The government has clarified that the pharma companies are not required to spend their corporate social responsibility (CSR) fund towards providing free medicines to the medicine bank that can be used by the central government during health emergencies, disaster or any other circumstances.
In a recent meeting of Drugs Technical Advisory Board (DTAB), the panel discussed the proposal to amend Drugs Rules, 1945 to include mandatory provisions for pharma companies to spend at least 1% of their net profit for providing free medicines.
While deferring the proposal, the DTAB said that any amendment in the CSR framework does not fall under the ambit of Drugs and Cosmetics Act and rules made thereunder.
Regulatory Conflict
Under section 135 of the Companies Act 2013, companies with a net worth above Rs 500 crore or turnover above Rs 1,000 crore or net profit above Rs 5 crore during the preceding financial year must spend at least 2% of their average net profits from the previous three years on CSR.
The pharma associations said that the CSR rules as such don’t allow pharma companies to provide free medicines. Schedule VI of the Companies Act broadly outlines the qualified activities, and prohibits Activities or products that a company typically provides or engages in as part of its routine operations. “Such a proposal would create a risk of violating the uniform code for pharmaceutical marketing practices (UCPMP) guidelines which regulate unethical marketing practices of the pharma companies, including giving excessive free drugs samples,” said spokesperson of a pharma association.
Industry Pushback
While some experts said that such proposal squarely falls under the domain of the ministry of corporate affairs (MCA) since the task of the DTAB is to regulate safety and quality of drugs, others argued that this move might allow the central government to give an option to pharma companies to meet their CSR obligations by way of contribution of medicines to a medicine bank.
“It seems that the government had referred the matter to the drug regulator for its inputs, and the fact that the policy making body of the drug regulator has effectively expressed a no-objection to such a proposal has now paved the way for introduction of such an option to pharma companies,” said Anay Shukla, founding partner at Arogya Legal.
As per estimates, there are about 3,000 drug companies operating in the country with a cumulative annual turnover of over $60 billion.