High Court seeks explanation on steps taken against Indian pharmas' unethical marketing practices

In a suo moto action, the Madras High Court has asked the ministry of health, ministry of chemicals and fertilizers, National Pharmaceutical Pricing Authority (NPPA) and Medical Council of India (MCI) to explain the measures they have taken to stop unethical marketing practices in the pharmaceutical industry.

The HC has taken this action during the hearing of an appeal filed by Income Tax Department against a Tax Tribunal Order which set aside the department's decision to consider payments made by a pharmaceutical company to NPPA as taxable. The appeal was admitted on January 6.

The HC observed that "though the case on hand is a Tax Case Appeal filed under Section 260A of the Income Tax Act, 1961, this Court suo motu invokes Article 226 to consider the larger issues of bribing of doctors and overpricing of drugs by pharmaceutical companies, as they directly affect citizens violating their rights under Article 21 of Constitution of India".

The HC has asked the government bodies to explain the action taken by the MCI for violation of Regulation 6.8 of Indian Medical Council (Professional Conduct, Etiquette and Ethics) Regulations, 2002 which prohibits medical practitioners from taking any gifts, travel facilities, hospitality, cash or monetary grant from pharmaceuticals and allied health sector industries and also for getting commission from diagnostic laboratories by prescribing unnecessary tests, scans etc., for the past five years.

The court wanted to know how many medical practitioners were prosecuted for violation of this regulation since 2009. Similarly, the Court has sought year-wise details of the pharmaceutical companies that have been prosecuted for violating Regulation 3 of the Drug Price Control Order (DPCO), 1995 for the past five years and other measures taken by the government to control the pharmaceutical companies which overprice the drugs in violation of the DPCO.

The government departments have also been asked to furnish details of the pharmaceutical companies that have claimed deduction as for sale promotion expenses to promote their company-branded medicine by providing incentives such as gifts, travel facilities, hospitality, cash or monetary grant to the doctors and wanted to know whether the Income Tax Department is regularly informing the central government and NPPA about the pharmaceutical companies which claim deduction in respect of sale promotional expenses regarding payments and incentives to doctors and for overpricing of drugs. The government will also have to provide details (year wise) of the complaints received so far with regard to overcharging of medicines by NPPA and other official respondents viz., the Medical Council of India as well as by the central government for the past five years and the money recovered as the amount accrued due to overpricing of drugs from pharmaceutical companies, importer, distributor as per Section 13 of DPCO.

The HC also asked to know when the government plans to establish a separate "Ministry of Pharma and Medical Devices" and by when would the Central Government make "Uniform Code of Pharmaceutical Marketing Practices (UCPMP)" prepared by the department of pharmaceuticals mandatory to control unethical marketing practices in the pharmaceutical industry.

Commenting on the tax litigation appeal, the HC observed that it is clear that even though it is prohibited under law, the pharmaceutical companies are still promoting their drugs by providing gifts, travel facilities, hospitality, cash or monetary grant to the doctors to promote their brand medicines. "It is also proved that drugs are overpriced illegally by the companies. It is shocking and surprising to note that the company claimed deduction from Income Tax for the amount spent towards sale promotion expenses as well as for licences & Taxes", the court noted. It has also sought details of the doctors who accepted the hospitality from the respondent company to the tune of Rs 42,81,986 during the assessment year 2012-13 and the action taken against them.

The company against which the income tax department filed an appeal in the High Court is Chennai based Fourrts (India) Labs Pvt Ltd.

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