CIRC in MEDIA - January 2014

Expediting National Competition Policy

Financial Express, January 27, 2014

By Pradeep S Mehta

The NCP can bring in a second wave of economic reforms, and fortunately there is a national consensus on this

Investment and competition are the two sides of a coin. The government is promoting investment seriously and is also addressing bottlenecks through the Cabinet Committee on Investment and a Project Monitoring Group. Many of the investment bottlenecks are due to entry barriers and thus promoting competition reforms can enable investment flows and immersion better and easier. Fortunately, the government is also considering competition reforms seriously and to oversee it by establishing a Cabinet Committee on Competition to be headed by the Prime Minister.

PM Manmohan Singh, speaking at the 3rd BRICS Competition Conference at New Delhi on November 21 last year, said: “Growth, development and poverty reduction are the most important challenges that our governments have to face. To meet these challenges, governments look for a sound architecture of policy in which beneficial effects of markets can be maximised by action to prevent market failure. The development of a sound Competition Policy is an essential element of such an architecture.”

The PM went on to say that state-owned or public sector enterprises (PSEs) are another challenge, because they have been sheltered from competition. “Several possible distortions can arise because of the advantages some PSEs have due to their government ownership. Competitive neutrality requires that the government does not use its legislative and fiscal powers to give undue advantage to its own business over the private sector.”

Alas, the huge bailout to Air India is an example of how the government engages in doublespeak. Not only that, but all travels on government account have to be done only on Air India, otherwise one has to wait for settlement of the travel bills for long if one has travelled at a lower cost by a private airline. I am a victim of that, as some of my travel claims, from Jaipur to Delhi or elsewhere, on work with the ministry of road transport & highways, have been pending for over two years. Not only that, a set of babus in the civil aviation ministry process applications from other government offices to give special leave for clearing the bills and the requesting government offices waste resources in making such applications and they, including my assistant, waste their time and money in following up for approvals and payment.

I wonder what the finance ministry is doing to cut down all this unnecessary expense, knowing that the approval will always be given. Paradoxically, whenever I have travelled for finance ministry’s meetings, they do not bother whether I flew by Air India or a private airline, and settled the bills across the table.

In order to address both the issues of competitive neutrality and unnecessary red tape, the ministry of corporate affairs has drafted a National Competition Policy (NCP), which, after a gap of some time, is now gaining traction. The Planning Commission has been advocating a competition policy since the 9th Five Year Plan was adopted in 1998. No wonder, India has slipped from 131 to 134 in 2013 ranking of the Ease of Doing Business and we continue to talk gibberish about economic growth, policy paralysis and what not.

The good news is that the young and dynamic corporate affairs minister, Sachin Pilot, has not given up hope. On the annual day function of the Competition Commission of India last year May 20, he called upon the government to adopt the NCP. At the BRICS event on November 19, close on the heels of the PM, he spoke about the same again: “The government of India has also been pursuing the idea of an NCP in order to promote economic democracy, entrepreneurship, employment, higher standards of living and an all-round development of the economy, benefiting both consumers and businesses. The Competition Policy focuses on ensuring competitive neutrality, cooperation in competition advocacy and enforcement as well as establishing a complementary relationship between the Competition Commission of India (CCI) and other sector regulators. The NCP also proposes a competition assessment of all the government laws, policies and regulations. This is expected to instil a competition culture in all sectors.”

The issue about resolving complementary relations between sector regulators and CCI is another important dimension of the Competition Policy and related laws. Let me give you an example of the same. In January 2011, Reliance brought forward a complaint against the PSU oil companies for cartelisation in the aviation fuel sector before the CCI. The Delhi High Court injuncted the proceedings at CCI stating that oil sector issues have to be taken up before the Petroleum & Natural Gas Regulatory Board, which is empowered to promote competition in the sector. In another similar case of oil PSUs cartelising in fuel retail, the same High Court once again stayed the proceedings on exactly the same ground, without even a detailed speaking order. Both these stays are temporary and yet to be resolved finally. What the High Court could not appreciate is that the PNGRB Act requires the board to promote competition, as the whole economic governance system should do, but it does not empower them to check anticompetitive practices. Only the CCI is empowered to check anticompetitive practices in Indian economy.

The problem has been addressed by a proposed amendment in the Competition Act, 2002, asking for mandatory consultations between the CCI and all sector regulators. Such a provision will enable smoother resolution of overlap conflicts and avoid forum shopping. The Bill is pending before Parliament.

Addressing red tape is another major measure in the NCP. The finance ministry, among others such as the Planning Commission, is seriously engaged in making it easier to do business in India, which is affecting growth adversely. In expressing the mind of the finance ministry, on November 18, Arvind Mayaram, secretary, Economic Affairs, while addressing the opening session of the CUTS-CIRC 3rd Biennial Conference on Competition Challenges for the Developing Countries, said: “We are looking at several non-legislative measures such as National Competition Policy to bring in the second wave of economic reforms in the country.”

Indeed, adoption—and implementation—of the NCP can bring in a second wave of economic reforms in the country, and fortunately this matter enjoys a national consensus. So whichever government comes in after the summer, the growth process will take a leap through better competition in the economy.

The author is secretary general of CUTS International.

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Don’t carry on, doctor!
The Hindu Business Line, January 17, 2014

By Pradeep S Mehta

The nexus between the pharma industry and doctors needs to be broken

A doctor friend and his wife said that a pharma company had paid for their recent trip to to Bali. This was standard practice, the doctor said, rather nonchalantly. The idea, he explained, was to feel sufficiently incentivised to prescribe their medicines.

I did not ask for the name of the company. But in future GlaxoSmithKline (GSK) will probably stop paying for his and his wife’s holidays.

Britain’s largest pharmaceutical company, GSK, has just said it will stop offering allurements to doctors to promote their drugs. It will also stop linking the bonuses of sales staff to the number of drugs they sell. This is a much appreciated initiative from a leading player in an industry that has for long been accused of unethical sales and marketing practices by governments and regulators.

Perhaps GSK adopted such a policy because it was hammered by Chinese authorities for bribing doctors, hospitals and government officers. GSK was accused of paying $490 million to various travel agencies, using them as intermediaries to facilitate bribes to doctors and officials.

Last year, GSK paid the US government $3 billion to settle charges of illegal drug promotion, failure to report safety data and false price reporting. It was the biggest fine paid by a drug firm in US history.

In the past five years, leading pharma companies, including GSK, Pfizer, Johnson & Johnson, AstraZeneca, Merck, Abbot, Eli Lilly and Allergen, have paid about $13 billion in fines to settle charges of misleading marketing and bribery of doctors to get their drugs prescribed

Indian Scenario

This unholy nexus between the pharma industry and medical professionals has been debated in India for several years. In a survey carried out by CUTS International in 1995, over 2,000 prescriptions were collected by consumer groups of West Bengal, Rajasthan, Gujarat, Maharashtra, Tamil Nadu and Andhra Pradesh.

The survey revealed that there was a gross tendency to prescribe useless medicines, like tonics, restoratives, vitalisers and vitamin formulations. Sixty per cent of the prescriptions were considered to be irrational in various ways. In another CUTS study in select districts of Assam and Chhattisgarh in 2010, it was found that a mere 20 per cent of consumers surveyed obtained medicines from public hospitals, as doctors in these hospitals prescribed expensive drugs of certain companies which were available only in private chemist shops.

Promotional practices are mainly of three types: information and brand reminders, incentives and inducements to prescribe, and cash payment and bribes to increase sales.

While it is illegal for doctors in India to accept cash gifts, enforcement of the law is rare. Further, there is no direct regulation of the pharmaceutical companies which offer bribes to healthcare providers. Last year, the Department of Pharmaceuticals introduced a code for pharmaceutical marketing practices, but it is voluntary in nature.


According to the Parliamentary Standing Committee on Health and Family Welfare, India’s top drug regulatory agency, the Central Drugs Standard Control Organisation (CDSCO), indulged in serious irregularities in the drug approval process. CDSCO, which oversees clinical trials, was accused of approving medicines from companies without requisite clinical trials and without seeking expert medical opinion. This appears to be a classic case of regulatory capture.

Self-regulatory measures are crucial for an industry battling scandals over its sales marketing practices. In Saudi Arabia, when a policy on prescription audit was announced in late 1980s, irrational prescriptions fell by 40 per cent.

(The author is secretary-general and chairman, CUTS International. Vikash Batham of CUTS contributed to this article.)

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