Rs 1,000-crore freebies to promote Dolo 650: Unreasonable charge

The Supreme Court has raised concern over a claim by the Federation of Medical and Sales Representatives Association of India (FMRAI) that the manufacturer of Dolo 650, a popular anti-fever drug, had distributed freebies worth Rs 1,000 crore. The sensational claim is based on a Central Board of Direct Taxes (CBDT) press release of July 16.

“Income Tax Department carried out search and seizure operations on 06.07.2022 on a major Bengaluru-based pharmaceutical group, engaged in the business of manufacturing and marketing of pharmaceutical products and Active Pharmaceutical Ingredients (API). The group has presence in over 50 countries. The search action covered around 36 premises spread across 9 States,” the release said https://incometaxindia.gov.in/Lists/Press%20Releases/Attachments/1083/Press-Release-IT-Department-conducts-searches-on-a-Pharmaceutical-Group-in-Bengaluru-dated-14-07-2022.pd.

Though the release didn’t mention the name of the manufacturer, Micro Labs Ltd, it was widely reported in the media.

“During the course of the search operations, substantial incriminating evidence, in the form of documents and digital data, has been found and seized. The initial gleaning of the evidence has revealed that the group has been debiting in its books of account unallowable expenses on account of distribution of freebies to the medical professionals under the head ‘Sales and Promotion.’ These freebies included travel expenses, perquisites and gifts etc. to doctors and medical professionals… 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 Rs 1,000 crore,” the release said.

It also claimed that the company had evaded tax worth Rs 300 crore.

The Income Tax Department accusing companies of tax evasion, and companies denying that, is not new. Pharmaceutical firms spending money on doctors is also not new. What is new, and sensational, here is the claim that Micro Labs spent Rs 1,000 crore for this purpose.

Even more sensational is the accusation that Micro Labs spent this money just to prescribe Dolo 650. This is what senior advocate Sanjay Parikh, appearing FMRAI, said in the apex court.

One need not be a chartered accountant to say that the claim is excessive, if not false, for the total sale of Dolo 350 was in the region of Rs 350 in 2021. “It is impossible for any company to spend Rs 1,000 crore on the marketing of a brand which did [Rs] 350 crore [business] in the Covid year. That too when Dolo 650 comes under NLEM [price control],” said Micro Labs executive vice-president (marketing and communication) Jayaraj Govindaraju told a news agency.

Besides, Micro Labs is not Microsoft; it is a medium-sized company whose net profit was Rs 1,125 crore in 2021 and Rs 541 crore in 2020. How on earth could it have paid Rs 1,000 crore to doctors and others?

Further, the quantum of the alleged freebies presupposes a very large number of corrupt doctors. Is this how we view the community that lost 800 members in the second wave alone?

Besides, there are other questions. There are over 1.3 million doctors, a large number of whom have been recommending Dolo 650. How did Micro Labs reach out to them, and that too in the Covid period? Where did they travel to, as the CBDT alleged, when leisure travel was almost negligible?

Further, have there been any complaints about Dolo 650?

Against this backdrop, the charge of Rs 1,000-crore freebies (read bribes) to doctors seem unreasonable.