Pharma body clears Micro Labs of charges of spending Rs 1000 cr on freebies

Indian Pharmaceutical Alliance ethics committee submits report to NPPA

The Indian Pharmaceutical Alliance (IPA) on Saturday cleared Micro Labs, the makers of the paracetamol tablet Dolo-650, of the charge that they offered freebies worth Rs 1,000 crore to doctors to prescribe the brand.

The IPA, whose members account for 60 per cent of India’s domestic pharmaceutical market and about 80 per cent of India’s exports, in a report submitted to the National Pharmaceutical Pricing Authority (NPPA) said that, “in view of interaction with the management of the company and the detailed reply, it is clear Rs 1,000 crore expenditure on single brand Dolo-650 on freebies in one year is not correct.”

The national pricing regulator had asked the IPA to investigate the matter under the Uniform Code of Pharmaceutical Marketing Practices (UCPMP). A three-member internal committee examined the issue.

The investigation report that Business Standard has seen said that, “the total turnover of the company is Rs 4,500 crore, out of which around Rs 2,500 crore is domestic sales. The overall expenses on domestic sales in the last four years (year by year on all activities) on an average are Rs 200 crore.”

Therefore, the fact that Micro Labs incurred expenses to the tune of Rs 1,000 crore to promote Dolo-650 is misrepresented.

Sheetal Sapale, president-marketing, AWACS, a research and analytics firm, had told Business Standard in July that Dolo contributed to around 7 per cent of the company turnover in pre-Covid times. This contribution has moved up to around 14 per cent now.

“In the paracetamol market, Dolo had a market share of 15 per cent in pre-Covid-19 times; this has moved to 24 per cent now. It has overtaken Calpol, the market share which has remained 20-22 per cent in the past five years,” she explained.

Another contention against Micro Labs was that the dose of 650 mg is irrationally prescribed.

In a hearing before the Supreme Court, the Federation of Medical & Sales Representatives Association of India (FMRAI) alleged that while the price of 500 mg paracetamol is controlled, the higher doses are out of price control. The FMRAI counsel argued in the apex court that in order to increase profits, Micro labs distributed freebies amongst doctors to prescribe a dosage of 650mg, which he referred to as an "irrational dose combination", according to a Livelaw report.

The IPA ethics committee investigation report, however, stated, “its strength has been approved in all the treatment protocols issued by the Government of India and various state governments, including Indian Council of Medical Research (ICMR) during the pandemic. Besides, it is a recommended dose across the world, and has been available in many countries such as the US, European countries. The company submits that 650mg strength is accepted as the appropriate dosage regimen for mild to moderate fever.”

Moreover, Dolo-650 mg is covered under the National List of Essential Medicines and its prices to the consumer have been controlled by the NPPA since 2016, the report added. “The price of Paracetamol 650 was Rs 1.84 per tablet in the year 2021,” it noted.

Speaking to Business Standard, Micro Labs executive VP Jayaraj Govindaraju had strongly refuted the charges of spending Rs 1,000 crore on handing out freebies to clinicians to promote Dolo. “We have spent Rs 1,000 crore as marketing expenses across all our 14 divisions over several years, and not on marketing Dolo during the pandemic,” Govindaraju said.

According to the company, the amount was spent over 5 years or more, and included gifting low-value items like table-top memorabilia, brand reminders through diaries, pens, calendars and the like.

In response to IPA’s investigation, Micro Labs had shared the five-year expenditure details on all activities. The company had incurred a total of Rs 186 crore on total sales and marketing in FY 2020-2,1 of which Rs 65 crore was spent on Product Management Team Expenses, Rs 67 crore on Scientific and Academic Services and Rs 53 crore on Sales and Promotion Activities. In 2019-20, the company spent Rs 67 crore on Sales and Promotion Activities.

The total expenditure on Dolo 650 is Rs 115.2 crore in 2021-22. This was Rs 71.2 crore in 2020-21. The expenditure was mainly made on visual aids, literature and print promotional inputs, brand reminders, physician samples and scientific and academic services combined.

IPA, however, has noted in its report that, it has neither the mandate nor the resources, to investigate the matter of tax evasion which the CBDT is looking into.