Patients pay for high margins of pharma firms

Patients in India end up paying more for medicines and all kinds of treatment as prevailing conditions do not allow the market to function effectively, says a report 

By Kundan Pandey
Published: Monday 29 October 2018
Generic medicines are seen as an affordable solution for patients who cannot afford branded ones. Credit: Getty Images

The Competition Commission of India (CCI), in a policy note published on October 24, says that information asymmetry in the pharmaceutical/healthcare sector significantly restricts consumer choice resulting in them paying higher for treatment. The note was based on 52 major complaints received in the last nine years by CCI. 

“In the absence of consumer sovereignty, various industry practices flourish which have the effect of choking competition and are detrimental to consumer interest,” the note says.

Interestingly, CCI observed that these practices may not always violate the provisions of law, but create conditions that do not allow markets to work effectively. CCI, the market watchdog, finds that the major factor leading to high drug prices in the country is unreasonably high trade margins. It is because of incentives or indirect marketing tools used by drug companies.  

The report also says that instead of controlling malpractices, self-regulating trade associations are contributing towards high margins. They control the entire drug distribution system in a way that reduces competition.

Generic medicines are seen as an affordable solution for patients who cannot afford branded ones. But in India, corporates have found another way to make the situation worse for patients. In the name of ensuring quality, these pharmaceutical firms have brought braded generics. Doctors generally prescribe these branded medicines, says the CCI, adding that quality might be the reason.

However, there is no system to ensure whether these branded generics are better than the normal generic medicines. In CCI’s language, “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”.

Talking about the in-house pharmacies of hospitals, the CCI says that patients are not allowed to purchase medicines from outside. As a result, they have little choice but to purchase costly medicines. The watchdog recommends that there should be regulations where hospitals have to change the system and consumers can purchase medicines and standardised consumables from the open market.

A similar crisis comes when a patient wants to move from one hospital to another for treatment. She/he cannot shift because there is no regulatory system to facilitate a patient’s data, treatment record and diagnostic reports between hospitals. It creates a lock-in effect, says the CCI.

“Portability of patient data can help ensure that a patient is no longer locked into data silos and does not bear additional cost for switching medical services and that doctors/hospitals can have timely access to patient data,” says the report.

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