During a scrutiny of a private lab's income tax assessment, it was found that Rs 42.81 lakh was spent towards 'sales and promotion expenses' which includes payments made to doctors for promoting their drug.

Asserting that a cartel of doctors, pharma firms and diagnostic labs are fleecing patients in the country, the Madras High court on January 8 took notice of the practise of providing 'commissions' to doctors for promoting and prescribing their drugs.

The court directed the Union health ministry, chemical and fertilizers ministry, National pharmaceutical pricing authority and Medical Council of India to explain as to the action taken against doctors for violating the code of conduct and accepting gifts, hospitality, cash or monetary grant from pharmaceutical firms and allied health sector Industries in the past 5 years.

A division bench of Justices passed the order while expanding the scope of the plea moved by Fourrts (India) Labs Pvt Ltd a pharmaceutical company challenging its income tax assessment. During the scrutiny of its assessment for 2012-13, the firm admitted to a total income of Rs 14.69 crore and claimed deductions for Rs 5.45 crore towards licenses and taxes and another Rs 42.81 lakh towards 'sales and promotion expenses' which includes payments made to doctors for promoting their drug.

Appalled over the submissions, the court said "It is clear that even though accepting such commissions is prohibited under law, pharmaceutical companies are still promoting their drugs by providing gifts, travel facilities, hospitality, cash or monetary grant to doctors. 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 and taxes."

The bench then directed the authorities to answer a series of questions including the list of doctors who were paid by Fourrts, number of doctors prosecuted for violating the rule and accepting such gifts from 2009. The court also wanted authorities to answer as to the number of pharmaceutical firms that have been prosecuted for regulation of the drug pricing authority, number of pharma companies who have claimed tax deductions under 'sale and promotions' head, complaints received on over pricing of drugs and amount recovered from pharma firms for over pricing. It has also directed the Union government to inform by January 20 as to when a separate ministry for pharma and medical devices would be established as stated by the ministry of chemicals in February 2018.

This story was originally published on The News Minute and is reprinted here with permission. It can be viewed here.