Draft code of marketing practices: SECP seeks to place strict checks on pharma companies
The Securities and Exchange Commission of Pakistan (SECP) wanted to place strict checks on the pharmaceutical companies while interacting with doctors and proposed compensation to healthcare professionals only through cheques or electronic banks transfers to avoid cash payments.
Copyright Business Recorder, 2013
In this regard, the SECP on Tuesday issued a draft code of marketing practices for the pharmaceutical industry to the Minister of Health Services, stating that the Drug Regulatory Authority of Pakistan (DRAP) may be advised to put in place a mechanism for ensuring effective regulation of marketing practices in the pharmaceutical industry.
Sources said that the SECP has made recommendations to the DRAP for effective enforcement and compliance by the pharmaceutical companies which may result in decrease in prices of medicines and drugs in the country. The SECP has taken serious notice of ongoing practice of companies involved in making cash payments to the doctors etc. A draft code has been recommended to the DRAP for implementation.
Reportedly, the Supreme Court had issued notices to 22 pharmaceutical companies for selling different drugs on exorbitant prices against the prices fixed by the DRAP. According to the draft code, available with Business Recorder, consulting arrangements between companies and Healthcare Professionals must comply with the following: Firstly, a legitimate need and purpose for the services is identified in advance. Secondly, only the number of Healthcare Professionals reasonably needed to perform the services are engaged. Thirdly, healthcare professionals are selected based on their qualifications to perform the services and are not based on the volume or value of business generated or potentially generated by them. Fourthly, the compensation paid to a Healthcare Professional consultant must be consistent with fair market value for the services actually performed. Fifthly, the compensation is paid after the services have been performed and upon sufficient evidence of performance of services (retainer fees or other advance payments are not permitted). Sixthly, the compensation is paid by cheques or electronic bank transfer. Payment must not be by cash. Seventhly, the services and compensation to be paid (if any) are documented in a written agreement in advance of the services being performed and consulting arrangements should be disclosed in advance and in writing to the Healthcare Professional consultant's institution or employer, unless applicable laws, regulations or institutional rules specifically require disclosure to a different body, in which case disclosure should be made in accordance with the applicable laws, regulations or rules.
The SECP's draft code further said that when it is necessary for the Healthcare Professional consultant to travel in order to perform the services, companies may pay for or reimburse the reasonable travel, accommodation and meal expenses, provided that:
The expenses are limited to those that are necessary for the Healthcare Professional to perform the services. No expenses are paid for spouses or other guests accompanying the Healthcare Professional; (An exception for spouses who worked at the same entity and assigned by the supervisor of that Healthcare Professional to join the event). Whenever possible, Companies make travel bookings directly on behalf of the Healthcare Professional, rather than providing reimbursement to the Healthcare Professional. When direct bookings are not possible, reimbursement is only made for actual and appropriate costs incurred, and upon submission of original receipts or other adequate proof of payment. The reimbursement is made by cheques or electronic bank transfer. Payment must not be by cash. The companies must not fund the Healthcare Professional consultant's vacation or other personal activities such as private side trips.
The companies must not fund any international trips of the Healthcare professional consultant, the SECP code added. According to the letter of SECP to Minister of State, Ministry of National Health Services, Regulation and Co-ordination, the SECP has been established for the beneficial regulation of the capital markets, superintendence and control of corporate entities and for matters connected therewith and incidental thereto, pursuant to the Securities and Exchange Commission of Pakistan Act, 1997. In furtherance of SECP's objectives and also in view of international reports and practices on the subject, marketing related expenses of companies engaged in pharmaceutical sector were reviewed by our teams.
In this context, it is critical for the effective oversight of marketing practices of pharmaceutical sector that voluntary code for interaction with health care professional is put in place. The Drug Regulatory Authority of Pakistan (DRAP), formed under the "Drug Regulatory Authority Ordinance 2012" and governed under the Ministry of national health services, regulation and co-ordination, Government of Pakistan, being the frontline regulator of the sector is the appropriate forum for putting such a mechanism in place and at a later stage, ensure effective accountability thereunder as considered appropriate by the DRAP.
The pharmaceutical companies having abnormal variances in their account head "Advertising and marketing expenses" were identified and selected for inspection proceedings under Section 231 of the Companies Ordinance, 1984 ("Ordinance"). Inspection proceedings against these companies revealed instances of weak internal control systems and the fact that lack of regulatory controls over marketing practices was to some extent responsible for such control issues, SECP said.
The SECP said that the commission's research on the international practices has revealed that globally codes for interactions with healthcare professionals have been developed by the local pharmaceutical associations and their member pharmaceutical companies are required to follow them. The Pakistan Pharmaceutical Manufacturers Association (PPMA) that has, as per information disclosed on its website, over 250 members does not require adherence to any such code by its members. The Code of Ethics of PMDC as applicable in Pakistan to some extent caters to this situation however in line with international practices on the subject a separate and more exhaustive set of principles applicable on the pharmaceutical industry may be considered for ensuring accountability at industry level.
General examples of such codes internationally are as follows:- Voluntary code of marketing for Indian Pharmaceutical Industry - Released on 2.6.2011 by the "Department of Pharmaceutical (DOP)" in the Ministry of Chemicals and Fertilisers; International Federation of Pharmaceutical Manufacturers and Associations - Code of Practice: Since its initial adoption in 1981 as the foundation of a global self-regulatory approach, the Code has been regularly updated and strengthened to adapt to changing needs and Irish Pharmaceutical Healthcare Association-Code of Marketing Practice for the Pharmaceutical Industry.
General examples of such codes also included Voluntary Pharmaceutical and Healthcare Association of the Philippines (PHAP) - Code of Pharmaceutical Marketing Practices: It sets the standards for the ethical marketing and promotion of prescription products directed to the healthcare professions and Pharmaceutical Research and Manufacturers of America (PhRMA) Code of interactions with healthcare professionals.
The SECP said that as a stop gap arrangement the SECP has, by deriving inspiration from the international practices on the subject, developed first sketch of "draft Voluntary Code on interactions with health care professionals" which, if implemented, would regulate the marketing practices adopted by the pharmaceutical companies and thus resulting in safeguarding public interest as well as image of Pakistan's pharmaceutical industry. The same is being forwarded to you, for its implementation in this form or after modifications, under the laws administered by Drug Regulatory Authority of Pakistan (DRAP).
The section 7 of the Drug Regulatory Authority of Pakistan Ordinance, 2012 designates certain powers and functions to the Drug Regulatory Authority, including among others the power to issue guidelines and monitor the enforcement of regulation for the advertisement; issue guidelines and monitor proceedings and funding and accounts of health seminars, workshops and conferences and monitor and regulate the marketing practices so as to ensure rational use of drugs and ethical criteria for promotion of therapeutic goods in line with international practices. It is hoped that the said Code will be a first step in the direction of ensuring ethical interaction with healthcare professionals, the SECP added.