddy’s regained their lost mojo in the last three months. While some of these companies have advanced in clinical trials of the antiviral drug, the uncertainty overhang has not dissipated as Washington pushes to bring drug manufacturing back to the US. However, as India charts out its own path, in search of a more affordable drug, and an oral pill that can be administered at home, with exports a high possibility too, these Indian pharma companies may very well be laughing all the way to the bank!

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