COMPETITION LAW AND

PHARMACEUTICAL SECTOR
CHI RAG M AT HARANI
INTRODUCTION
•The Indian pharmaceuticals market is one of the largest in the world, both in terms of volume and
value

•Moreover, it is also one of the critical sectors in determining public health.

•With the enactment of the Indian Competition Act in 2002, India has become one of the newer
countries that have a robust competition regulation.

•The unique nature of the pharmaceutical markets, it is important to understand how competition law
applies to this sector.

•India currently imports close to 80% of its bulk drug requirements from China
 CCI and The PHARMACEUTICAL
INDUSTRY
•The Competition Commission of India was set up in 2003 subsequent to the passage of the Competition Act of 2002, which
was amended further in 2007 and 2012.
•The role of CCI is to eliminate practices having adverse effect on competition, promote and sustain competition, protect
interests of consumers and ensure freedom of trade in the markets of India.
•In addition CCI also required to give opinion on competition issues on a reference received from a statutory authority
established under any law and to undertake competition advocacy, create public awareness and impart training on competition
issues
•The CCI consists of a Chairperson and between 2 to 6 full-time members at all time, who are appointed by the Central Govt.

•If the CCI finds any party in contravention of the Competition Act, it is empowered to discontinue the alleged anti-
competitive practice, and impose a penalty that may not exceed more than 10 percent of the average of the turnover for the last
three preceding financial years
TWO MAJOR ISSUES BRODLY
1. COLLUSIVE PRACTICES among players in the healthcare supply chain
◦ Drug manufacture – doctors:
◦ Incentives for prescribing irrational combination
◦ Prescribing expensive brands
◦ Hospitals/doctors – diagnostics clinics:
◦ Usual practices of paying commission to the referring doctors

2. COERCIVE PRACTICES in the distribution and supply chain

◦ Instances of shortage of essential medicines on retail shelves after new DPCO was announced in early 2013
◦ Many wholesalers and distribution found that their margins were eroded and stopped distributing some of these
drugs
◦ Such practices prevent consumer access to affordable medicines
Cases followed by CCI
Santuka Associates Pvt. Ltd. vs All India Organization of Chemists and Druggists (AIOCD)

• This is more prominent case against the national level body. The other two were more or less identical but against smaller
regional associations

• AIOCD is the body of pharmacies across India having more than 0.75mn members

• Allegations against AIOCD for regularly indulging in following anticompetitive practices:

– Distribution tied with No Objection Certificate (NOC) for appointment of distributor/stockiest

– Mandatory Advertisement on Launch of New drugs

– Demanding high commissions

– such margins rarely passed onto consumers

– Boycotting firms not in agreement of above

CCI Order found AIOCD Guilty
1. Requirement of NOC by AIOCD creates a restraint on freedom of trade and has an effect on market
supply

2. Requirement of advertisement for launching a product in the markets is an additional and stricter
burden borne by drug manufacturers results in entry barrier and hence restrict supply of drugs in the
market

3. Agreement to fixed trade margins of the wholesalers and the retailers has the effect of directly or
indirectly determining the purchase or sale prices of the drugs in the market, thus reducing competition
Contd..,
4. Boycotting drug manufacturers is an illegal act having a farreaching effect on the distribution and
availability of drugs: denial of market access and non-availability

5. In view of the above anti-competitive practices, the Commission imposed a maximum penalty
(INRs 5mn or $1mn) on AIOCD (10 per cent of its turnover)
Issues in pharmaceutical market
•The first relevant issue in the pharmaceutical markets is the competition between the innovators and
the generic manufacturers.

•Some recent research shows that it is not necessarily the case in India everything else being equal
consumers prefer innovators brands over the domestic brands. There could be several reasons for the
consumer perception.

•Second, the difference between inter-molecular competition and intra-molecular competition needs to
be clearly differentiated, especially in the Indian context. This is because, unlike the more mature
pharmaceutical markets, India adopts a practice of branded generics. That is, in India, even the generic
medicine requires a brand name, unlike in the US, where the generic medicine sells purely on the
molecular name.
Central drug standard control
organization (regulatory authority)
The CDSCO of India is main regulatory body for the regulation of pharmaceutical, medical devices
and clinical trials

Head office is located in new Delhi and functioning under the control of DG of health services,
ministry of health and family welfare Govt of India

Function of CDSCO in center

◦ Approval of new drugs and clinical trials
◦ Import registration and licensing
◦ Licensing of blood banks, vaccines, and some medical devices
◦ Banning of drugs and cosmetics
◦ Testing of drugs by central Labs
Anti Competitive Agreements
Abbott/Geneva-Agreements between Branded and Generic Companies
•Abbott had a patent on Hytrin(Used to treat hypertension)

•In 1998, Abbott' s sales of Hytrinamounted to $542 million (over 8 million prescriptions) in the United
States.

•Abbottspatent on Hytrinwas nearing its expiry.

•Abbott projected that Geneva' s entry with a generic version of Hytrinwould eliminate over $185
million in Hytrinsales in just six months.
Anti Competitive Agreements
•Abbott paid Geneva approximately $4.5 million per month to keep Geneva' s generic version of
Abbott' s proprietary drug (Hytrin) off the U.S. market, potentially costing consumers hundreds of
millions of dollars a year.

•Geneva also agreed not to launch the generic version till another competitor in the market undertook to
do so.

•Such an agreement held anti competitive as the same prevents the entry of competitors
THANK
YOU