Does the CSR activity of the pharma giant Pfizer which is independent of its commercial interests and where a grant of Rs 7 crore was given to ICMR to set up a disease centre compromise the collaboration?
By Dr KK Aggarwal
Recently, there was a lot of furore over news that the Indian Council for Medical Research (ICMR) was collaborating with Pfizer, a drug multinational company that sells antibiotics, for its Anti-Microbial Resistance (AMR) project. There were charges of conflict of interest (CoI) in this “public-private partnership” (PPP) as Pfizer had provided an initial grant of Rs 7 crore to set up a centre in Delhi to combat anti-microbial resistance and to enhance the surveillance programme for this malaise.
As per officials of the ICMR, Pfizer offered its Corporate Social Responsibility (CSR) funds to it and there were no strings attached and no CoI. Those criticising this collaboration advocate that industry support to AMR activities, if any, should be in the form of unrestricted educational grant with multiple grants to a common pool. They assert that the WHO document pertaining to PPPs states: “Pharmaceutical companies would have to be willing to contribute collectively, for example, through their industry associations.” They also say that to eliminate or at least reduce CoI, no single company should be selected as a partner to a specific educational or surveillance activity.
Before deciding whether this collaboration amounts to CoI or not, let’s first understand the meaning of “conflict of interest” and “corporate social responsibility”. A conflict of interest is a situation in which a person/organisation has competing interests or loyalties. It is a situation in which an individual/organisation is involved in multiple interests, financial or otherwise, and serving one interest could involve working against another. Here, the personal interest of an individual/organisation might adversely affect a duty owed to make decisions for the benefit of a third party. A conflict of interest exists if the circumstances are reasonably believed (on the basis of past experience and objective evidence) to create a risk that a decision may be unduly influenced by secondary interests, and not on whether a particular individual is actually influenced by a secondary interest.
The easiest way to explain the concept of CoI is by using some examples:
- When a public official’s personal interests conflict with his professional position.
- When a person has a position of authority in one organisation that conflicts with his interests in another organisation.
- When a person has conflicting responsibilities.
There are different types of activities that can create a possible conflict of interest. These include: Nepotism where favours are given to relatives and close friends, often by hiring them; self-dealing where someone in a position of responsibility in an organisation has outside conflicting interests and acts in their interests rather than the interest of his organisation. However, these activities do not involve wrongdoing or any criminal activity. For example, a business executive hiring her daughter might not be CoI unless the latter is given preferential treatment or more pay. If the executive isn’t in a position to give favours, there’s no CoI.
Coming to CSR, the Companies Act, 2013, makes it mandatory for companies having a net worth of Rs 500 crore or more or a turnover of Rs 1,000 crore or more to constitute a CSR Committee. This Committee is entrusted with the work of undertaking activities known as CSR activities. It is mandatory for the company to spend, in every financial year, at least two percent of the average net profits made during the three preceding years in pursuance of its CSR policy. Also, it is mandatory for the company to give preference to the local area around where it operates for spending this CSR amount.
Activities which may be included by companies in their CSR policies are mentioned in Schedule VII of the Companies Act. One of the provisions of Section 135 of the Act is that if the company fails to spend its CSR amount, the Board shall in its report specify the reasons for it. Activities which may be included by companies in their CSR policies are mentioned in Schedule VII of the Companies Act. These include: eradicating extreme hunger and poverty; promotion of education; promoting gender equality and empowering women; reducing child mortality and improving maternal health; combating the human immunodeficiency virus, acquired immune deficiency syndrome, malaria and other diseases; ensuring environmental sustainability; employment enhancing vocational skills; social business projects; contribution to the Prime Minister’s National Relief Fund or any other fund set up by the central or state governments for socio-economic development and relief and funds for the welfare of the Scheduled Castes, Scheduled Tribes, other backward classes, minorities and women, etc.
In a circular on June 18, 2014, the Ministry of Corporate Affairs had clarified that while activities undertaken in pursuance of the CSR policy must be relatable to Schedule VII of the Companies Act, 2013, the entries must be interpreted liberally so as to capture the essence of the subjects enumerated in the said Schedule. The items enlisted in this Schedule are broad-based and intended to cover a wide range of activities. Further, the ministry clarified in a circular that enabling access to or improving the delivery of public health systems should be considered under the head “preventive healthcare” or “measures for reducing inequalities faced by socially and economically backward groups”.
In this context, the funding of the AMR project of ICMR by Pfizer falls under Clause (v) of Schedule VII of the Companies Act. The said CSR activity cannot be CoI as a CSR project of any company is independent of its commercial interests. There is an independent committee in a company which assesses any CoI by it.
CoI should be disclosed by anyone in a company who is attending a particular meeting and he should affirm that his decision will not be influenced and will be independent of the other party. Otherwise no doctor should become the health minister; no lawyer, the law minister and no industrialist, the finance minister.
Conflict of interest has to be seen without a blinkered vision and in the spirit of the guidelines in this regard.
—Dr KK Aggarwal is President, Heart Care Foundation of India, and President-elect, Confederation of Medical Associations of Asia and Oceania