CCI blames unreasonable trade margins for high drug prices

Unreasonably high trade margins of drug companies are the primary cause of high drug prices in India, the Competition Commission of India (CCI) said in a policy note on affordable healthcare.

The fair-trade regulator in the paper, ‘Making markets work for affordable healthcare’ said high margins are a form of incentive and an indirect marketing tool employed by drug companies. The regulator has also blamed drug associations saying they control the entire drug distribution system in a manner that reduces competition.

The CCI also prescribed various ways to reduce the anti-trade practices in the policy paper.

“Efficient and wider public procurement and distribution of essential drugs can circumvent the challenges arising from the distribution chain, supplant sub-optimal regulatory instruments such as price control and allow for access to essential medicines at lower prices,” a government statement, quoting the policy note, said.

The CCI has suggested that electronic trading of drugs with appropriate regulatory safeguards could be another potent instrument for bringing in transparency and spurring price competition among platforms and retailers.

Practices restricting competition

The CCI has till now probed 52 cases pertaining to the pharmaceutical and healthcare sector. In the note, the regulator said various industry practices choke competition but do not violate the competition law. “The response to these issues can, in many instances, take the form of appropriate regulations that can pre-empt market-distorting practices and help create pro-competition conditions. In pursuance of the same, a series of initiatives has been taken up by the CCI over the years in the pharma and healthcare sector,” the statement said.

On regulation and competition, it said because of multiple regulators governing the pharmaceutical sector at the central and state levels, implementation of regulations was not uniform across the country.