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Ethical marketing and promotion of medicines

Time and again, the pharmaceutical industry has been accused of indulging in unethical practices concerning the marketing of medicines around the world.  These unethical marketing practices are, in fact, a major area of concern for the Government as well as patient groups. Amongst all unethical practices, the one that attracts the highest amount of scrutiny is the (questionable) interaction between pharmaceutical companies and healthcare practitioners (HCPs).

India is no exception. The Draft Pharmaceutical Policy, 2017 published by the Government itself makes a note that unethical practices employed by pharma companies are an area of major concern and that Doctors are lured to recommend a particular brand through all expenses paid trips often disguised as ‘educational conventions’. Unfortunately, the cost of such trips and other incentives gets added to the overhead cost of marketing of the medicine and is ultimately passed on to the patients.

There is no law at present that regulates the promotion and marketing of drugs (including medical devices) by companies before HCPs. Interactions between pharma companies and HCPs are regulated, at best, by way of restrictions cast on HCPs through their respective professional and ethical guidelines. For example, the Indian Medical Council (Professional Conduct, Etiquette and Ethics) Regulations, 2002 regulate the professional and ethical conduct of doctors practising modern medicine and prohibits doctors from accepting any kind of freebies (including travel and accommodation) from pharma and allied healthcare industry. Unfortunately, the principal legislation that regulates the pharma industry i.e. The Drugs and Cosmetics Act, 1940 does not say what pharma companies can and cannot say, or give or cannot give, to HCPs.

It is true that there are consumer protection legislations in India such as the Consumer Protection Act, 1986 (now the Consumer Protection Act, 2019) and the Drugs and Magic Remedies (Objectionable Advertisement) Act, 1954 and Rules, 1955 but these legislations regulate misleading advertisements, not unethical industry-HCP interaction.

It is, perhaps, not right to say that the government has turned a blind eye to this problem. In fact, in light of the increasing number of complaints of unethical practices adopted by pharma companies, the Department of Pharmaceuticals had introduced the Uniform Code of Pharmaceutical Marketing Practices (UCPMP) back in 2011 (later revised in 2014). The intent behind UCPMP code was to guide the pharma industry in its interaction with HCPs. However, the voluntary nature of UCPMP has relegated its own status to that of a “non-binding guideline”.

However, not all is lost. There is no dearth of pharma companies who are proudly ethical in their dealings with HCPs. In fact, most pharma MNCs have put in place exhaustive internal guidelines and robust internal systems which guide interactions of their medical representatives/marketing personnel with HCPs.  Interestingly, HCPs also seem to value such ethical behaviour. It is obvious that, at the end of the day, a HCP will prescribe medicines from only those pharma companies whose quality he or she trusts.

It is quite likely that the Indian government may decide to give legal teeth to UCPMP and make it binding. After all, the UCPMP is the nearest Indian equivalent to the US Physicians Payment Sunshine Act that we have. Interestingly, the enforcement of the Sunshine Act by US Authorities have resulted in hundreds of millions of dollars in fines for some pharma companies.

There is no doubt that making UCPMP into a law would certainly help to curb the rampant quid-pro-quo arrangements that exist today between pharma companies and HCPs. More so, those companies which currently engage in unethical practices will be forced to re-evaluate their sales and marketing strategies and become compliant, or else they will have to face legal consequences.  

In the meanwhile, at least those companies who have achieved leadership positions in India’s pharma industry may lead by example and assume voluntary responsibility to follow UCPMP in text and spirit. The pharma industry associations would also do much good if they could adopt the UCPMP and direct their members to ensure compliance with the provisions of UCPMP at all costs. Such proactiveness will go a long way in instilling a sense of confidence amongst the Government and patients groups. And if that happens, needless to say,  the heavily regulated industry that is pharma industry will have one less regulation to worry about.

The views are personal.

Anil Upadhyay

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Confidentiality and Non-Disclosure Agreements – Key Things to Keep in Mind before Disclosing Confidential Information

All health-focused businesses, whether of pharmaceuticals, medical devices, food & beverages, cosmetics or healthcare, hold a large amount of information that is confidential or proprietary to the business. While soliciting investments from investors, or in the course of finding the right business partners, it becomes vital to disclose or share such information for validation. At that time, there is some hesitation to disclose confidential or proprietary information – what if the data fell in a competitor’s hand? What if the information is used against the owner?

Contrary to general perception, it is possible to retain full control over the use of confidential or proprietary information even after it has been disclosed in the course of business. It is also possible to force the receiving party to permanently delete the information from its systems, so that there is no scope of its misuse. The legal instrument that allows a business to have control over the use and disclosure of its confidential and proprietary information is called a Non-Disclosure Agreement (commonly referred to as NDA).

It is easy to source an NDA template because they are very readily available on the internet. Most businesses that have been around for some time usually have an NDA template of their own. However, before actually signing an NDA, health-focused businesses should ensure that their NDA template checks the following essential boxes:

Wide definition of confidential information: Ideally, any information that is shared by disclosing party to receiving party should be treated as confidential under an NDA. This leaves no scope for ambiguity between the disclosing party and receiving party with regards to the information shared by the dislosing party. It may also be a good idea to add language which clarifies the scope of confidential information, for instance, that confidential information covers customer list, regulatory information, pricing information etc. as it serves as a reminder to the receiving party that use and disclosure of such information is to be taken very seriously.

Clear identification of purpose: The real objective behind signing an NDA is to control the use and disclosure of confidential or proprietary information. The use of such information can be regulated only if the NDA clearly identifies the purpose behind sharing of the information. If the purpose is clearly defined, it is easy to establish whether the information that was disclosed was used or misused. Any use of the information beyond the purpose of its disclosure would amount to misuse of the information, which will be prohibited (see section on Non-Disclosure below). Therefore, it is very critical for the effectiveness of an NDA that the purpose of the disclosure is clearly identified within the NDA.

Existence of a non-disclosure clause: The language that imposes restriction on use and further disclosure of the confidential and proprietary information is, perhaps, the most critical part of an NDA. It is very important to properly define the limitations for use and disclosure of the information. Ideally, the information disclosed should not be used (a) for purposes other than the defined purposes; (b) by parties other than the receiving party; (c) by persons other than those for whom it is absolutely necessary to know about the information and who are in direct employment of the receiving party  and (d) beyond a stipulated time-period for any purpose whatsoever (usually the term of the NDA).

Protection against competition from receiving party: These days, it is fairly common to have non-compete provisions built into an NDA. A non-compete clause is a negative covenant by which the receiving party agrees not to enter into a business that competes with the business of the disclosing party. Such a provision  becomes necessary to include in the NDA when the receiving party is in same or similar business, and can capitalize on the disclosed information to compete with the disclosing party in a short span of time. While it is fairly simple to contractually impose such an obligation on the receiving party, it is not easy to enforce non-compete obligation before the Indian courts. The Indian courts have held that non-compete provisions will be binding during the currency of the contract, but its enforceability after expiry or termination of the contract is a moot point which will be decided on a case to case basis. Therefore, many times, the term of the NDA is deliberately stretched (up to 10 years!) in order to improve chances of enforcement of the non-compete. If the term of the NDA cannot be stretched, then in order to improve the chances of enforcement of a non-compete obligation, the disclosing party should record in the NDA that the receiving party has given assurance to it that it would not compete with the disclosing party and only on the basis of such assurance the disclosing party has agreed to disclose the information.

Additional protection from non-circumvention: Sometimes, a receiving party is tempted to bypass the disclosing party and explore business opportunities within the business network of the disclosing party without involving the disclosing party. This may not, strictly speaking, amount to ‘using’ the confidential information. Therefore, it is important to address the possibility of such a ‘circumvention’ in the NDA. This form of ‘circumvention’ is particularly common in business relationships where the disclosing party is not the actual manufacturer/supplier of goods and services, but is instead a facilitator. To address any risk of such circumvention, the NDA should compel the receiving party to refrain from circumvention, avoidance or by-passing of the disclosing party in order to avoid signing of a contract (for investment, fee, commission etc.).

Stipulation of remedies: Monetary compensation may not always be an adequate remedy in case of breach of the NDA. Ideally, the receiving party should be stopped from using any information that is confidential or proprietary to the disclosing party. However, until the disclosing party is able to prove that the monetary compensation is not going to be adequate remedy for breach of NDA, Indian courts will not issue an order that stops the receiving party from doing so. Therefore, in the NDA, it is important to record that the remedy of specific performance and injunctive relief will be available to receiving party in addition to monetary compensation, because monetary compensation alone may not be adequate remedy to disclosing party in case of breach of the NDA.

Governing law and jurisdiction: An NDA between two domestic parties is always regulated by domestic law. However, that may not be the case when one of the parties is a foreign party. When there is no clear stipulation of governing law in an ‘international’ NDA, then in the unfortunate event of a dispute, the receiving party may take up the defence of non-application of domestic law (or foreign law, depending on where the action is instituted!) in an enforcement action before a Court. This could delay the remedy for disclosing party that is otherwise stipulated and agreed to in the NDA. Therefore, it is important to clearly stipulate the governing law of the agreement in the NDA. Separately, as a disclosing party, it is natural to prefer domestic law as governing law of the NDA. However, this may actually be counter-productive if the receiving party is a foreign party because a large number of countries do not directly recognize the orders of Indian courts. In case of perceived or actual breach of NDA, time is of essence, and therefore the quickest option to secure relief is to go to the courts which have jurisdiction over the foreign receiving party and ask for urgent relief. Now, in order to be able to do so, it is preferred that the governing law of the contract is actually the domestic law of the foreign party and not the domestic law of the disclosing party. On the same note, it is equally important to identify which court will have jurisdiction over any breach or dispute arising out of the NDA, so that the opposite party does not institute a counter-action in another court and objects to the jurisdiction of the court that has been approached by the disclosing party for relief.

Sometimes, in order to avoid ‘forum shopping’, the parties agree to resolve any dispute by way of an arbitration seated in a neutral country whose orders would be directly enforced by courts in the country of the disclosing party as well as the receiving party.

Survival clause: Last but not the least, it is important to verify whether the NDA has a survival clause or not. If the NDA does not have a survival clause, then its effect will cease after expiry of the term of the NDA, or early termination of the NDA by either party. The disclosing party should ensure that certain obligations such as that of confidentiality and dispute resolution (disputes can happen even after expiry of the NDA because the disclosing party may not become aware of the breach for a long time) survive the expiration or termination of the NDA.

Happy signing!