Tag Archives: competition act

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.

Source: https://www.cci.gov.in/sites/default/files/press_release/PressRelease.pdf

 

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Competition Act: Amendment to the Combination Regulations Seeks to Simplify the Procedures Relating to Combinations

The Competition Commission of India (“Commission”), with the main objective of simplifying the procedures relating to combinations provided under the Competition Act, 2002 (“Competition Act”), has recently amended the Competition Commission of India (Procedure in regard to the transaction of business relating to combinations) Regulations, 2011 (“Combination Regulations”). The Combination Regulations, which was first introduced on May 11, 2011 has been amended multiple times and the latest amendment to the same is the Competition Commission of India (Procedure in regard to the transaction of business relating to combinations) Amendment Regulations, 2018 (“Amendment Regulations”) which was notified on 9 October, 2018.

Some of the Key Amendments are:

The Amendment Regulations Provides Clarity on the Time Period of 210 Days for a Combination to come into Effect:

As per the Act, every combination shall come into effect only after 210 days have passed from the date when the notice regarding the combination has been given to the Commission or the Commission has passed an order in relation to the same, whichever is earlier[1]. The Combination Regulations provides for getting additional information, clarifications, rectification of defects, etc. if required. However, there was no clarity in relation to whether the time taken to get these details would be covered within the 210 days period. Now, as per the Amendment Regulations, it is clear that the time period for getting additional information, clarifications, rectifications of defects, etc. is not included in the 210 days period. This essentially means that the time taken for a combination to come into effect will now be longer even for deemed approval due to the additional time that may be taken for getting additional information, clarifications, rectifications, etc.

Withdrawal and Re-Filing of Notice

As per the Amendment Regulations, a new regulation 16A has been inserted which states that, any time prior to issuance of notice by the Commission to the parties to a combination under Section 29 (1) of the Act[2], the Commission, may on the request of the parties to the combination allow withdrawal and refiling of the notice. Also, in case of withdrawal and refiling, the fee already paid in respect of such notice will be adjusted against the fee payable in respect of the new notice, provided the new notice is given within 3 months from the date of withdrawal.

Modifications to the Combination

As per the Amendment Regulations, before the Commission forms an opinion under Section 29 (1) of the Act, the parties to the combination may offer modifications to the combination and the Commission may approve the proposed combination basis such modifications. The position before the amendment was that, only if the Commission considered it necessary, it may require the parties to file additional information or accept modification.

Modifications in response to the Notice issued by the Commission

As per regulation 25 (1) of the Combination Regulations, the Commission can propose appropriate modifications to a combination if it is of the opinion that such combination is likely to have adverse effect on competition but such adverse effect can be eliminated by suitable modifications. Now, a new regulation 25 (1A) is inserted whereby, along with the response to the notice issued by the Commission under Section 29 (1) of the Act, the parties to the combination also can offer modifications to address the concerns of the Commission. The Commission may approve the combination basis such modifications. In such a case, the additional time required to evaluate the modification shall be excluded from the period provided under sections 6 (2A), 29 (2) and 31 (11) of the Act.

Source:https://www.cci.gov.in/sites/default/files/whats_newdocument/Comb.%20Amend%20Regl.2018.pdf

[1] Section 6 (2A) of the Act

[2] As per Section 29 (1), where the Commission is of the prima facie opinion that a combination is likely to cause, or has caused an appreciable adverse effect on competition, it shall issue a notice to show cause to the parties to combination calling upon them to respond within 30 days of the receipt of the notice, as to why investigation in respect of such combination should not be conducted.