I-T action on USV India puts spotlight on pharma marketing code, tax rules

Tax sleuths raid firm's premises in Mumbai, Nagpur, and Rajkot; USV denies violation of any regulations

The income tax (I-T) department raid on drug maker USV India on charges of paying off doctors to prescribe its medicines has put the spotlight on government norms on ethical marketing practices and tax regulations.

The Times of India reported on Tuesday that the I-T department had unearthed a nexus between the pharmaceutical company and doctors and had raided USV's premises in Mumbai, Nagpur, and Rajkot. USV confirmed the raid but denied violation of any regulations.

Pharmaceutical industry executives expressed surprise over I-T raids on a drug maker, while some experts said the issue could be purely tax-related — concerning the treatment of expenses for tax calculation. Deviating from its earlier stance, the Income Tax Appellate Tribunal had in January allowed drug firm PHL Pharma to claim a deduction on expenses of Rs 23 crore, on account of travel and accommodation for seminars and subscription of journals for doctors, among other things.  

The departmental action, however, has brought to the fore a draft policy to curb freebies and payments to doctors. A mandatory code for pharmaceutical marketing practices has been hanging fire for the past several months. The Department of Pharmaceuticals' plan to introduce the code under the Essential Commodities Act has faced opposition from the law ministry and the industry.

The draft code proposed by the government aims to regulate unethical marketing practices and prohibits pharmaceutical companies from giving gifts, cash, and other benefits to doctors. Further, under the code, companies are barred from extending hospitality, like hotel accommodations, or arranging trips for doctors. The draft proposes penalties and revocation of product approvals in case of a violation.

Indian Pharmaceutical Alliance Secretary General D G Shah refused to comment on the I-T action against USV.

"The department of pharmaceuticals should make the marketing code mandatory but it should not be under the Essential Commodities Act, which is essentially meant for action against hoarding and black marketing of edible oils and sugar. The draft order equates pharmaceutical companies with hoarders and black marketers," he said.