The COVID-19 pandemic has reiterated the importance of the pharmaceutical and
healthcare industries. India is the largest producer of generic drugs in the
 However, 50-65% of the Indians still do not have access to essential
medicines. The pharmaceutical and healthcare industries are plagued with
anti-competitive practices which lead to increase in the price of medicines,
thereby making them unaffordable for many people. In India, the Competition Act,
2002 (Act) prohibits anti-competitive practices.
The Competition Commission of India (CCI) since its inception has been enforcing the provisions of the
Act. It has actively conducted investigations and taken up market studies
specific to the anti-competitive practices in the pharmaceutical and healthcare
sectors. On this account, this article aims to analyse the anti-competitive
practices prevalent in the pharmaceutical and healthcare sectors. Further, it
also analyses the interface between intellectual property rights (IPR) and the
Application Of The Act In The Pharmaceutical And Healthcare Industries
The Act was enacted to prevent practices that adversely affected the competition
and to promote and sustain competition in markets. Further, the Act aims to
protect the interests of consumers and ensure freedom of trade carried on by
other participants in the Indian markets.
Section 3 of the Act prohibits anti-competitive agreements. Under the said
section, no person or enterprise or association is allowed to enter into any
agreement that determines the purchase or sale prices, controls production,
supply or the markets, or directly or indirectly indulges in bid-rigging or
collusive bidding. However, no such restrictions are placed on the patent
holders. Therefore, IPR monopoly is allowed.
Section 4 of the Act prohibits abuse of dominant position. Under this section,
no group or enterprise is allowed to abuse its dominant position and impose
discriminatory conditions or prices in the purchase or sale of goods and
Section 5 of the Act deals with combination regulations wherein only after the
approval of the CCI, mergers and acquisitions are successful. This is done in
order to check if the combinations are going to hamper competition in the
It is important to apply the Act in the pharmaceutical and healthcare industries
given the fact that healthcare is one of the basic needs of the people which
must be accessible easily. The said industries are not transparent in nature and
the blatant information asymmetry between the consumers and the companies
operating in these sectors must be curbed.
This often leads to the
exploitation of consumers since the main motive of such companies is to reap
high profits. Such evil practices of charging high prices can cost the lives of
people who cannot afford it. Therefore, in order to maintain competitive markets
and preclude consumers from falling prey to anti-competitive practices,
enforcing the Act in the pharmaceutical and healthcare sectors is very crucial.
Over the years, the CCI has been conducting various studies and investigations
with respect to anti-competitive practices undertaken by companies in the
pharmaceutical and healthcare sectors to suggest measures for curbing them.
CCI's Healthcare Policy Note
For the first time in the year 2010, CCI realized the need to investigate and
study the causes for the increase in the anti-competitive practices prevalent in
the pharmaceutical and healthcare industries. The Centre for Trade and
Development's (Centad) report on anti-competitive practices in pharmaceutical
and healthcare sectors had extensively covered the need for a better regulation
of competition in the said sectors.
In October 2018, the CCI released a healthcare policy note called Making
Markets Work for Affordable Healthcare
(policy note).  In the policy note,
various stakeholders connected to the pharmaceutical and healthcare industries
identified the following anti-competitive issues and recommended solutions to
- High prices
The policy note highlighted the role of the intermediaries in drug price build
up. The unreasonable high trade margins have hiked up drug prices. High trade
margins are indirect marketing tools used by drug companies. There is a colossal
difference in market prices of the same drugs in different states. Further, the
drug trade associations control the entire drug distribution system. They are
self-regulated and contribute to high margins.
To solve this issue, public procurement of drugs which will break the long
distribution chain was recommended. This will make essential drugs available at
affordable prices for the consumers. Further, using online pharmacies was also
recommended. Unlike offline pharmacies, online pharmacies do not have a lot of
intermediaries, thereby reducing the prices of the medicines. The online
pharmacies directly deliver the pharmaceutical products from the manufacturers,
thereby giving high discounts.
Furthermore, in the case of offline pharmacies,
consumers do not have much choice while choosing a brand of medicine as owing to
information asymmetry, they end up purchasing the medicine brand given by the
pharmacist. However, online pharmacies are transparent and show various brands
of the same medicines along with their price differences. This enables consumers
to make informed choices.
Further, since 1997, the National Pharmaceutical Pricing Authority (NPPA), the
pricing regulator which ensures that the essential drugs are available at
affordable prices, has imposed a total penalty
of Rs 6,423 crore on pharmaceutical companies selling essential drugs above the
ceiling prices. In addition to it, between the financial years of 2016 and
2019, the CCI has imposed a total penalty of Rs 11,939 lakh on pharmaceutical
companies indulging in unfair trade practices including excessive pricing of
drugs. However, even after imposing such enormous penalties, the prices of
drugs do not seem to reduce.
- Branded generics
Another issue is with respect to quality perceptions behind proliferation of
branded generics. There exists no or very little difference in efficacy and
quality between branded and unbranded generics. However, the pharmaceutical
market is dominated by the branded generics. The branded generics are expensive.
Both the doctors and pharmacists indulge in unfair practices of prescribing
branded generics when a cheaper alternative is available. The doctors and the
pharmacists gain incentives and high margins by doing so. To solve this issue,
it is recommended that the quality of all drugs must be thoroughly checked and
inspected. It must also match the statutory standards. This must be done in a
transparent manner for consumers to believe that the unbranded drugs are also of
- Vertical arrangements
The next issue identified is with respect to vertical arrangements in healthcare
services and lack of transparency. Various diagnostics and procedures done at
the hospitals are not transparent. The consumers cannot make informed choices
due to information asymmetry. Many hospitals have in-house pharmacies and
diagnostic labs where multiple unnecessary services are prescribed for a
package. Further, some hospitals force the patients to buy medicines from their
pharmacies when the same can be bought outside at a cheaper price. The tests
conducted at the diagnostic labs of the hospitals are also more expensive. The
recommendation is that there must be a strong regulatory framework to ensure
that the hospitals do not restrict its patients with respect to where they want
to buy the medicines or do the tests.
Besides the above identified anti-competitive practices in the policy note,
there are other practices proven to be anti-competitive which are discussed
Anti-Competitive Practices Indulged By Trade Associations
The CCI has been receiving several cases pertaining to the anti-competitive
practices in the pharmaceutical and healthcare industries. Some cases were even
taken by CCI on suo moto basis. In many instances, it was found that the trade
associations were involved in muting the competition.
In the case of M/s Arora Medical Hall, Ferozepur v. Chemists & Druggists
, Ferozepur (CDAF), CDAF made it mandatory for all the new
chemists/druggists who wanted to take distributorship for medicines of a company
in Ferozepur to get a no objection certificate ("NOC") and letter of credit
(LOC) from CDAF by making a payment of Rs. 2100/- per company. The informant was
removed from the primary membership of CDAF. Further, CDAF also asked its
members to not purchase goods from the informant.
The wholesalers were directed
to stop dealings with the retailers who continued to purchase goods from the
informant. This violated provisions of section 3 and section 4 of the Act.
The Director General (DG) during the investigation found out that CDAF's mandate
of compulsorily requiring the chemists/druggists to take NOC from CDAF and the
practice of not granting NOC to certain people resulted in foreclosing of the
market for such a person and this ultimately meant that CDAF limited and
controlled the supply of drugs and medicines in Ferozepur. The act of CDAF
drove out the existing competitors from the market.
The CCI held that the
conduct of CDAF is violative of the provisions of section 3(3)(b) read with
section 3(1) of the Act as it limits/ controls the supply/ provision of goods/
services in the markets.
The Bengal Chemist and Druggist Association (BCDA) case is a suo moto case
taken by the CCI for investigation. BCDA is an association of wholesalers and
retail sellers of drugs. It was engaged in directly or indirectly determining
the sale price of drugs and controlling the supply of drugs in a concerted
manner and in issuing anti-competitive circulars directing the retailers not to
give any discount to the consumers. The CCI held that the activities of the BCDA
caused restraint of trade, stifled competition and harmed the consumers. It
violated section 3(3) of the Act and therefore, a penalty was imposed.
In the case of M/s Sandhya Drug Agency, a complaint was filed against many
drug dealers association for anti-competitive practices and abuse of dominant
position. The supply of drugs was stopped to the informant due to some political
differences between the informant and the trade associations. The drug dealers
association was directed to refrain from indulging in such anti-competitive
practices which violated section 3 of the Act. It also directed that the
practice of issuing NOC appointment of stockists, fixation of trade margins,
collection of product information service ("PIS") charges and boycott of
products of pharmaceutical companies must be discontinued. A penalty was imposed
by the CCI for violating section 3 of the Act.
All the above cases show how the trade associations indulged in anti-competitive
practices by not issuing NOC which led to the non-supply of drugs to the
Further, there have been cases such as the case of Varca Druggists and Chemists
& Ors. v. Chemist & Druggist Association, Goa  where the trade association
laid down the margins for wholesalers and retailers. CCI held that such
practices are anti-competitive and are against the interests of consumers.
CCI also ensures that mergers and acquisitions in the pharmaceutical and
healthcare sectors do not stifle the competition.
Mergers and Acquisitions
Mergers and acquisitions (M&A) also lead to anti-competitive practices as they
have the ability to create monopolies in the market. The merger control is dealt
with by CCI. CCI grants its approval to M&A deals only if it is satisfied that
the deal will not lead to a monopoly. For instance, initially, CCI raised
objections in the merger of Sun Pharmaceuticals and Ranbaxy stating that the
merger could be anti-competitive. However, the CCI allowed for the merger with a
condition that the companies must divest eight drugs altogether. This had to be
done to prevent concentration for the markets of those molecules. Therefore,
preventing any combination that could hurt competition in the pharmaceutical and
Further, CCI has also dealt with many cases wherein the question of dominance
has arisen. Dominant position thwarts competition and violates section 4 of the
Several pharmaceutical and healthcare giants are evidently in dominant position
as stated under section 4 of the Act. Although the dominance exerted by major
corporations is evident, it becomes difficult to establish the same in cities
where there are ample options available to the consumers. In the case of Shri
Tarun Patel v. Haria Lakhamshi Govindji Rotary Hospital
, CCI held that there
were other substitutes available, thereby not establishing the said hospital to
be in a dominant position.
Further, in the case of Shri Ramakant Kini v.
Hiranandani Hospital, the complainants argued that the said hospital had
contravened section 4 of the Act and denied market access. However, their
argument failed before CCI as they could not place on record the evidence to
establish the dominance of the said hospital.
However, CCI took a new approach in the case of Vivek Sharma v. Max Super
Speciality Hospital after realizing that it is difficult to establish
dominant position of the hospital. In the said case, CCI noted that although
there are several other super-speciality hospitals in Delhi, Max Super
Speciality Hospital is larger than the others in terms of size, resource and
research & development (R&D). Therefore, the said hospital was in dominant
position. This approach is a deviation from CCI's earlier approaches and has
made it easier to establish dominance in the healthcare industry.
Further, CCI, in October 2020, initiated a market study to study deep into the
issues identified in the policy note as enumerated before.
CCI's Market Study
On August 27, 2021, a multi-stakeholder workshop called "Competition Issues in
the Pharmaceutical Sector in India" was conducted wherein different issues were
deliberated. On 18th November, 2021, the report called market study on the
pharmaceutical sector in India was released based on the workshop ("market
It was observed at multiple instances that the same company had five to six
brands for the same formulation of medicine. Further, there was an enormous
price difference between brands of a particular generic formulation of different
companies. There are variations in prices between brands of the same company.
Also, the market leaders sell their drugs at a price higher than the companies
with lower market share.
Furthermore, there is a huge difference in prices of
branded generics in the private retail market and public procurement. 87% of
drugs sold in India are branded generics. Even the doctors prescribe branded
generics over generics which are low cost and functionally indifferent.
Furthermore, there is a huge difference in the prices of pure generics in public
procurement and branded generics in the retail market.
One set of stakeholders contended that the pharmaceutical companies foster
higher quality of certain brands and price-quality correlation through their
brand promotion measures, however, in reality there is no difference in quality
between different branded generics or between unbranded generics of the same
molecule. According to them, this perception hampered price competition and
allowed them to set high prices and indulge in price discrimination.
the other set of stakeholders believed that quality varied across drugs of same
molecules. They contended that since safety and efficacy were unobservable,
known clinical experience of physicians through their prescription patterns
reflect a preference for brands which could be of higher quality. Further, the
stakeholders argued that the difference in quality across drugs is due to the
non-uniform enforcement of quality standards across states.
It is recommended
that the existing quality standards must be uniformly and effectively
implemented throughout India. Further, in order to improve the quality
expectations of drugs, all drugs across geographies must be tested in a
periodic, systematic and scientific manner. It was also recommended that a
national digital drugs databank containing formulation wise approved
branded/unbranded drugs must be maintained to address the problem of information
asymmetry in consumers.
Although it is recommended to have public procurement of drugs owing to low
prices, the percentage of sub-standard quality drugs were found to be higher in
government distribution outlets.
Further, unbranded generics are not available in the private retail market in
India owing to the fact that doctors largely prescribe only branded generics
which lead to low demand for unbranded generic drugs in the domestic retail
market. Therefore, unbranded generics are available only in public health
Additionally, it was recommended that large scale public information campaigns
must be launched to create awareness among the consumers about the efficiency
and efficacy of generic drugs. Further, standard-compliant unbranded generic
drugs must be available in private retail markets to make them available to the
A positive aspect brought about by the market study is that the majority of the
stakeholders reported that the anti-competitive practices of mandatory NOC and
collection of PIS charges no longer exist owing to the impact of several of
CCI's orders with respect to the same.
Further, conflicts have always arisen while implementing IPR and the Act
simultaneously. While IPR creates patent monopoly, the Act aims to prevent
Interface Between IPR And Competition Act In The Pharmaceutical And
On one hand, under the IPR, patents are granted to innovators for their
innovations as per the reward policy. This is to encourage more and more
innovations and inventions. On the other hand, competition law aims at
preventing abuse of dominant powers, monopolistic power and anti-competitive
practices. A patent owner can charge above the marginal cost as they hold the
patents. This will limit competition to a large extent.
It is important to understand that both IPR and competition laws aim at the
welfare of the people. The laws must be implemented in such a way that there is
a perfect balance between the both. The United Nation Development Programme (UNDP) deliberated
on the interface of IPR and competition law in relation to access to medicines
in developing and underdeveloped countries.  It stated that it is difficult
to have a perfect balance between the two.
According to UNDP, depending on the
circumstances, the balance might shift to one side. In developed countries, the
balance ideally should be more towards the IPR. However, in underdeveloped
countries, the balance should go towards competition policies. This attitude
might keep changing depending on the change in socio-economic conditions.
Further, the Trade-Related Aspects of Intellectual Property Rights (TRIPS )
Agreement also allows the members of the World Trade Organisation (WTO) for
enacting suitable competition laws in their countries to address and thwart IPR-related
In absence of patent protection, 65% of pharma products would not have been
introduced. Therefore, it is safe to say that without patent protection,
innovators would not have been incentivized to research and innovate more
life-saving drugs. It is fair to grant the patent holders their patents for the
time, efforts, money, and energy they are investing in their research.
Nevertheless, there are provisions under the Patents Act, 1940 which provide
for accessing the patented products without the consent of the patent holder
under certain circumstances. Section 84 and section 92 provide for compulsory
licensing. Under section 84, an application for the grant of compulsory
licensing can be made after the expiry of three years from the date of issuance
of a patent.
Under the said section, an application for the grant of the compulsory license
must be made only three years after the date of grant of the patent.
The application can be made only in the following situations:
- When reasonable public requirements in relation to the patented
invention is not satisfied.
- When the public cannot access the patented invention at a reasonably
- When the patented invention has not been used in the territory of
Section 92 lays down specific situations where compulsory licenses can be
granted. They are:
- Compulsory licensing can be issued for exports under exceptional
- A country that does not have sufficient or no manufacturing power in the
pharmaceutical sector in order to address public health can be issued with a
- In cases of extreme urgency, national emergency, or public
non-commercial use, as long as a notification has been issued to the central
government, the Controller General of the Patent can issue a compulsory
license even without having received a formal application.
Therefore, using the above two provisions, patent monopoly can be prevented
during situations of extreme necessity.
Nonetheless, CCI is yet to face a case of patent monopoly in its hand. If at all
CCI faces such a case, it would be interesting to see what stance would be
Several recommendations have been made by various stakeholders in the policy
note and the market study to prohibit anticompetitive practices. It is
imperative to note that these are just recommendations and not laws which are
enforceable. Furthermore, it is evident that CCI has been tirelessly working
towards investigating and identifying several anti-competitive practices in the
pharmaceutical and healthcare sectors.
However, the recommendations made in the
policy note and market study cannot be incorporated in the Act as the
recommendations are specific to the pharmaceutical and healthcare sectors.
Although CCI has successfully controlled certain anti-competitive practices
indulged by the trade associations, there are several other anti-competitive
practices that are intrinsic to the said sectors and can be only resolved with
uniform and stringent sector-specific regulations. In addition to not being
uniform, the existing laws are not enforced well.
For instance, according to
rule 65 (11A) of the Drugs and Cosmetics Rules, 1945, the retailers/chemists
dispensing a prescription containing substances specified in Schedule H and
Schedule H1 or X are not allowed to supply any other preparation whether
containing the same substance or not, instead of what is prescribed. However, it
is noticed in the policy note and market study that brand substitution is
extensively followed by the retailers/chemists in order to get incentives from
such substituted brands.
CCI's efforts in highlighting the anti-competitive practices in pharmaceutical
and healthcare sectors must be appreciated. Its policy note and market study
have been eye openers. The nature of such anti-competitive practices in the
pharmaceutical and healthcare sectors is such that it could cost several lives.
The issues are integral to the very core functioning of the said sectors. It has
now become pertinent for the government to intervene and enforce a stringent
legislation to prevent malpractices in the pharmaceutical and healthcare
sectors. The government needs to ensure that every Indian has access to
medicines whenever necessary since a majority of the population still do not
have access to it.
- Issa, J., 2021. GBR - The World's Pharmacy: India's Generic Drug
Industry (Feb. 12, 2020),
- Patrick McMullan, Vamadevan S. Ajay, Ravi Srinivas, Sandeep Bhalla,
Dorairaj Prabhakaran & Amitava Banerjee Improving access to medicines via
the Health Impact Fund in India: a stakeholder analysis, Global Health
Action (Mar. 2, 2018), https://www.tandfonline.com/doi/full/10.1080/16549716.2018.1434935
- The Competition Act, 2002
- The Competition Act, 2002,§ 3
- The Competition Act, 2002, § 4
- The Competition Act, 2002, § 5
- Souvik Chatterjee, Nupur Anchlia and Smita John, Dealing With
Anti-Competitive Practices in the Indian Pharmaceuticals and the Health
Delivery Sector (2008), http://www.cuts-international.org/pdf/CCIER-3-2008.pdf
- Making Markets work for Affordable Healthcare, Competition Commission of
India, October 2018, https://www.cci.gov.in/sites/default/files/POLICY_NOTE.pdf
- Mani, S., 2022. India's Pharma Regulator Seeks Millions in Fines for
Overpriced Drugs (Dec 22, 2020), https://www.zenger.news/2020/12/22/indias-pharma-regulator-seeks-millions-in-fines-for-overpriced-drugs/>
- CCI imposes Rs 11,939 lakh fine on pharma firms in last 3 years (July 1,
- Market Study On The Pharmaceutical Sector In India Key Findings And
Observations 18-11-2021, https://www.cci.gov.in/sites/default/files/whats_newdocument/Market-Study-on-the--Pharmaceutical--Sector-in-India.pdf
- Pharmaceutical Industry: The Interface Between Competition Law And
Patent Law |(Aug. 9, 2016), https://www.legistify.com/blogs/view_detail/124-pharmaceutical-industry-the-interface-between-competition-law-and-patent-law/
- The Patents Act, 1940
- The Patents Act, 1940, § 84
- The Patents Act, 1940, § 92
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