BackCCI orders drug trade body to curb anti-competitive practices
CCI directs All India Organisation of Chemists and Druggists to desist from anti-competitive practices that affect supply of drugs
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Mumbai: The Competition Commission of India (CCI) has directed the All India Organisation of Chemists and Druggists (AIOCD) to desist from anti-competitive practices that affect the supply of drugs.
The CCI order on Wednesday directed AIOCD, a drug trade lobby body that controls over 700,000 retail and wholesale shops, and its state affiliates to file an undertaking that “the practices carried on by their members on the issue of grant of NoC (no objection certificate) for appointment of stockists, fixation of trade margins, collection of Product Information Service (PIS) charges and boycott of products of pharmaceutical companies have been discontinued within 60 days from the date of receipt of this order".
The CCI verdict followed a petition filed by Peeveear Medical Agencies, a wholesale medical distributer in Kerala, against AIOCD and its affiliates on limiting drug supply. AIOCD has been collecting ₹ 2,000 per product as PIS from manufacturers in each state to permit the launch of new medicines.
“I am going through the report. The basic issue is of getting better trade margins," said J.S. Shinde, president of AIOCD, reacting to the CCI order.
“Appointment of stockist is the prerogative of pharma companies. But NoC is essential so that we know them well, as it is on the retailer to prove his innocence if something goes wrong with the product," he added.
AIOCD, which has been battling drug companies over better margins for more than two decades, intensified the fight after the introduction of the new drug price control (DPCO) regime that further affected its margins.
DPCO was made effective in July, and regulates prices of 348 drugs categorized under the National List of Essential Medicines.
Prior to this, prices of only 74 molecules were regulated in India.
“We are happy that the drugs have become more accessible to people due to the new DPCO. But pharma companies reduced our margins without any notice," said Shinde.
“The total reduction in margin is to the tune of 8.81%," he added.
There are those who are happy with the CCI directive.
“It is a relief to patients as well. AIOCD’s anti-competitive practices often affect supply of essential medicines in the market in spite of continued production by drug companies," said a pharmaceutical consultant with a multinational consultancy who did not want to be named.
Supply was impacted as AIOCD using its dominant position to determine the margin and supply, affecting the profitability of drug companies, the pharmaceutical consultant added.
Pharma companies, on their part, had raised concerns over profitability erosion and drug supply disruption.
Glaxo SmithKline Pharmaceuticals Ltd, the Indian unit of British drug maker GSK Plc, said in September that its business was affected because of the new price control regime and a segment of the trade channels not buying inventory following a strike called by them demanding high trade margin.
GSK posted a 33.7% drop in profit in the September quarter because of a decline in sales. On Wednesday, the company informed that trade has resumed in November.
According to pharma market researcher IMS Health India, lower stock intake by distributors and retailers is seen as one of the major reasons for the ₹ 75,933 crore local drug market, which was growing at an average 12-13% in January-July, to drop to a low 4.9% in August and further to 1.8% in September.
C.H. Unnikrishnan contributed to this story.
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