Introduction
In the intricate ecosystem of global healthcare, the trust between doctors and patients forms the bedrock of ethical practice. A growing number of Indian healthcare service providers are integrating digital health technologies into their business development initiatives and operational framework, leading to an unsettling trend. Several such healthcare providers now deploy offline and online resources to set up and maintain incentive-driven patient referral networks through collaboration and partnership arrangements with healthcare institutions and practicing doctors. These arrangements are designed to attract new patients through referrals from doctors, pharmacists, and healthcare workers, who are then adequately compensated with merchandise, coupons, gifts, travel facilities and grants. This intersection of medicine and commerce raises profound ethical and legal questions, challenging the integrity of the medical profession and the sanctity of patient care.
Permissibility under the Ethics Regulations
The Indian Medical Council (Professional Conduct, Etiquette and Ethics) Regulations, 2002 (“Ethics Regulations”)[1] provides ethical standards and guidelines for all registered medical practitioners (“RMPs”) in India. It is interesting to note that the Ethics Regulations are only applicable to RMPs and not to healthcare providers/ institutions such as pharma companies, hospitals, nursing homes and digital health platforms. The provisions of the Ethics Regulations mandate that:
- RMPs are prohibited to give, solicit, or receive any gift, gratuity, commission, or bonus in consideration of or return for the referring, recommending, or procuring of any patient for medical, surgical, or other treatment.
- RMPs are prohibited from directly or indirectly participating in or be a party to act of division, transference, assignment, subordination, rebating, splitting, or refunding of any fee for medical, surgical, or other treatment.
- The dealings between RMPs and the pharmaceutical and allied health sector industry must adhere to the Ethics Regulations, which inter alia prohibit receiving gifts, travel and hospitality privileges, cash and grants, etc.
Accordingly, RMPs are prohibited from receiving any payments / disbursements for referring patients.
Viewpoint of the Supreme Court
The applicability of the Ethics Regulations’ restrictions on healthcare providers and institutions is subject to the judicial interpretation of the extent of the restrictions on RMPs, even though RMPs are prohibited from participating in any incentive-based patient referral arrangements. The Supreme Court, in the case of M/s Apex Laboratories Pvt. Ltd. v. Deputy Commissioner of Income Tax[2] inter alia opined the following:
- The incentives (or ‘freebies’) given by Apex (the pharmaceutical company), to the doctors, had a direct result of exposing the recipients to the odium of sanctions, leading to a ban on their practice of medicine. Those sanctions are mandated by law, as they are embodied in the code of conduct and ethics, which are normative, and have legally binding effect. The conceded participation of the assessee (Apex) i.e., the provider or donor- was plainly prohibited, as far as their receipt by the medical practitioners was concerned. That medical practitioners were forbidden from accepting such gifts, or “freebies” was no less a prohibition on the part of their giver, or donor, i.e., Apex;
- It is crucial to note that the agreement between the pharmaceutical companies and the medical practitioners in gifting freebies for boosting sales of prescription drugs is also violative of Section 23 of the Contract Act, 1872. The provision is as follows:
“23. What considerations and objects are lawful, and what not.—The consideration or object of an agreement is lawful, unless—
it is forbidden by law; or is of such a nature that, if permitted, it would defeat the provisions of any law; or is fraudulent; or involves or implies injury to the person or property of another; or the Court regards it as immoral, or opposed to public policy.
In each of these cases, the consideration or object of an agreement is said to be unlawful. Every agreement of which the object or consideration is unlawful, is void.”
- It is also a settled principle of law that no court will lend its aid to a party whose root cause of action is dependent on an immoral or illegal act (ex dolo malo non oritur action) meaning that no one should be allowed to profit from any wrongdoing coupled with the fact that statutory regimes should be coherent and not self-defeating; and
- The Parliamentary Standing Committee on Health and Family Welfare took cognizance of the threat of prescribing significantly marked-up medication over effective generic counterparts in lieu of such a quid pro quo exchange, it made the following observations:
“The Committee also notes that despite there being a code of ethics in the Indian Medical Council Rules introduced in December 2009 forbidding doctors from accepting any gift, hospitality, trips to foreign and domestic destinations etc from healthcare industry, there is no let-up in this evil practice and the pharma companies continue to sponsor foreign trips of many doctors and shower with high value gifts like air conditioners, cars, music systems, gold chains etc. to obliging prescribers who then prescribe costlier drugs as quid pro quo. Ultimately all these expenses get added up to the cost of drugs. The Committee’s attention was drawn to a news item in Times of India dated July 1, 2010 by Reema Nagarajan giving specific instances of violations of MCI code. The Committee calls upon the Government to take strict and speedy action on such violations. Since MCI has no jurisdiction over drug companies, the Government should take parallel action through DCGI and the Income Tax Department to penalize those companies that violate MCI rules by cancelling drug manufacturing licences and/or disallowing expenses on unethical activities.”[3]
While the Ethics Regulations, does not apply to companies, any payment which is prohibited under the Regulations by companies may lead to imposition of disciplinary action/ sanctions on the RMPs, including suspension of their license to practice medicine. Healthcare providers may also be prohibited from claiming tax deductions against payments disbursed to the RMPs as they are forbidden from accepting such gifts or ‘freebies’ and the same prohibition applies in relation to their giver or donor.
Concluding Thoughts
Healthcare service providers setting up patient-referral networks in India need to take an informed decision in light of the restrictions on incentive-based patient referrals. Specifically, it must be ensured that the commercial arrangements between healthcare service providers do not provide quid pro quo relationship between healthcare providers and the RMPs. The practice of doctors receiving commissions or referrals from healthcare providers for patient referrals poses significant ethical questions.
The Department of Pharmaceuticals, on March 12, 2024, issued the Uniform Code of Pharmaceutical Marketing Practices 2024[4] (“UCPMP 2024”), which is an updated version of the Uniform Code of Pharmaceutical Marketing Practices 2014[5]. The UCPMP 2024 has been specifically revamped to regulate the marketing practices of pharmaceutical companies in India to ensure the ethical promotion of medicines. The intention of the Government with the introduction of the UCPMP 2024 is to curb unethical practices and ensure transparency, integrity, and accountability in the marketing of pharmaceutical and medical device products nationwide while safeguarding public health interests. Additionally, once the National Medical Commission Registered Medical Practitioner (Professional Conduct) Regulations, 2023 is enacted, doctors in India will have to contend with stricter ethical requirements. It is crucial that doctors and healthcare providers adhere to the Ethics Regulations and its future iterations as medical practitioners not only safeguard the trust and confidence of their patients but also uphold the fundamental principles of medical ethics, ensuring that the highest standard of care is consistently upheld across India’s diverse healthcare landscape.
For further information, please contact:
Biplab Lenin, Partner, Cyril Amarchand Mangaldas
biplab.lenin@cyrilshroff.com
[1] https://www.nmc.org.in/wp-content/uploads/2017/10/Ethics-Regulations-2002.pdf
[2] SLP (CIVIL) NO. 23207 OF 2019
[3] The Supreme Court quoted the 45th Report on Issues Relating to Availability of Generic, Generic-Branded and Branded Medicines, their Formulation and Therapeutic Efficacy and Effectiveness), dated 04.08.2010.
[4] https://pharmaceuticals.gov.in/sites/default/files/UCPMP%202024%20for%20website_0.pdf
[5] https://pharmaceuticals.gov.in/sites/default/files/UCPMP.pdf
