CCI proposes regulatory framework for affordable healthcare
25 October 2018
The Competition Commission of India (CCI) has identified key issues hurting competition and suggested ways to better regulate the healthcare and pharmaceuticals sector through a system that would allow patients make choices through informed product differentiation.
In a policy note shared with the ministry of corporate affairs, ministry of health and family welfare, the Department of Pharmaceuticals and NITI Aayog, the regulator has suggested that in view of the incentive-based referral system that pervades the healthcare landscape, issuing periodic validated data by hospitals relating to mortality rate, infection rate, number of procedures etc could be made public so as to help patients make informed choice.
CCI has suggested that the in-house pharmacies of super specialty hospitals that are completely insulated from competition as inpatients are typically not allowed to purchase any product from outside pharmacies must be replaced by a regulation that mandates hospitals to allow consumers to buy standardised consumables from the open market.
To end exploitation in the diagnostics area, the regulator has suggested uniform standards for all accredited diagnostic labs in terms of infrastructure, equipment, skilled manpower etc for getting accreditation. This, it said, will ensure the same degree of reliability and accuracy of test results across labs.
To enable patients opt for better healthcare, the CCI has suggested a regulatory framework that ensures and governs portability of patient data, treatment record and diagnostic reports between hospitals. Absence of such a regulation 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,” it said.
The CCI also suggested a uniform regulatory regime across the country by removing the multiplicity of regulators governing the pharmaceutical sector at the centre and states level, which has resulted in multiple standards of same products and also different levels of regulatory compliance requirements.
A mechanism may be devised under the aegis of the CDSCO to harmonise the criteria/processes followed by the state licensing authorities to ensure uniformity in interpretation and implementation, it added.
The policy note also calls for a mandatory time-bound approval of new drugs along with publication of detailed guidelines governing each stage of new drug approval process.
Finally, the regulator noted two other major issues that complicate public health delivery system and thus warrant policy response, including: (i) shortage of healthcare professionals in the country owing inter alia to high cost of medical education and (ii) inadequacy in health insurance.
The CCI has observed that information asymmetry in the pharmaceutical/ healthcare sector significantly restricts consumer choice. In the absence of consumer sovereignty, various industry practices flourish which have the effect of choking competition and are detrimental to consumer interest. Such practices may not always violate the provisions of the Act, but they create conditions that do not allow markets to work effectively and healthy competition to drive the market outcomes.
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, CCI noted.
The issues identified and recommendations suggested by the stakeholders have been documented in a Policy Note by the Commission titled ‘Making Markets Work for Affordable Healthcare’.
One 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, CCI noted.
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.
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.
The CCI noted that addressing quality perception is the main cause behind proliferation of branded generics. Worldwide, generic drugs are seen as a key competitive force against the patent-expired brand name drugs marketed at monopoly prices. In India, however, even the pharmaceutical market is dominated by ‘branded generics’ which limit generic-induced price competition. 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 stated in the policy note.