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Karnataka Chemists & Druggists Association under CCI scrutiny again

LiveMint logoLiveMint 03-03-2017 Shreeja Sen

New Delhi: The Competition Commission of India (CCI) has found the Karnataka Chemists and Druggists Association (KCDA) to be indulging in anticompetitive practices through its guidelines which create barriers to the entry of new drugs in the state.

The antitrust regulator directed KCDA to not insist on the requirement of a no-objection certificate (NOC) from the association for appointment of stockists and asked the body to desist from fixing trade margins for retailers and wholesalers of drugs.

The order dated 2 March was put up on CCI’s website on Friday.

This is the second time that the association has come under the antitrust regulator’s scrutiny.

The complaint before CCI was filed by Belgaum District Chemists and Druggists Association (BCDA) in 2009. Some of its members were refused a supply of essential medicines from Abbott India and Geno Pharmaceuticals as they did not have the required NOC from KCDA or the All India Organisation of Chemists and Druggists (AIOCD).

The CCI director general, probing the issue, found that two conditions were imposed—a new stockist required a no-objection certificate from the state chemists and druggists association; and pharmaceutical companies had to pay a product information service (PIS) charge to the association to introduce a new drug in a territory.

The CCI found both the NOC and mandatory collection of the PIS charge to be anticompetitive in nature.

“Where product information service charge is collected as a mandatory prerequisite to launch a pharma drug in a particular territory, it becomes an obstacle for entry of the drug into the market,” the commission noted, adding that the NOC practice also restricted entry of new stockists, limiting supply of medicines in the market.

On the issue of fixing trade margins of wholesalers and retailers by the KCDA, the CCI said that this was only “an attempt to discipline the price competition amongst wholesalers at one end and amongst retailers on the other”.

“Elimination of such competition restricts the freedom of wholesalers and retailers in deciding the price at which they have to sell pharmaceutical products to their customers,” the commission said in its 36-page order.

In August 2016, the CCI imposed a penalty of Rs8.6 lakh on KCDA on the same grounds of restrictive policies. The Competition Appellate Tribunal in December, however, set aside this penalty and the finding of anticompetitive activity against the association.

The CCI, in its March order, clarified that any repeat of the anticompetitive activities on KCDA’s part would be “taken seriously and proceeded with” by the commission.

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