Pharma: 8600 companies claims IT benefits on 'sales promotion' and gifts to doctors

More than 8,600 Indian pharmaceutical firms have claimed an income tax deduction under the category of “sales promotion expenses” and “gift” in 2019-20 even though providing expensive presents to doctors, sponsoring their travel and promotion of medicines are barred under two different government regulations.

Way back in 2009, the Medical Council of India modified it's Medical Council (Professional Conduct, Etiquette and Ethics) Regulations to make it an offence for a practicing doctor to accept gifts worth Rs 1,000 and more, besides every type of travel support for the individual and family members.

In addition, five years ago the Department of Pharmaceuticals under the Union Ministry of Chemicals and Fertiliser prepared a uniform code of pharmaceutical marketing practices in order to curb unethical marketing practices like gifts to doctors and the promotion of drugs.

But earlier this week, the income tax department informed the Madras High Court that in the assessment year 2019-20, as many as 8,667 companies claimed deduction under the “Sales promotion Expenses” and “Gift”.

The companies are categorised into three groups according to their income tax returns – ITR-3 (1,410 companies), ITR-5 (1,915) and ITR-6 (5,342).

The High Court was hearing a matter in connection to the income tax return of a company named Fourrts (India) Labs Pvt Ltd that claimed a deduction of Rs 42,81,986 (the assessment year 2012-13) towards "sales promotion expenses" including payments to the doctors for promotion of company's brands of medicine. The company had a total income of Rs 14,69,29,707 (Rs 14.69 crore) in that fiscal.

While hearing the case, a two-judge bench of the High Court in January observed, "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.”

The High Court quoted a survey carried out by a Pune-based non-governmental organisation, Support for Advocacy and Training to Health (SATHI) that had stated, “big pharmaceutical companies bribe doctors through high-value bribes such as smartphones, credit cards e-vouchers and even female companionship.”

The bench in January sent notices to Union Health and Pharmaceutical ministries, National Pharmaceutical Pricing Authorities and MCI. Responding to the notice, a government counsel on Feb 17 informed the HC about the IT deductions sought by the companies.

Coincidentally on the same day, the department of pharmaceutical held a meeting with the representatives of pharmaceutical companies on unethical marketing, but there was barely any progress in making the UCPMP a statutory one, sources told DH.