Context

The judgment by a two-judge Bench of the Supreme Court dismissed the Special Leave Petition by Apex Laboratories to claim deduction on freebies given to doctors.

About the case

•  In the said case, the company was giving out freebies to doctors in order for them to create awareness about a health supplement it was manufacturing called Zincovit.
• Prohibited by the law: Upholding a decision by the Madras High Court, the Bench said that the act of pharmaceutical companies giving freebies to doctors is clearly ‘prohibited by the law’.
• Further, it cannot be claimed as a deduction under Section 37(1) of the Income Tax Act, 1961.
• The judge said that in the process of interpretation of the law, it is the responsibility of the court to discern the social purpose which the specific provision subserves.
•  Invoking the principle of implied condition, the Court relied on the precedents in the case of P.V. Narasimha Rao (1998) 4 SCC 626 under the Prevention of Corruption Act, and Jamal Uddin Ahmad (2003) 4 SCC 257 under the Representation of the People Act.

Immoral practice

• Breach of trust: Laying emphasis on the fiduciary relationship between doctor and patient, the Court noted that a doctor’s prescription is considered as the final word on medication by the patient even if the cost of such medication is unaffordable.
• In a situation where such trust is reposed in doctors, having prescriptions manipulated by the lure of freebies is immoral.
• Driving up the cost of medicine: The Court was conscious that the cost of such freebies is factored in the cost of medicines sold, in turn driving up their prices and perpetuating a publicly injurious cycle.
• This fact was taken note of by the Parliamentary Standing Committee on Health and Family Welfare in its 45th report, dated August 4, 2010.
• Report from the US: In its elaborate judgment, the Supreme Court bench also took note of a report issued by the United States Department of Health and Human Services Office called “Savings Available Under Full Generic Substitution of Multiple Source Brand Drugs in Medicare Part D”.
• Here, it was stated that the beneficiaries could have saved over $600 million in out-of-pocket payments had they been dispensed generic equivalent drugs.
•  In the U.S., by the reason of the Physician Payments Sunshine Act 2010 also known as Section 6002 of the Affordable Care Act (ACA) of 2010, the law compels the manufacturers of drugs, devices, biologic and medical supplies to report to the Centers for Medicare and Medicaid Services, on three broad categories of payments or transfers of value.

Way forward

• Keeping the price under control: Even though the Drug Price Control Order and Drugs and Cosmetics Act are there on the statute book, there is hardly any action to keep the sale price of medicines under control with due and proper investigation into their so-called research and development costs and keeping their profit margins within a prescribed limit.
• The law should be amended to compel the manufacturer of drugs to sell at the verified genuine cost, that also factors in a reasonable profit margin for each product by bringing manufacturers, both foreign or domestic, under the control of the MCI or any other equivalent body.
• This must be at a uniform rate throughout the country; further, classified life saving drugs should be sold at cost only or even at subsidised rates.

Conclusion

This judgment can also go far. It should be debated and applied to other unethical practices and expenditure out of public funds.

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