The advancement in science has extended the life span of the individuals by means of life saving medications. The innovative skills in the field of pharmaceutical industry has promoted the increase in the quality of life as well. The governing set up in India encourages the scientists to strive for the development of better technology. Not only does it incentivise the budding researchers but also provides protection of their intellectual property rights.

Commercialization of Pharmaceuticals

Increasing awareness in the domain of healthcare and medicine has led to rise in the demand of pharmaceutical products. Like many other businesses in India, pharmaceutical production depends on public and private sectors. The Pharmaceutical Policy 2002 focusses on licensing for the manufacture of all drugs and pharmaceuticals, the investment thereunder, protection of rights of the manufacturers, etc. The Government regulates the commercialization of drugs under the provisions of the Drugs and Cosmetics Act, 1940 under the authority of Central Drugs Standard Control Organisation (hereinafter referred to as “CDSCO”).

Competition in the market

Drugs and pharmaceuticals manufacturing units in the public sector are being allowed to face competition including those from import of foreign products. In order to monitor competition in the Indian markets the Competition Act, 2002 (hereinafter referred to as the “Act”) has been enforced which promotes fair competition in the market, protect the interests of the consumers and ensure freedom of trade is carried on by other participants in the market. The competition regulator of the country, Competition Commission of India (hereinafter referred to as the “CCI”), ensures proper monitoring of fair competitive trade practices.

Unfair transactions by Drug companies

Over the passage of years, it has been observed that there has been absence of fair competition in the Indian market in respect of the pharmaceutical sector. Significant restrictions as to the choice of the consumers has been evident not allowing markets to work effectively and healthy competition to drive the market outcomes.

CCI’s latest approach

In order to address the concerns of the consumers as well as the stakeholders in the pharmaceutical sector while ensuring fair market practices and competition, the CCI introduced a Policy Note on ‘Making Markets Work for Affordable Healthcare’ (hereinafter referred to as “Policy Note”). Some of the features of the said Policy Note are listed below:

  • Role of intermediaries in drug price build-up - One major factor that contributes to high drug prices in India is the unreasonably high trade margins in the form of incentive and an indirect marketing tool by drug companies and self-regulation by trade associations. Efficient and wider public procurement as well as distribution of essential drugs and electronic trading of drugs can help mitigate the rise in prices.

  • Quality perception behind proliferation of branded generics - The branded generic drugs enjoy a price premium owing to perceived quality assurance that comes with the brand name. The regulatory apparatus must address the issue of quality perception by ensuring consistent application of statutory quality control measures and better regulatory compliance in order to eliminate generic competition.

  • Vertical arrangements in healthcare services – Restrictions offered during healthcare services prohibit a healthy competition in this domain. The in-house pharmacies of super specialty hospitals which restrict the purchase of pharma products should not prevent the consumers to buy standardised consumables from the open market. All accredited diagnostic labs should meet the same quality standards in terms of infrastructure, equipment, skilled manpower etc. for getting accreditation. Portability of patient data in the form of patient data, treatment record, diagnostic reports should be allowed between hospitals.

  • Regulation and competition - A mechanism may be devised under the aegis of the CDSCO to harmonise the criteria/processes followed by the state licensing authorities to ensure uniformity in interpretation and implementation. Also, the new drugs must be approved in a time-bound along with publication of detailed guidelines monitoring the same.

The CCI and the Act aims to achieve fair competition for greater good. The policy note introduced by CCI focuses to ascertain that the competition in the pharmaceutical industry is not chocked owing to high prices and lack of proper regulations.