Making Markets Work for Affordable Healthcare - Policy Note

The Competition Commission of India on 28-29 August organized a technical workshop on ‘Competition Issues in the Healthcare and Pharmaceutical sector in India’, as a follow up to this workshop on 24/10/2018 the CCI issued a policy note titled ‘Making Markets Work for Affordable Healthcare’. The primary focus of this policy note is to provide and create a pro-competition market in the healthcare industry.  It has been observed that pharma/healthcare suffer with information asymmetry the note stated.

The press note enumerates various problems related to the pharma/healthcare industry (in four distinct categories) which prohibit the industry from becoming pro-competition.

Below is a summary of the issues and possible solutions discussed by the CCI under the policy note:

Role of intermediaries in drug price build up:

  1. High trade margins and closed and connected distribution channels. Further the self-regulation by trade associations contribute towards high trade margins.
  2. A larger and wider public procurement and distribution system of essential drugs can circumvent the high trading prices. Initiatives like Pradhan Mantri Jan Aushadhi Pari Yojna  are an excellent example of the same.
  3. Using electronic means of trading in drugs with appropriate safeguards would encourage transparency and spur competition in the market among all stakeholders.

Quality perception behind proliferation of branded generics:

  1. The Indian pharmaceutical market is dominated by branded generic drugs which are expensive in nature. The reason being, brand identity and the quality of these branded drugs. The note clearly states in this regards “However, it is also equally possible that the brand proliferation is to introduce artificial product differentiation in the market, offering no therapeutic difference but allowing firms to extract rents”.
  2. The note with regards to the quality of the drugs states that regulatory bodies must ensure consistent application of statutory quality control measures by each drug manufacturer.
  3. It also mentions that the problem of artificial product differentiation may be addressed through ‘a one-company-one drug-one brand name-one price’ policy.

Vertical arrangements in healthcare services:

  1. In-house pharmacies of super speciality hospitals are insulated from competition; generally the inpatients are not allowed to buy drugs or any product from outside pharmacies.
  2. The note also focuses on how all accredited (NABL) pathological labs shall maintain quality standards in terms of infrastructure, equipment, skilled manpower.
  3. Last but not the least the note states that there is no framework that ensures and governs portability of patient’s e-health records. This causes a lock-in situation for all the patients and makes it really hard for them to switch between medical service providers.

Regulation and competition:

Due to presence of various regulatory bodies at centre and state level, regulating the pharmaceutical industry has resulted in multiple standards for the same products. A mechanism under the aegis of CDSCO can be formalized to negate this issue also there should the new drug approval should be time bound.

Further the policy discusses two other issues related to the healthcare industry: (i) shortage of healthcare professionals in the country owing inter alia to high cost of medical education and (ii) inadequacy in health insurance.






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