Dolo-650 bribery allegation: Why pharma cos need tight monitoring

Unethical marketing practices by pharmaceutical companies have always been a big concern, not just in India but globally. In a bid to curb this, the Centre brought the Uniform Code of Pharmaceutical Marketing Practices (UCPMP) in 2015, a voluntary code, which was initially meant to run for six months on an experimental basis but has now become a permanent one.

It is the apparent failure of this code which is at the heart of current litigation in the Supreme Court. When first notified on December 12, 2014 (operationalised from Jan 2015), the Centre had said if the UCPMP was found “not been implemented effectively” by pharma companies it would “consider making it mandatory”. Now the Centre has told the court that it is working “adequately” and there is no need to make it mandatory by giving it a legal status.

This stand is questionable for many reasons, but primarily because of (i) the manner in which Micro Labs was given a clean chit in the alleged “freebies” of ₹1,000 crore given to doctors to push its drugs, including Dolo-650 – anti-pyretic (fever reducing) and analgesic (pain reducing) tablet which rose to fame during the pandemic – during the pandemic-induced national health crisis and (ii) then using this clean chit to assert that the UCPMP is working just fine.

IT raids, CBDT alleges ₹1,000 crore ‘freebies’ by Dolo-650 maker

An old PIL on marketing malpractices by drug makers was taken up this August by the Supreme Court after a fresh affidavit was filed by the Federation of Medical and Sales Representatives Associations of India (FMRAI) – a national trade union and the original petitioner. This followed nation-wide raids on the Micro Labs in July 2022.

After the raids (at Micro Labs’ “36 premises spread across 9 states”), the Central Board of Direct Taxes (CBDT), under which the IT department works, issued a statement, on July 13, stating: “The evidence indicates that the group has adopted unethical practices to promote its products/brands. The quantum of such freebies detected is estimated to be around ₹1,000 crore.”

It explained the “unethical practices” (giving “freebies”) as “unallowable expenses” which included “travel expenses, perquisites and gifts etc. to doctors and medical professionals for promoting the group’s products under the heads ‘promotion and propaganda’, ‘seminars and symposiums’, ‘medical advisories’ etc.”. The CBDT also alleged a tax evasion of ₹300 crore by the company and declared seizures of unaccounted cash, gold and diamond jewelry worth ₹2.6 crore.

Months before the IT raids, Dolo-650 was in news for the dramatic rise in sales. This drug was widely recommended by medical professionals after the pandemic struck in 2020, more so at the time of vaccination in 2021 – earning it the sobriquet “COVID-pandemic’s favourite snack”. When the Supreme Court was told (in August, post IT raids) that bribes had allegedly been paid to doctors through “freebies” to push its sales (reiteration of the CBDT’s charge) during the national health crisis, Justice DY Chandrachud, heading a two-judge bench, reacted: “What you are saying is not music to my ears. This is exactly what I had when I had Covid. This is a serious issue.”

Micro Labs takes particular pride in the rise of Dolo-650. The first article showcased on its official website reads, “How Micro Labs struck gold with Dolo-650 during Covid-19”. This article (of February 2022) says, the company “sold 350 crore tablets since the Covid-19 outbreak in 2020, and earned revenues of ₹400 crore in a year”. It further says, the sales went up dramatically from about 7.5 crore strips annually in 2019 (before the pandemic) to 14.5 crore strips by the end of 2021 – almost doubled. A national daily reported the drug saw its highest sales in April and May 2021 – during the second pandemic wave – when it witnessed sales of ₹48.9 crore and ₹44.2 crore, respectively.

Centre relies on ‘self-certification’ for clean chit

In its affidavit to the Supreme Court on October 4, 2022 – Fortune India has a copy of it – the Centre absolves Micro Labs of the allegations on the basis of a clean chit from the Indian Pharmaceutical Alliance (IPA), an industry body. This is in keeping with the mechanism provided by the very voluntary code (UCPMP).

The Centre goes exclusively by the IPA’s findings and completely ignores the CBDT’s allegations (of “unethical practices” and ₹1,000 crore of “freebies”). What does the IPA rely on to give a clean chit to Micro Labs? It relies solely on data provided by the accused. As per this (quoted extensively in the Centre’s affidavit), Micro Labs’ (a) total turnover was ₹4,500 crore, of which ₹2,500 crore was from domestic sales (the year is not mentioned) and (b) the overall expenses on domestic sales in the last four years (FY18 to FY22) was ₹200 crore; on Dolo-650 alone, it spent average of ₹9.7 crore during the same period.

On the basis of these data, the IPA concludes that the allegation of ₹1,000 crore “freebies” was misleading and that the UCPMP “works adequately”. The Centre endorsed it without checking facts or consulting the CBDT. Its clean chit read: “In view of interaction with the management of the company and the detailed reply, it is clear that ₹1,000 crore expenditure on single brand Dolo-650 on freebies in one year is not correct.”

Here comes another shocker.

The IPA is a group of 24 pharma companies, including the Micro Labs. This is no secret though. The IPA’s website reveals it and so does the Centre’s affidavit and yet, none flags the apparent conflict of interest in the IPA’s clean chit. Moreover, the Centre upholds the UCPMP which provides for this mechanism.

Flip-flop on UCPMP

A legal backing to the UCPMP is important because that would enable the Centre to regulate marketing malpractices and prevent “freebies” as well as prescription of branded medicines (like Dolo-650) by doctors – which is what the marketing malpractice is all about – instead of prescribing generic names (like, paracetamol, instead of Dolo-650). Prescription of generic drugs is mandatory under the Indian Medical Council (Professional Conduct, Etiquette and Ethics) Regulations of 2002 (framed under the Indian Medical Council Act of 1956). Generic drugs are way cheaper than branded ones but more about it later.

The UCPMP’s ineffectiveness was obvious soon enough.

The Department of Pharmaceuticals (DoP), which issued the UCPMP, recommended that it should be made “mandatory” in its 2017-18 annual report, following a review of its working. It said: “The implementation of the UCPMP has been reviewed in consultation of all the stakeholders including NGOs/Civil Societies and it was felt that in order to implement it more effectively, it would be desirable to make it mandatory.”

It also added: “With the above intention, the Department has prepared a draft order under the Essential Commodities Act, 1955 and is in the process of finalisation of the same in consultation with Legislative Department/ Legal Affairs.” That never materialised and is still stuck with the Law Ministry.

From three years between 2016 and 2018, the Centre was open to making the UCPMP mandatory but changed track in 2019 in a reply to the Rajya. Then in 2020 (September 18) Minister for Chemical and Fertilizers Sadananda Gowda reiterated the same in the Rajya Sabha even while admitting how toothless it was. He said: “The Uniform Code for Pharmaceutical Marketing Practices (UCPMP) is voluntary in nature and under UCPMP, there is no provision for Department of Pharmaceuticals to directly deal with complaints received regarding unethical practices.”

What was the new discovery that led to the change in stand?

That is not known. What is known is that several new facts came to public domain showing that marketing malpractices continues, pointing to the code’s ineffectiveness.

For example, in February 2019, the DoP had revealed in a response to a RTI query that it had received complaints of “bribing doctors, medical shopkeepers and unauthorized medical practitioners to sell their pharmaceutical products” in 2016 against 20 pharma companies (names identified) – which included some of the big and famous ones. What action did the DoP take? The reply said the DoP had forwarded the complaints to the Ministry of Health and Family Welfare (MoHFW), the Medical Council of India (MCI) and a pharma association (not named). What action did the MoHFW or MCI took? The DoP didn’t reveal.

In December 2019, more dirt flew. An NGO, Support for Advocacy and Training to Health (SATHI), alleged that medical representatives had paid for “purchase of cars, international conferences, online shopping vouchers and even female companionship for doctors”. Following this, three drug makers’ associations, including the IPA, were pulled up by the government.

In January 2020, the Prime Minister reportedly met top drugmakers and warned them about bringing in a law to control malpractices and indicated that the Ministry of Chemicals and Fertilizers (under which the DoP works) had been asked work on the law.

Following this, the Indian Medical Association (IMA), the largest body of medical doctors, wrote to the Prime Minister seeking an explanation as to why pharma companies were invited to the PMO for talk, instead of initiating criminal proceedings if it had details of the bribery by the companies.

In the meanwhile, revealing more contradictions, the Centre’s affidavit of October 4, 2022 to the Supreme Court made two more disclosures: (i) It had initiated a study in October 2021 “to evaluate the necessity and measure of making the code statutory”, but this study couldn’t take off and (ii) it set up a High-Level Committee (HCL) on September 12, 2022, under NITI Aayog member V K Paul, to examine the entire issue of marketing malpractices and to find “legally enforceable mechanism”. The HCL has been given 90 days to submit its report and one of its members happens to be CBDT chairman Nitin Gupta.

So, why did the Centre rule out a legal status in its affidavit and cite several other mechanisms –Indian Medical Council (Professional Conduct & Ethics) Regulations of 2002 (under the Indian Medical Council Act of 1956), Drugs and Cosmetics Act of 1940 and Prevention of Corruption Act of 1988 – to claim that the existing mechanisms are “robust and effective”?

That is not clear.

Here is another shocking revelation, from the US, which is pertinent to the Dolo-650 matter.

Drugs aren’t costlier due to R&D or curative values

On September 26, 2020, a first known study of its kind was published about the US pharma world. An international team of researchers from top universities evaluated if high R&D explained high drug prices in the U.S. – since drug companies often claim so to charge high prices. They studied 60 new drugs approved by the US Food and Drug Administration between 2009 to 2018, and found no such association between R&D expenses and high prices.

This study also found that even curative value of drugs had nothing to do with high pricing. It said it found “no association between the clinical benefit of a new product and prices” – that is, the pricing of drugs is not determined by their corresponding curative or therapeutic value (clinical benefit as proxy for therapeutical value).

It also added that this finding (disconnect between curative value and pricing) “is in line with results from a previous study of cancer therapies”.

The University of California highlighted this study a few days in a paper published three days later (September 29, 2022), which provided some easily relatable facts regarding high drug pricing and R&D. This paper said: “The pharmaceutical industry spent $83 billion on R&D in 2019, according to the Congressional Budget Office. Companies are estimated to spend somewhere between $1 billion and $3 billion on average to bring a single new product to market. In 2019, the US drug market generated more than $490 billion in revenue…”

That is, a revenue of over $490 billion in 2019, from an R&D spend of $83 billion!

The paper went to add: “Americans spend more on prescription drugs per capita than citizens in any other country. In 2019, that worked out to more than $1,200 per person. A 2021 Rand Corporation study found U.S. drug prices were 2.56 times higher than those in 32 comparable countries.”

Now you know why pharma companies need a tight leash.