Taxing freebies to doctors, will it end unethical marketing practices?

The Union Finance Ministry, in a major setback to the pharmaceutical companies in the country, has decided to bring gifts and other freebies given to the doctors by pharmaceutical companies under the ambit of taxation. The Finance Bill, 2022 clarified that the gifts and freebies to doctors shall not be treated as business expenditure under section 37 of the Income Tax Act, 1961.

But bringing the gifts and other freebies given to the doctors by pharmaceutical companies under the ambit of taxation cannot be a solution to end the unethical practice of bribing doctors to prescribe medicines. The fact is that the issue is far from over as unethical promotion of medicines by pharmaceutical companies is still a matter of serious concern. Promotion of medicines by way of direct cash payments, sponsoring of pleasure trips and other incentives to physicians constitute more than 20 per cent of the price of medicines. The need to eliminate such avoidable costs on medicines is extremely relevant even today as the prices of most of the essential medicines are beyond the reach of common man.

The Finance Ministry's action in this regard has triggered a heated debate in the corridors of pharmaceutical circles on making the Uniform Code of Pharmaceutical Marketing Practices (UCPMP) mandatory in the country. Currently, the Code is of voluntary in nature. In a country like India where even the mandatory laws are very often violated rather than complying, the less said the better about the implementation of a voluntary code like UCPMP.

According to the Finance Bill 2022, pharma companies can no longer claim a business deduction for the gifts they provide to doctors that include foreign trips. The Explanatory Memorandum to the Bill says, "Thus, the legal position is clear that the claim of any expense incurred in providing various benefits in violation of the provisions of Indian Medical Council (Professional Conduct, Etiquette and Ethics) Regulations, 2002 shall be inadmissible under section sub-section (1) of section 37 of Act being an expense prohibited by the law". Under the Indian Medical Council (Professional conduct, Etiquette and Ethics), Regulations 2002, as well as under clause 7.2 of the UCPMP, offering inducements to doctors in the form of honorariums for participation in conferences, travel assistance, accommodation, food expenses, all of which are strictly prohibited.

But it is now not a secret that pharma companies continue to flout these rules with impunity to promote their business as these rules are presently voluntary in nature. No doubt, pharmaceutical companies continue to bribe doctors to prescribe their medicines. These companies continue to bribe the doctors with expensive gifts such as sponsored foreign trips, microwave ovens, smartphones, jewelry items, etc to prescribe their products. Hardly 10-20 per cent of doctors follow the Medical Council of India's code of ethics, while the rest accept or even demand incentives to prescribe products of a particular company. The most common inducement to the doctors is the sponsoring them for conferences, especially international conferences. These conferences are just an alibi, as in effect these are sponsored foreign tour packages.

It was under this background, the Department of Pharmaceuticals (DoP) under the Union Ministry of Chemicals and Fertilisers had come out with UCPMP way back in June 2011 to arrest the unethical marketing practice of bribing of doctors by the pharmaceutical companies. But the law remained largely on paper as it was a voluntary code. After releasing the marketing code, the DoP had then stated that its implementation will be reviewed after six months and if it is found that it has not been implemented effectively by the pharma companies, the government would consider making it a statutory code.

But, instead of making it mandatory after six months, the government dragged its feet on the issue. Finally, as there were continued complaints of bribing of doctors by pharma companies, the DoP came out with a revised UCPMP in 2015, which was also voluntary. As the code lacked penal provisions to deter the wrongdoers, a large section of the pharmaceutical companies continued to indulge in bribing the doctors. As voluntary compliance failed to materialize in the absence of any deterrence, the DoP finally decided to give the code some teeth.

So, in September 2015, it came out with a plan to make the marketing code mandatory with legal backing and penal provisions by introducing it under the Essential Commodities (EC) Act, 1955. But, due to stiff opposition from the industry and industry associations, the government backed out from its plan. Ever since, the government has periodically been warning the industry to strictly adopt and comply with the UCPMP, failing with the government would make the code mandatory. More recently, on August 21, 2020 after a review meeting, the DoP has once again given its green signal to implement the UCPMP on voluntary basis by the industry. The code in all practical purposes has fallen flat now. It is high time the government resuscitates it by making it a mandatory code.

(The author is freelance journalist with varied experience in different fields)