Several pharmaceutical and medical devices manufacturers have claimed tax benefits on crores of rupees spent in buying gifts, sponsoring seminars and organizing foreign trips for doctors. Time and time again, the pharmaceutical industry has been accused of adopting questionable practices in relation to marketing of their products. Names of global ‘branded’ companies such as Johnson & Johnson, Abbott and Medtronic amongst others have been red-flagged by authorities. According to the Indian Express the companies have been parking such expenses under accounting heads such as ‘invention’, ‘advertisement’, ‘publicity’, ‘propaganda’ and ‘customer relationship’ to claim benefits under Section 37(1) – tax deduction for expenditure on business or profession of the Income Tax Act.
Moreover, the Income Tax Appellate Tribunal (ITAT) ruled in favor of the companies in most of the cases. The Tribunal has also questioned the applicability of a 2012 tax circular. It sought to disallow rebates on expenses incurred for providing ‘freebies’ to doctors. The Medical Council of India (MCI) in 2009 had amended the Indian Medical Council Regulations 2002, prohibiting doctors and their associations from taking any gift, travel facility, cash, hospitality or monetary grant from pharmaceuticals and allied health sector industries. But in 2014, the MCI said that the jurisdiction of its 2002 regulations was limited to medical practitioners and did not extend into the healthcare industry.
Former president of MCI Dr Jayshree Mehta said the conduct of companies and hospitals is subject matter of regulation under the Companies Act or Clinical Establishment Act or State Nursing Homes Act. “So it is imperative upon authorities under these Acts to make ethical regulations on MCI model and curb such practices with an iron hand.” The Draft Pharmaceutical Policy 2017 noted that unethical practices deployed by pharma companies are an area of concern. It highlighted that “doctors are lured to recommend a particular brand through all expenses paid trips often disguised and called ‘educational conventions’ and other incentives. Unfortunately, there is no law at present that regulates the promotion and marketing of drugs including medical devices.