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DAIRYREPORTER.COM INVESTIGATION

Nutricia India at ‘risk of non-compliance’ with IMS Act: Danone

By Mark Astley+

10-Apr-2014
Last updated on 10-Apr-2014 at 17:28 GMT

Nutricia India at ‘risk of non-compliance’ with IMS Act: Danone

The Danone Group has acknowledged that its Nutricia India business is still at “risk of non-compliance” with the Infant Milk Substitutes Act (IMS Act), DairyReporter.com can exclusively reveal.

An integration audit, Audit on Baby Ethical Marketing Practices, conducted by the Danone Group in August 2013 “did not identify any payments made to doctors” by Nutricia India employees, but concluded there is “still a risk of non-compliance.”

The IMS Act - known in full as the Indian Infant Milk Substitutes, Feeding Bottles and Infant Foods Act 1992 - prohibits the payment of health officials by those involved in the supply of breast milk substitutes such as infant formula.

The findings, based in part on a review of payments and invoices made and received between March 1 and August 31 2013, were detailed in a confidential document sent to DairyReporter.com by a whistleblower.

While acknowledging the risk of non-compliance with the IMS Act by Nutricia India is very real, the audit document added: “Nevertheless, necessity to animate the category.”

The Danone Group declined to comment on the exact meaning of this phrase when approached by DairyReporter.com.

“Following our normal practice, an integration audit was undertaken in August of last year, to ensure that daily operations were in compliance with our business principle,” said the Danone Group.

“We have no further comment at this time,” it added.

“Some gifts” given

In July 2012, the Danone Group completed its €250m ($182m) acquisition of Wockhardt’s nutrition business. Through the deal, Nutricia India adopted the Indian firm’s Dexolac, Nusobee, and Protinex brands and officially entered the country’s infant nutrition market.

It became apparent during the handover period that payments, in the form of cash and gifts, were being made to doctors, the aforementioned whistleblower claimed in January 2014.

Dexolac was among the infant formula brands Danone acquired from Wockhardt.

During this period Nutricia India’s finance department approved “direct and indirect” payments by sales representatives to doctors, the source said. Nutricia India documents, seen by DairyReporter.com, appear to detail payments of around 15,000 Indian Rupees ($240, €180) by sales representatives to doctors.

Initiated one-year after the Danone Group’s acquisition of Wockhardt’s nutrition business, the integration audit “did not identify any payments made to doctors.”

“Some gifts” such as sanitizing wipes and small medical instruments were “identified” but were “in line with Green Book requirements,” the audit report said.

The Danone Policy for the Marketing of Foods for Infants and Young Children , which is generally referred to as the Danone Green Book, “governs the marketing practices of the Early Life and Medical Nutrition divisions, across all markets.”

“Key failure of the audit”

Scrutinizing the audit, our source claimed that auditors chose not to cover the five-month period following the Wockhardt nutrition division purchase.

“A key failure of the audit is that Danone conducted in India is that they audited the period March 1 2013 to August 31 2013,” said the whistleblower.

“At the time of the audit, they were aware of allegations [of payments to doctors], and that the period they should have been looking at was the second half of 2012.”

Our source also alleged the audit was purposely based on a small sample of payments and invoices. “The total business in India had more than 400 staff, yet they chose a small sample given that they knew there was an issue.”

DairyReporter.com put these allegations to the Danone Group, which declined to comment.

When pressed, the French diary giant said: “We have no further comments.”

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