Mains Paper 2: Social Justice| Issues relating to development and management of Social Sector/Services relating to Health, Education, Human Resources.
From UPSC perspective, the following things are important:
Prelims level: E-pharmacies
Mains level: The news-card analyses the issues of cartelisation in pharma sector and how e-pharmacies will increase the competition leading to better prices.
Amid a slew of conflicting judicial decisions from different High Courts, the legality of e-pharmacies continues to be questioned by various trade associations such as the All India Organisation of Chemists and Druggists (AIOCD).
- E-pharmacies, which operate through websites or smartphone apps on the Internet, offer medicines for sale at a discount of at least 20% when compared to traditional pharmacists.
- The added convenience of home delivery of medicines to one’s doorstep is there.
- For scheduled drugs, patients can submit photographs of prescriptions while placing orders.
- The legal status of these e-pharmacies is not clear because the government is yet to notify into law draft rules that it published in 2018.
Opposition to e-pharmacies
- The fiercest opponents of e-pharmacies are trade associations of existing pharmacists and chemists.
- They argue that their livelihoods are threatened by venture capital-backed e-pharmacies and that jobs of thousands are on the line.
- These trade associations also spin imaginary tales of how e-pharmacies will open the door to drug abuse and also the sale of sub-standard or counterfeit drugs, thereby threatening public health.
Need for e-pharmacies to curb cartelisation
- The entry of e-pharmacies will have effect on lowering the price of medicine for Indian patients.
- Associations of pharmacists is one of rampant, unabashed cartelisation that has resulted in an artificial inflation of medicine prices.
- In a fully functional, competitive market, pharmacists would compete with each other for business.
- This competition could happen in the form of discounts or improving operational efficiency.
- This practice of two competitors colluding to fix the sale price and area of operation is called cartelisation and is illegal under India’s Competition Act.
- Over the last decade, the Competition Commission of India (CCI) has had to deal with several complaints alleging that trade associations of pharmacists are providing platforms for cartelisation.
Barriers in way of e-pharmacies
- The practice of requiring pharmaceutical companies to apply for a no-objection-certificate (NOC) from the regional trade association before they appoint new stockists in a region to sell a particular drug prohibits competition.
- By creating such artificial, extra-legal barriers to the free trade of medicines within India, these trade associations create huge distortions in the Indian market.
- In its recent policy note on “Making markets work for affordable healthcare”, published in October 2018, the CCI noted, “One major factor that contributes to high drug prices in India is the unreasonably high trade margins.”
- One of the culprits for this phenomenon identified by the CCI was “self-regulation by trade associations [which] also contributes towards high margins as these trade associations control the entire drug distribution system in a manner that mutes competition”.
Solutions Proposed by CCI
- As stated by the CCI in its policy note, “Electronic trading of medicines via online platforms, with appropriate regulatory safeguards, can bring in transparency and spur price competition among platforms and among retailers, as has been witnessed in other product segments.”
Where the state has failed, it is possible that venture capitalist backed e-pharmacists will succeed in bringing back competition to the retail drug markets in India. There is no reason for India to continue indulging trade associations that have no taste for competition or fair business practices.