Relevance: GS-2: Issues Relating to Development and Management of Social Sector/Services relating to Health.

Key Phrases: IM/s Apex Laboratories Pvt. Ltd. Case, Freebies, Immoral, Fiduciary relationship;

Why in News?

• Recently, Supreme Court has declined to accept freebies given to doctors by pharma companies as an income tax-deductible expenditure.
• This judgement in M/s Apex Laboratories Pvt. Ltd. Case (2022) has struck a blow for the public good.

Key Highlights

What are Freebies?

• These are certain kinds of expenditures done from the perspective of gaining short-term benefits.
  • For eg Politicians promise election-freebies to garner votes in the upcoming elections.
• From the perspective of the medical community, these refer to gifts, services, etc provided by the pharmaceutical company to the medical practitioner in return for prescribing their brand of medicines.

What is the issue behind medical freebies?

• Misuse of Legislative gap
  • Indian Medical Council (Professional Conduct, Etiquette and Ethics) Regulations, 2002 framed under the Medical Council Act, 1956, now repealed and substituted by the National Medical Commission Act, 2019, places restrictions on medical practitioners to take freebies.
  • Since there wasn’t any statute to ban the practice from the supply side, The Supreme Court invoked the principle of implied condition in arriving at the present decision.
• Against the fiduciary relationship between doctor and patient
  • A doctor’s opinion is considered the final word about the choice of medicine, the same word can’t be prejudiced because of freebies, otherwise, there can be a lack of trust between a doctor and patient.
  • This will further alienate people and make them mistrust healthcare and governance leading to a loss of confidence in the administrative system of the country.
• Against public policy making
  • Companies will be motivated to spend more on marketing and less on the quality and efficacy of the drugs produced.
• It is immoral.
  • The act of providing freebies has the potential to dilute the Hippocratic oath taken by the medical fraternity. As per the oath, the practitioner is to do all in his/ her power to ensure the best health of his/ her client.
  • Getting freebies pushes one to prescribe more of that brand of drugs and not what might be right for the patients.
• Inflates the prices of drugs perpetuating a publicly injurious cycle
  • The drugs sold in the marketplace at the MRP necessarily include the expenses made on freebies.
  • This increased price of drugs denies the right to affordable healthcare to the vulnerable community.
• It should be counted as taxable expenditure because it directly undergoes consumption without creating benefits for the economy
  • The idea behind non-taxable expenditure is that it should have tangible benefits for the economy.
  • E.g. Expenditure on R&D by companies helps the economy with the technological intervention that speeds up growth. Hence, they shouldn’t be taxed while calculating the income tax payable by the company.

Stance in the US

• It was observed in a report that the beneficiaries could have saved over $600 million in out-of-pocket payments had they been dispensed generic equivalent drugs.
  • This report was issued by the United States Department of Health and Human Services Office
• As per the study by Pro Publica, Docs who get Company Cash Tend to Prescribe Brand Name Meds.
• Physician Payments Sunshine Act 2010 puts up an elaborate system for companies to report expenditure under 3 broad items
  • meals,
  • travel reimbursements and
  • consulting fees.
• These include expenses borne by manufacturers such as speaker fees, travel, gifts, honoraria, entertainment, charitable contribution, education, grants and research grants, etc.

Way forward

• Creating provisions for the pharmaceutical companies to report such expenditure on the lines of the law in the US.
• Creation of an Autonomous body on the lines of ICAI (Institute of Chartered Accountants of India).
  • They can audit the company's expenditure to ensure that there is a reasonable margin of profit for Pharma companies but, at the same time, they are following principles of Medical Ethics.
  • This will ensure that companies aren’t any more motivated to distribute their products using freebies or ‘bribes’.
• Taxing such unnecessary expenditures can help reduce these, thereby bringing proper attention to production.

Conclusion

• The judgement should become a guiding light in counting all the expenditure on all freebies, especially electioneering freebies. The freebies launched before elections aren’t launched to drive the economy but to appeal to populist measures. It must be taxed otherwise it is the taxpayer’s money used to garner votes.

Source: The Hindu

Mains Question:

Q. What are freebies? What is the issue with them as far as growth and development are concerned? Suggest a suitable way forward.