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Pharmaceutical body absolves Micro Labs of charges for spending Rs 1000 cr on gifts

On Saturday, the Indian Pharmaceutical Alliance (IPA) acquitted Micro Labs, the makers of the Dolo-650 paracetamol tablet, on charges that they offered gifts worth Rs 1 billion 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 the interaction with the company management and the detailed response, it is clear that spending Rs 1,000 crore on a single Dolo-650 brand on gifts in one year is not correct.”

The national price regulator had asked the IPA to investigate the matter under the Uniform Code of Pharmaceutical Marketing Practices (UCPMP). An internal committee of three members examined the issue.

The research report that Business Standard has seen said that “the company’s total turnover is Rs 4,500 crore, of which about Rs 2,500 crore is domestic sales. The domestic sales overhead in the last four years (year on year in all activities) is an average of Rs 200 crore.”

Therefore, the fact that Micro Labs incurred expenses to the tune of Rs 1000 crore to promote Dolo-650 is misrepresented.

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

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

Another argument against Micro Labs was that the 650mg dose is unreasonably prescribed.

In a Supreme Court hearing, the Federation of Sales and Medical Representatives Associations of India (FMRAI) argued that while the price of 500mg paracetamol is controlled, higher doses are outside of price control. FMRAI’s attorney argued in high court that to increase profits, Micro labs distributed gifts to doctors to prescribe a 650mg dose, which he referred to as an “irrational dose combination,” according to a Livelaw report.

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

Additionally, Dolo-650 mg is covered by the National Essential Medicines List and its consumer prices 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,” he noted.

Speaking to Business Standard, Micro Labs Executive Vice President Jayaraj Govindaraju had strongly refuted allegations of spending Rs 1,000 crore on giving gifts to doctors to promote Dolo. “We have spent Rs 1 billion as marketing expenses across all our 14 divisions for several years, and not on Dolo marketing during the pandemic,” Govindaraju said.

According to the company, the amount was spent over 5 years or more and included gifts of low-value items such as table favors, brand reminders through diaries, pens, calendars and the like.

In response to the IPA investigation, Micro Labs had shared five years’ worth of spending details across all activities. The company had incurred a total of Rs 186 crore in total sales and marketing in FY2020-2.1, of which Rs 65 crore was spent on product management team expenses, Rs 67 crore on scientific services and academics and Rs 53 million in sales and promotional activities. . In 2019-20, the company spent Rs 67 crore on sales and promotional activities.

Total spending on Dolo 650 is Rs 115.2 crore in 2021-22. This was Rs 71.2 crore in 2020-21. Spending was primarily on visual aids, printed promotional literature and supplies, brand reminders, medical samples, and combined scientific and academic services.

However, the IPA has stated in its report that it has neither the mandate nor the resources to investigate the tax evasion issue that the CBDT is investigating.

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