ANTITRUST ISSUES IN THE PHARMACEUTICAL INDUSTRY
The Indian pharmaceutical sector presents a range of practices that militate against competition, largely due to the practices of manufacturers and distributors.
According to a report, the majority of CCI interventions have targeted the pharmaceutical distribution chain, notably focusing on the All India Organization of Chemists and Druggists (AIOCD) and various state-level associations of chemists and druggists.
In a 2018 paper, it was noted that the CCI has actively curbed abuse of dominance and cartel-like behaviours among associations of chemists, druggists, stockists (distributors), wholesalers, and manufacturers, thus mitigating potential adverse impacts on public health. A 2014 press release from the CCI identified several anti-competitive practices among associations at different levels, including:
- Mandating No Objection Certificates or letters of consent for opening chemist shops or being appointed as stockists, distributors, or wholesalers.
- Imposing compulsory payment of Product Information Service (PIS) charges by pharmaceutical firms or manufacturers to associations for the release of new drugs or formulations.
- Setting trade margins at various levels of drug/medicine sales.
- Issuing instructions to limit discounts on drug sales at retail or wholesale levels.
- Calling for boycotts against enterprises by associations for non-compliance with their instructions.
CASE LAWS:
In Rohit Medical Stores v Macleods Pharmaceutical Limited and Ors (2015), the Himachal Pradesh Society of Chemists and Druggists Alliance (HPSCDA) was penalized for imposing conditions like obtaining No Objection Certificates (NOCs) before stockist appointments.
In M/s Bio-Med Private Limited v. Union of India & others (2015), the CCI imposed a fine of approximately INR 64 crore on GlaxoSmithKline Pharmaceuticals Ltd. and Sanofi Pasteur India for collusive bidding and plotting to charge higher prices in government tenders for meningitis vaccines for Hajj pilgrims. However, this order was later set aside by COMPAT, and the decision was upheld by the Supreme Court of India.
In M/s Arora Medical Hall, Ferozepur v. Chemists & Druggists Association, Ferozepur (2014), the Competition Commission of India (CCI) penalized the association and its office bearers for restricting the supply of drugs in Ferozepur district of Punjab. The association imposed requirements such as obtaining NOCs and Lines of Credit for distributorship and violating competition laws.
In M/s Santuka Associates Pvt. Ltd. v. All India Organization of Chemists and Druggists and Ors (2013), the CCI found the All India Organization of Chemists and Druggists (AIOCD) guilty of abusing its dominant position by limiting the supply of pharmaceutical drugs in India. The organization was penalized for various anticompetitive practices, including controlling stockist appointments, fixing trade margins, collecting PIS charges, and boycotting products.
In Nadie Jauhri v Jalgaon District Medicine Dealers Association (JDMDA) (2019), the Competition Commission of India (CCI) imposed a penalty of INR 80,185 on JDMDA and its office bearers for mandating pharmaceutical companies to pay Product Information Service (PIS) charges. This condition was deemed anti-competitive as it restricted drug supply in the market, violating Section 3(3)(b) read with Section 3(1) of the Competition Act