FREEBIES TO DOCTORS – NOT ALLOWABLE EXPENDITURE BUT TAXABLE IN HANDS OF DOCTORS- CBDT.

[C.A. DEV KUMAR KOTHARI]

Links and references:

Section 28 and 37 of the Income –tax Act, 1961.

CBDT Circular No. 5/2012 [F. No. 225/142/2012-ITA.II], dated 1-8-2012

Indian Medical Council (Professional conduct, Etiquette and Ethics) Regulations, 2002 found webhosted at:
http://www.mciindia.org/RulesandRegulations/CodeofMedicalEthicsRegulations2002.aspx

Recent circular:

The CBDT has issued circular No. 5/2012 [F. No. 225/142/2012-ITA.II], dated 1-8-2012. This instructs that freebies provided by pharmaceutical companies, diagnostic centers, and others in medical business to doctors is illegal (in popular terms - bribes) and not allowable in hands of provider but is taxable in hands of recipients as income.

Confusions:

On reading of articles and logs on some websites it is felt that a confusion has been created in a manner that even free samples provided to doctors are covered by the circular. But that is not the case. Samples are not covered.

 Circular:

To understand meaning of the circular the same is reproduced below with highlights added by author:

           “It has been brought to the notice of the Board that some pharmaceutical and allied health sector Industries are providing freebees (freebies) to medical practitioners and their professional associations in violation of the regulations issued by Medical Council of India (the ‘Council’) which is a regulatory body constituted under the Medical Council Act, 1956. 

2. The council in exercise of its statutory powers amended the Indian Medical Council (Professional Conduct, Etiquette and Ethics) Regulations, 2002 (the regulations) on 10-12-2009 imposing a prohibition on the medical practitioner and their professional associations from taking any Gift, Travel facility, Hospitality, Cash or monetary grant from the pharmaceutical and allied health sector Industries.

3. Section 37(1) of Income Tax Act provides for deduction of any revenue expenditure (other than those failing under sections 30 to 36) from the business Income if such expense is laid out/expended wholly or exclusively for the purpose of business or profession. However, the explanation appended to this sub-section denies claim of any such expense, if the same has been incurred for a purpose which is either an offence or prohibited by law. 

Thus, the claim of any expense incurred in providing above mentioned or similar freebees in violation of the provisions of Indian Medical Council (Professional Conduct, Etiquette and Ethics) Regulations, 2002 shall be inadmissible under section 37(1) of the Income Tax Act being an expense prohibited by the law. This disallowance shall be made in the hands of such pharmaceutical or allied health sector Industries or other assessee which has provided aforesaid freebees and claimed it as a deductible expense in its accounts against income. 

4. It is also clarified that the sum equivalent to value of freebees enjoyed by the aforesaid medical practitioner or professional associations is also taxable as business income or income from other sources as the case may be depending on the facts of each case. The Assessing Officers of such medical practitioner or professional associations should examine the same and take an appropriate action. 

This may be brought to the notice of all the officers of the charge for necessary action.”

Observations of author:

The circular does not cover free samples of medicines which are provided to doctors for making them aware of new products. Such samples are not for sale and doctors should not sell them.

The circular covers other freebies like meeting expenses of conferences, travel, expenses on  children,  gifts for doctors and his family members etc. All these are in nature of  incidental receipts of profession, perquisites, benefits or advantages to the doctor. These are  taxable as income from business or profession under section 28. However, it will generally depend on disclosure made by the recipient and undisclosed income can only be unearthed by proper survey and search on premises of doctors.

Restrictions on samples is also required:

Medicines can be prescribed with generic names. Brand names can be known from directories of medicines. In case of very old formulations of medicines, the doctors are well aware of the same and therefore free samples are not necessary. Therefore, provision of  free samples is not desirable in case of popular and old medicines. In case of newly invented or launched medicines also providing samples should be restricted to a limited period.

Disallowance of expenses:

Disallowance of expenses on such freebies is instructed because such provisions are not as per law. In view of author, the provisions of such freebies are in nature of un-ethical bribes to doctors for the following reasons:

1. Generally doctors get salary or professional fees for the professional work done, therefore commission (in cash or in kind) received from pharmaceutical companies, diagnostic centers, clinics and hospitals and other related business is nothing but illegal gratification in nature of bribes or kick backs.
2. Due to such freebies or incentives, doctors have adopted practices of prescribing un-necessary and excessive medicines, diagnosis, clinical tests etc. which goes against the honesty of doctors.
3. Freebies have acted in a manner that many doctors have become very dishonest professionals, for improving their revenue many malpractices have been adopted causing serious loss to patients. Instances have come to notice that wrong reports are issued which causes un-necessary treatment, medication, hospitalization, surgeries   etc. just to increase occupancy of private hospitals, increasing sale of many medicines which have hardly any benefit for treatment of patients, increasing demand of diagnostic reports etc.

Mere disallowance is not enough:

Making provisions for disallowance is not enough. This will not put check on malpractices. Serious action by people and concerned authorities are required to force doctors to desist from such practices. It is unfortunate that the regulatory authorities of medical profession have not been able to check malpractices in medical profession though the same are very rampant and very well felt by the public. Expeditious enquiry and punishment is desired.

What is more important is that the moral of doctors should be improved. They should not consider themselves  as a money making machine working without sensibility.

Some relevant provisions:

Some relevant provisions are reproduced below which shows that it is necessary to ensure that the doctors adhere to professional standard not as a compulsion or statutory requirement but as a natural duty and moral obligation of doctors to the society.

From the Indian Medical Council (Professional Conduct, Etiquette and Ethics) Regulations, 2002 we find the following provisions which are relevant in this regard: -

DECLARATION OF MEDICAL PRACTIONER (DOCTOR):

A medical practioner is required to obtain registration from the concerned medical council. For such registration  each applicant is required to  read, make and abide by  the following declarations :

                    I solemnly pledge myself to consecrate my life to service of humanity.

1. Even under threat, I will not use my medical knowledge contrary to the laws of Humanity.
2. I will maintain the utmost respect for human life from the time of conception.
3. I will not permit considerations of religion, nationality, race, party politics or social standing to intervene between my duty and my patient.
4. I will practice my profession with conscience and dignity.
5. The health of my patient will be my first consideration.
6. I will respect the secrets which are confined in me.
7. I will give to my teachers the respect and gratitude which is their due.
8. I will maintain by all means in my power, the honour and noble traditions of medical profession.
9. I will treat my colleagues with all respect and dignity.
10. I shall abide by the code of medical ethics as enunciated in the Indian Medical Council (Professional Conduct, Etiquette and Ethics) Regulations 2002.

I make these promises solemnly, freely and upon my honour.

Unethical acts of doctors are provide din the Rule 6 in Chapter 6

                                                 6. UNETHICAL ACTS

an shall not aid or abet or commit any of the following acts which shall be construed as unethical

6.1 Advertising:

6.1.1 Soliciting of patients directly or indirectly, by a physician, by a group of physicians or by institutions or organisations is unethical. A physician shall not make use of him / her (or his / her name) as subject of any form or manner of advertising or publicity through any mode either alone or in conjunction with others which is of such a character as to invite attention to him or to his professional position, skill, qualification, achievements, attainments, specialities, appointments, associations, affiliations or honours and/or of such character as would ordinarily result in his self aggrandizement. A physician shall not give to any person, whether for compensation or otherwise, any approval, recommendation, endorsement, certificate, report or statement with respect of any drug, medicine, nostrum remedy, surgical, or therapeutic article, apparatus or appliance or any commercial product or article with respect of any property, quality or use thereof or any test, demonstration or trial thereof, for use in connection with his name, signature, or photograph in any form or manner of advertising through any mode nor shall he boast of cases, operations, cures or remedies or permit the publication of report thereof through any mode. A medical practitioner is however permitted to make a formal announcement in press regarding the following:

1. On starting practice.
2. On change of type of practice.
3. On changing address.
4. On temporary absence from duty.
5. On resumption of another practice.
6. On succeeding to another practice.
7. Public declaration of charges.

6.1.2 Printing of self photograph, or any such material of publicity in the letter head or on sign board of the consulting room or any such clinical establishment shall be regarded as acts of self advertisement and unethical conduct on the part of the physician. However, printing of sketches, diagrams, picture of human system shall not be treated as unethical.

6.2 Patent and Copy rights: A physician may patent surgical instruments, appliances and medicine or Copyright applications, methods and procedures. However, it shall be unethical if the benefits of such patents or copyrights are not made available in situations where the interest of large population is involved.

6.3 Running an open shop (Dispensing of Drugs and Appliances by Physicians): - A physician should not run an open shop for sale of medicine for dispensing prescriptions prescribed by doctors other than himself or for sale of medical or surgical appliances. It is not unethical for a physician to prescribe or supply drugs, remedies or appliances as long as there is no exploitation of the patient. Drugs prescribed by a physician or brought from the market for a patient should explicitly state the proprietary formulae as well as generic name of the drug.

6.4 Rebates and Commission:

6.4.1 A physician shall not give, solicit, or receive nor shall he offer 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. A physician shall not directly or indirectly, participate 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.

6.4.2 Provisions of para 6.4.1 shall apply with equal force to the referring, recommending or procuring by a physician or any person, specimen or material for diagnostic purposes or other study / work. Nothing in this section, however, shall prohibit payment of salaries by a qualified physician to other duly qualified person rendering medical care under his supervision.

6.5 Secret Remedies: The prescribing or dispensing by a physician of secret remedial agents of which he does not know the composition, or the manufacture or promotion of their use is unethical and as such prohibited. All the drugs prescribed by a physician should always carry a proprietary formula and clear name.

6.6 Human Rights: The physician shall not aid or abet torture nor shall he be a party to either infliction of mental or physical trauma or concealment of torture inflicted by some other person or agency in clear violation of human rights.

6.7 Euthanasia: Practicing euthanasia shall constitute unethical conduct. However on specific occasion, the question of withdrawing supporting devices to sustain cardio-pulmonary function even after brain death, shall be decided only by a team of doctors and not merely by the treating physician alone. A team of doctors shall declare withdrawal of support system. Such team shall consist of the doctor in charge of the patient, Chief Medical Officer / Medical Officer in charge of the hospital and a doctor nominated by the in-charge of the hospital from the hospital staff or in accordance with the provisions of the Transplantation of Human Organ Act, 1994. 

 “6.8 Code of conduct for doctors and professional association of doctors in their relationship with pharmaceutical and allied health sector industry.

6.8.1 In dealing with Pharmaceutical and allied health sector industry, a medical practitioner shall follow and adhere to the stipulations given below:-
a) Gifts: A medical practitioner shall not receive any gift from any pharmaceutical or allied health care industry and their sales people or representatives. 
b) Travel facilities: A medical practitioner shall not accept any travel facility inside the country or outside, including rail, air, ship , cruise tickets, paid vacations etc. from any pharmaceutical or allied healthcare industry or their representatives for self and family members for vacation or for attending conferences, seminars, workshops, CME programme etc as a delegate.
c) Hospitality: A medical practitioner shall not accept individually any hospitality like hotel accommodation for self and family members under any pretext.

d) Cash or monetary grants: A medical practitioner shall not receive any cash or monetary grants from any pharmaceutical and allied healthcare industry for individual purpose in individual capacity under any pretext. Funding for medical research, study etc. can only be received through approved institutions by modalities laid down by law / rules / guidelines adopted by such approved institutions, in a transparent manner. It shall always be fully disclosed. 
e) Medical Research: A medical practitioner may carry out, participate in, work in research projects funded by pharmaceutical and allied healthcare industries. A medical practitioner is obliged to know that the fulfillment of the following items (i) to (vii) will be an imperative for undertaking any research assignment / project funded by industry – for being proper and ethical. Thus, in accepting such a position a medical practitioner shall:-
(i) Ensure that the particular research proposal(s) has the due permission from the competent concerned authorities.

(ii) Ensure that such a research project(s) has the clearance of national/ state / institutional ethics committees / bodies.

(iii) Ensure that it fulfils all the legal requirements prescribed for medical research. 
(iv) Ensure that the source and amount of funding is publicly disclosed at the beginning itself. 
(v) Ensure that proper care and facilities are provided to human volunteers, if they are necessary for the research project(s). 

(vi) Ensure that undue animal experimentations are not done and when these are necessary they are done in a scientific and a humane way. 
(vii) Ensure that while accepting such an assignment a medical practitioner shall have the freedom to publish the results of the research in the greater interest of the society by inserting such a clause in the MoU or any other document / agreement for any such assignment.

f) Maintaining Professional Autonomy: In dealing with pharmaceutical and allied healthcare industry a medical practitioner shall always ensure that there shall never be any compromise either with his / her own professional autonomy and / or with the autonomy and freedom of the medical institution.

g) Affiliation: A medical practitioner may work for pharmaceutical and allied healthcare industries in advisory capacities, as consultants, as researchers, as treating doctors or in any other professional capacity. In doing so, a medical practitioner shall always:
(i) Ensure that his professional integrity and freedom are maintained.

(ii) Ensure that patients interest are not compromised in any way.

(iii) Ensure that such affiliations are within the law.

(iv) Ensure that such affiliations / employments are fully transparent and disclosed. 

h) Endorsement: A medical practitioner shall not endorse any drug or product of the industry publically. Any study conducted on the efficacy or otherwise of such products shall be presented to and / or through appropriate scientific bodies or published in appropriate scientific journals in a proper way”.

Note: Clause 6.8 was inserted vide “Indian Medical Council (Professional Conduct, Etiquette and Ethics) (Amendment) Regulations, 2009 - Part-I”.

Chapter 7 consists of provisions relating to misconduct:

7. MISCONDUCT : 

The following acts of commission or omission on the part of a physician shall constitute professional misconduct rendering him/her liable for disciplinary action:

7.1 Violation of the Regulations: If he/she commits any violation of these Regulations.

7.2 If he/she does not maintain the medical records of his/her indoor patients for a period of three years as per regulation 1.3 and refuses to provide the same within 72 hours when the patient or his/her authorised representative makes a request for it as per the regulation 1.3.2.

7.3 If he/she does not display the registration number accorded to him/her by the State Medical Council or the Medical Council of India in his clinic, prescriptions and certificates etc. issued by him or violates the provisions of regulation 1.4.2.

7.4 Adultery or Improper Conduct: Abuse of professional position by committing adultery or improper conduct with a patient or by maintaining an improper association with a patient will render a Physician liable for disciplinary action as provided under the Indian Medical Council Act, 1956 or the concerned State Medical Council Act.

7.5 Conviction by Court of Law: Conviction by a Court of Law for offences involving moral turpitude / Criminal acts.

7.6 Sex Determination Tests: On no account sex determination test shall be undertaken with the intent to terminate the life of a female foetus developing in her mother’s womb, unless there are other absolute indications for termination of pregnancy as specified in the Medical Termination of Pregnancy Act, 1971. Any act of termination of pregnancy of normal female foetus amounting to female foeticide shall be regarded as professional misconduct on the part of the physician leading to penal erasure besides rendering him liable to criminal proceedings as per the provisions of this Act.

7.7 Signing Professional Certificates, Reports and other Documents: Registered medical practitioners are in certain cases bound by law to give, or may from time to time be called upon or requested to give certificates, notification, reports and other documents of similar character signed by them in their professional capacity for subsequent use in the courts or for administrative purposes etc. Such documents, among others, include the ones given at Appendix –4. Any registered practitioner who is shown to have signed or given under his name and authority any such certificate, notification, report or document of a similar character which is untrue, misleading or improper, is liable to have his name deleted from the Register.

7.8 A registered medical practitioner shall not contravene the provisions of the Drugs and Cosmetics Act and regulations made there under. Accordingly, 

1. Prescribing steroids/ psychotropic drugs when there is no absolute medical indication;
2. selling Schedule ‘H’ & ‘L’ drugs and poisons to the public except to his patient;

in contravention of the above provisions shall constitute gross professional misconduct on the part of the physician.

7.9 Performing or enabling unqualified person to perform an abortion or any illegal operation for which there is no medical, surgical or psychological indication. 

7.10 A registered medical practitioner shall not issue certificates of efficiency in modern medicine to unqualified or non-medical person.

(Note: The foregoing does not restrict the proper training and instruction of bonafide students, midwives, dispensers, surgical attendants, or skilled mechanical and technical assistants and therapy assistants under the personal supervision of physicians.)

7.11 A physician should not contribute to the lay press articles and give interviews regarding diseases and treatments which may have the effect of advertising himself or soliciting practices; but is open to write to the lay press under his own name on matters of public health, hygienic living or to deliver public lectures, give talks on the radio/TV/internet chat for the same purpose and send announcement of the same to lay press.

7.12 An institution run by a physician for a particular purpose such as a maternity home, nursing home, private hospital, rehabilitation centre or any type of training institution etc. may be advertised in the lay press, but such advertisements should not contain anything more than the name of the institution, type of patients admitted, type of training and other facilities offered and the fees.

7.13 It is improper for a physician to use an unusually large sign board and write on it anything other than his name, qualifications obtained from a University or a statutory body, titles and name of his speciality, registration number including the name of the State Medical Council under which registered. The same should be the contents of his prescription papers. It is improper to affix a sign-board on a chemist’s shop or in places where he does not reside or work.

7.14 The registered medical practitioner shall not disclose the secrets of a patient that have been learnt in the exercise of his / her profession except –

1. in a court of law under orders of the Presiding Judge;
2. in circumstances where there is a serious and identified risk to a specific person and / or community; and
3. notifiable diseases.

In case of communicable / notifiable diseases, concerned public health authorities should be informed immediately.

7.15 The registered medical practitioner shall not refuse on religious grounds alone to give assistance in or conduct of sterility, birth control, circumcision and medical termination of Pregnancy when there is medical indication, unless the medical practitioner feels himself/herself incompetent to do so.

7.16 Before performing an operation the physician should obtain in writing the consent from the husband or wife, parent or guardian in the case of minor, or the patient himself as the case may be. In an operation which may result in sterility the consent of both husband and wife is needed.

7.17 A registered medical practitioner shall not publish photographs or case reports of his / her patients without their permission, in any medical or other journal in a manner by which their identity could be made out. If the identity is not to be disclosed, the consent is not needed.

7.18 In the case of running of a nursing home by a physician and employing assistants to help him / her, the ultimate responsibility rests on the physician.

7.19 A Physician shall not use touts or agents for procuring patients.

7.20 A Physician shall not claim to be specialist unless he has a special qualification in that branch.

7.21 No act of invitro fertilization or artificial insemination shall be undertaken without the informed consent of the female patient and her spouse as well as the donor. Such consent shall be obtained in writing only after the patient is provided, at her own level of comprehension, with sufficient information about the purpose, methods, risks, inconveniences, disappointments of the procedure and possible risks and hazards.

7.22 Research: Clinical drug trials or other research involving patients or volunteers as per the guidelines of ICMR can be undertaken, provided ethical considerations are borne in mind. Violation of existing ICMR guidelines in this regard shall constitute misconduct. Consent taken from the patient for trial of drug or therapy which is not as per the guidelines shall also be construed as misconduct.

Conclusions:

On reading of the related provisions it is obvious that there are strict regulations on profession of doctors however, public is well aware that these regulations are not complied with and there are large scale violations. Referral commission, and prescription commission, freebies, etc are very common. To some extent one can understand and consider the same as a compensation for low fees being charged by doctors (this situation is only few cases). However, as a professional, doctors can charge higher fees in a transparent manner. The ill effect of commission culture is very severe, and this culture should be reduced in all respect. Purchase officers in government, public sector and even in private sectors are habituated of asking and getting commission for placing purchase orders and ensuring, approval of goods and payment etc.  Even a domestic help working at homes, or a peon in office and a driver of vehicles  makes extra bucks by way of commission when they purchase some items or avail some services  for the employer. This is unfortunate, but is a reality. If an employer be strict and keep always vigilant eyes to avoid such commission being received by his employees, he may not be able to get people in spite of good salary being paid – this is truth of commercial life and this is not new this has remained part of life for very old times, but now-a-days there is too much prevalence of commission culture. The reason is too much of greed which causes corruption.

Corruption in government hospitals is cause of corruption in private hospitals:

Another  answer for such commission culture in medical profession  lies in underlying indiscipline and inactivity and corruption in government hospitals. In government hospitals due to less than normal working, keeping equipments non-functional, not keeping hospitals properly , private medical facilities are promoted. If spending in government hospitals is efficient, if subordinate staff in government work fully, properly and diligently, the hospitals will be neat and clean, the doctors will find environment to work and will spend more time to take care of patients. However, our politicians through trade unions lend  support to indiscipline amongst subordinate staff and group D employees. 
Many patients go to private hospitals only because many of government hospitals are not  maintained neat and clean. The reason is political support to subordinate staff and workers of government hospitals which leads to working just few hours and few days.

If government hospitals be neat and clean, the private hospitals may have to close down because patients will prefer to go to government hospitals.

Therefore, one can say that corruption in private medical sector is because of massive corruption in government medical sector. We find indication of such corruption in many ways including some TV serials like Satyamev Jayte and Crime Petrol which have aired strong signals of such corruption.