In its recent policy note on affordable healthcare (Making Markets Work for Affordable Care, October 2018), the Competition Commission of India (CCI) has picked out four issues that it deems, in its wisdom, as important, but its prescriptions to these are problematic. The first issue focuses on the enormous trade margins in the pharmaceutical market and attributes them to intermediaries in the trade. However, intermediaries in the pharma trade do not have much to do with this laissez faire. The MRP (maximum retail price) is printed by manufacturers based on their perceptions of what they think the market can take. High MRPs, in turn, are because of a lack of price regulation which, according to the note, is a “suboptimal regulatory measure”. It is suboptimal by design. The current DPCO 2013 (Drugs Price Control Order) covers less than 11 percent of the pharma market of more than ₹1.2 lakh crore. The policy note does not address the prevalence of high margins validated by the high ceiling prices due to the market-based ceiling price methodology.
The solution proffered in the note — public procurement and more e-pharmacies — does not solve the problem, especially when public health facilities are in decay in most States and privatized healthcare is the dominant model of care. The second issue involves the “quality perception” of “branded generics”. And as the note would have it, the “the root cause of brand proliferation is the trust-deficit in the regulatory apparatus for licensing and inspection, which needs to be addressed through consistent application of statutory quality control measures across states and better regulatory compliance.” This is partially correct. The recommendation for the trust deficit alluded to — “effective and uniform quality control of drugs and one-company-one drug-one brand name-one price policy” — is not even remotely a solution to brand proliferation nor can it prevent the same drug being sold by different companies at widely varying prices.
No choice, really
The third issue raised by the note is vertical arrangements in healthcare services and the lack of transparency. The recommendation is, “strong regulatory framework ensuring transparency, data portability and standardization of diagnostic labs.” The note recommends, among other things, “mandatory declaration of vital data such as mortality rate, infection rate, etc., by the hospitals” to help consumers make an informed choice. Mortality and infection rate? Don’t people know this in a sense — which hospital you come out worse than when you get into? And how can this help in informed choice when the choice is between treatment in bad hospitals and none at all? Why not insist on a price cap on all medical procedures, diagnostic tests and medical devices and consumables? And standard treatment guidelines at least for routine diseases — the treatment protocol and prescription is more or less the same — as well as insist on adoption of an appropriate Clinical Establishments Act?
Finally, the note talks of regulation of the pharmaceutical sector and its competition. In India “there are multiple regulators governing the pharmaceutical sector” as a result of which “implementation of regulations is not uniform across the country. This has resulted in multiple standards of same products and also different levels of regulatory compliance requirements….” Almost every sentence in this is problematic. India has one law, the Drugs and Cosmetics Act. The implementation is non-uniform because the regulators, with few exceptions, tend to be lax and at heart, rent collectors, from top to bottom. No amount, as recommended in the note, of “harmonization of processes” is going to solve the problem. The law anyway, being singular in India, stands harmonized. Health and pharma markets are congenitally asymmetric and come with built-in market failure. No amount of straightening out the asymmetry, like a dog’s tail, will make competition ‘work’. The problem is not just one of inadequate competition but the right regulation and political will that takes market failure in its stride and delivers healthcare at the lowest prices, preferably free through the public sector.
The writer S. Srinivasan is affiliated with the All India Drug Action Network (AIDAN) and LOCOST, Vadodara, a not-for-profit maker of essential medicines. – The Hindu BusinessLine