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Editorials/Opinions Analyses For UPSC 20 November 2021

Contents

  1. CCI market study on pharma sector

CCI market study on pharma sector

Context:

In a recent study the CCI found that the market for generic drugs is driven by brand competition instead of price competition despite such drugs being functionally and chemically identical.

Relevance:

GS-III: Industry and Infrastructure

Dimensions of the Article:

  1. Introduction
  2. What are the key findings of the CCI?
  1. What is being done regarding pharmacy sector in India?
  2. Way Forwards recommended by the CCI
  3. Conclusion

Introduction

  • India is often referred to as ‘the pharmacy of the world’ and this has been proved true especially in the ongoing Covid-19 pandemic when India continued to export critical lifesaving medicines to needy countries even during the countrywide lockdown.
  • However, despite these achievements, it is a matter of concern that our country is critically dependent on imports for basic raw materials, viz. Bulk Drugs (Key Starting Materials (KSMs)/ Drug Intermediates (DIs) and Active Pharmaceutical Ingredients (APIs)) that are used to produce some of the essential medicines.
  • Similarly, in medical devices sector, our country is dependent on imports for more than 85% of its requirements of medical devices.

What are the key findings of the CCI?

  • The CCI found that the market for generic drugs is driven by brand competition instead of price competition despite such drugs being functionally and chemically identical. Generic drugs are chemically identical to drugs that once had patent protection.
  • Pharmaceuticals including generic drugs account for about 43.2 per cent of out of pocket healthcare expenditure in India according to the CCI study and about 62.7 per cent of the total health spending in the country.
  • The study concluded that brand differentiation in terms of a perception of different levels of quality and trade margins offered to incentivise chemists were key drivers of brand competition in India’s markets for generics.
  • The study concluded that brand differentiation in terms of a perception of different levels of quality and trade margins offered to incentivise chemists were key drivers of brand competition in India’s markets for generics.
  • The CCI also highlighted that the perception of difference in the quality of drugs by different manufacturers also feeds into brand differentiation
  • The report noted that other manufacturers focus on increasing sales volume bidding up trade margins for retailers thereby incentivising them to push for the sale of their brands.
  • The commission also took note of the rising market share of online pharmacies and concerns around the concentration of patient data raised by brick-and-mortar pharmacies.

What is being done regarding pharmacy sector in India?

  • The Government of India has approved four schemes, two each for Bulk Drugs and Medical Devices parks.
  • The list of products contained in the scheme guidelines will enable domestic production of more than 50 bulk drugs.
  • Financial incentives will be given to manufacturers selected under the scheme as a fixed percentage of their domestic sales of the lister products manufactured locally with required level of domestic value addition.

Scheme for promotion of Bulk Drug Parks

  • The scheme envisages creation of 3 bulk drug parks in the country.
  • The grant-in-aid will be 90% of the project cost in case of North-East and hilly States and 70% in case of other States.
  • The creation of a centre of excellence is also envisaged to enable an ecosystem for Research and Development.

Production Linked Incentive (PLI) scheme for promoting domestic manufacturing of Medical Devices

The scheme intends to boost domestic manufacturing of medical devices in four target segments by giving financial incentives on sales.

Four target segments are:

  1. Cancer care / Radiotherapy medical devices
  2. Radiology & Imaging medical devices (both ionizing & non-ionizing   radiation products) and Nuclear Imaging devices
  3. Anaesthetics & Cardio-Respiratory medical devices including catheters of Cardio Respiratory Category & Renal Care medical devices
  4. All Implants including implantable electronic devices

Way Forwards recommended by the CCI

  • The report stated that effective price competition in generics can benefit consumers and improve access to affordable healthcare.
  • The CCI noted that the enforcement and interpretation of quality regulations was not uniform across states and different regulatory and testing capacities had led to different quality standards being followed.
  • The CCI also recommended and increase in the frequency of testing of drugs and in the capacity of drug testing labs.
  • The CCI also recommended that a National Digital Drugs Databank be created and made available to regulators, industry, physicians and consumers to address information asymmetry in the sector.

Conclusion

  • It is expected that the various schemes implemented by the Government will make India not only self-reliant but also capable of catering to the global demand for the selected bulk drugs and medical devices. These schemes along with the liberal FDI policy in these sectors and an effective corporate tax rate will give a competitive edge to India in the selected products vis-à-vis other economies.
  • This is a golden opportunity for the investors since incentivisation to industry and world-class infrastructure support simultaneously will help in bringing down the cost of production significantly.

-Source: Indian Express

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