Photo: Pradeep Gaur/Mint
Photo: Pradeep Gaur/Mint

Branded generics dominate drug market: CCI

CCI has called for regulation that mandates hospitals to allow consumers to buy standardized consumables from the open market.

New Delhi: The Indian pharmaceutical market is dominated by ‘branded generics’ limiting generic-induced price competition, when globally generic drugs are perceived as key competitive force against the patent-expired brand name drugs marketed at monopoly prices, a policy note issued by Competition Commission of India (CCI) on Wednesday said.

The fair trade watchdog pointed out that the branded generic drugs enjoy a price premium owing to perceived quality assurance that comes with the brand name. “Quality consideration may be a reason behind the prescription of branded generics by doctors. 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," CCI said in its note.

The policy note titled ‘Making Markets Work for Affordable Healthcare’ also highlighted that a major factor that contributes to high drug prices in India is the unreasonably high trade margins. “The high margins are a form of incentive and an indirect marketing tool employed by drug companies. Further, self-regulation by trade associations also contributes towards high margins as these associations control the entire drug distribution system in a manner that reduces competition," the policy note said.

The watchdog also noted that the in-house pharmacies of super specialty hospitals are completely insulated from competition as inpatients are typically not allowed to purchase any product from outside pharmacies. This calls for regulation that mandates hospitals to allow consumers to buy standardized consumables from the open market.

Based on the observations, the CCI has made recommendation that the regulatory apparatus must address the issue of quality perception by ensuring consistent application of statutory quality control measures and better regulatory compliance.

“Unless the quality of drugs sold in markets can be taken to be in conformance of the statutory standards regardless of their brand names, generic competition in the true sense of the term cannot take off. The practice of creating artificial product differentiation for exploitation of consumers may be addressed through a one-company-one drug-one brand name-one price policy," the note said.

“Electronic trading of drugs, with appropriate regulatory safeguards, could be another potent instrument for bringing in transparency and spurring price competition among platforms and among retailers, as has been witnessed in other product segments," it said.

In its recommendations, the CCI has said that all accredited diagnostic labs should meet the same quality standards in terms of infrastructure, equipment, skilled manpower, etc. for getting accreditation. This will ensure the same degree of reliability and accuracy of test results across labs.

The policy note has been shared with the Ministries of Corporate Affairs, Health and Family Welfare as well as Department of Pharmaceuticals and NITI Aayog.

Emphasizing on putting in electronic data systems in place, the CCI stated that there is no regulatory framework that ensures and governs portability of patient data, treatment record, diagnostic reports between hospitals. This acts as a constraint for patients in switching from one hospital to another and creates a lock-in effect. Portability of patient data can help ensure that a patient is no longer locked into the data silos and do not bear additional cost for switching medical services and that doctors/hospitals can have timely access to patient data.