Drug companies, that have been doling out freebies and sponsoring jaunts of doctors , may face problems with the government now stepping in to find ways to curb "unethical trade practices".

In a first-ever instance, the government is meeting drug companies on Tuesday to find a mechanism to limit sales promotional expenses, which include gifts in cash or kind to doctors.

"Drug companies need to limit promotional expenses and in certain cases unethical trade practices, which jack up prices of medicines for consumers. We need to have a proper mechanism in place, and see if it is being enforced", official sources said.

Major companies including Ranbaxy, Pfizer, Cipla and Sun Pharma, and all industry bodies like Indian Pharmaceutical Alliance (IPA), Organisation of Pharmaceutical Producers of India (OPPI), Indian Drug Manufacturers Association and Confederation of Indian Pharma Industry are expected to be part of the exercise.

Companies dole out huge amounts in the form of freebies, gifts, jaunts to promote drugs so that doctors prescribe their use to patients. These promotional costs form a huge component in the price of a drug. Promotional expenses also include trade margins, which the government has been trying to cap for sometime now. There are certain drugs sold in the market on which margins may be levied by retailers and wholesalers between 5 to 1000%, leading to a mark-up on prices. A medicine crosses different layers and sub-layers in the trade before it reaches a consumer.

So if the manufacturing cost of a medicine strip is Rs 2, may be sold at Rs 50 in the market. The government plans to evolve a mechanism to limit these expenses, see that the code of ethics is implemented by companies and reviewed by external agencies, sources said. The move comes even as several countries are already brought in legislation to curb unethical promotional expenses, which may influence doctors in their prescriptions.

Though there is a code of ethics for companies to follow, only a few are following them. Industry body, OPPI had devised a code of conduct nearly two years back which lays down clear guidelines on travel, international events, company sponsorships, entertainment expenses and gifts.