The Food & Drug Administration body (FDA) in the United States currently bans ‘gifts of any substantial value’ to medical practitioners. However, it lets pharmaceutical companies spend on continued medical education (CME), drug samples, free dinners, and promotional merchandise like pens and prescription pads carrying embossed company logos on them.
Things in India have though, gone topsy-turvy thanks to the new IT regulations apparently to prevent giving away of expensive gifts from companies to doctors. A recent elaborate news report in The Forbes does a detailed analysis of the issue. We quickly summarize its key points:
Drugmakers and expensive gifts
Armed with a set of new rules that were planned in August and circulated in October, the income tax (IT) department is preparing to crack down on companies paying doctors to push their respective drugs under the garb of marketing. Analysts estimate that drugmakers spend nearly five percent of their revenues on expensive gifts to doctors in exchange for their drugs being prescribed.
The new guidelines recognize that pharma companies often fly doctors and their families to conferences abroad (CME). Until now, pharma companies categorized such costs on their balance sheets as marketing expenses. The IT department will no longer allow them to do so. Doctors, too, will be held accountable. “We have just received the guidelines on how to track gifts given to doctors,” says a senior official of the IT department, who spoke to Forbes India on condition of anonymity.
Gifts on offer
A pharma company representative says gifts for doctors in India are somewhat like this: A foreign trip, a car at the doctor’s disposal, a wall-mounted TV or the latest model of refrigerator, goodies like pens and gift vouchers, and silver or gold idols during festivals. “In light of the IT department’s rules on tax freebies [in the form of foreign travel] given to doctors, we will pursue a CME format to engage with doctors,” said a spokesperson for drugmaker Lupin, adding that the company follows global standards.
How much do companies spend?
The budget that pharma companies have for such freebies is huge. According to one estimate, the top 20 drugmakers in India spend about $600 million a year on only freebies for doctors. It is still a paltry sum compared to the US, where drugmakers spend $58 billion or more annually on marketing drugs, including freebies for doctors. While the practice of giving gifts to doctors is rampant internationally, according to Forbes India sources, the practice borders on petty corruption.
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