Chemists’ body fined Rs. 50 crore for holding pharma cos to ransom

Mumbai, 3 Jan 2014: The Competition Commission of India has fined the All India Organisation of Chemists and Druggists (AIOCD) Rs 50 crore for using its control over chemists across the country to dictate terms to pharma companies on pricing and distribution. The Competition Commission order issued in December is being seen as the first blow to the cartelisation of AIOCD, which had been using its distribution muscle to force pharma companies to set aside higher margins for medicines, in the process pushing up retail prices of drugs and hurting consumers. The AIOCD also imposed its choices on pharma companies in appointing distributors and stockists across the country and stalled launch of new drugs unless the companies subscribed to its Product Information Service, which is nothing but a booklet listing new products introduced in the market.The Competition Commission order said the AIOCD's activities were in violation of Competition Act, 2002, which protects businesses against unfair trade practices, especially those aimed at building monopolies. The AIOCD is the sole apex organisation of pharmacy shops in the country and has 7.5 lakh members. While a 6-member Competition Commission bench asked the AIOCD to give an undertaking that it would put a stop to these illegal activities, the bench refrained from imposing any penalty. But in a separate order, Justice (retired) SN Dhingra, imposed a penalty of Rs 50 crore on AIOCD, saying that the chemist body had ignored similar directives issued in the past. AIOCD president J S Shinde on Friday said he was aware of the CCI bench order. "The matter is being pursued by our lawyers and we will file an undertaking within the time stipulated by the commission," he said. Shinde, however, claimed that the separate order issued by one of the bench members imposing a fine of Rs 50 crore was not applicable. "Only the order passed by the majority bench will be binding on us." The commission has asked AIOCD to 'cease and desist' from its practice of making it mandatory for drug manufacturers to appoint only those stockists who have a no-objection certificate issued by it. It also directed that AIOCD should not get involved in fixing trade margins or collect of Product Information Service charges from pharma companies. The Food and Drug Administration, which regulates manufacturing and sale of medicines in the state, described the Competition Commission's order as path-breaking. "What the AIOCD was doing was anti-consumer. Under the drug price control order, such practices are illegal. We had pointed this out two years ago and had even registered criminal cases against more than a dozen drug manufacturers," FDA chief Mahesh Zagade told Mumbai Mirror on Friday. The CCI has now asked the pharmacists' body to give an undertaking within 60 days confirming that above 'anti-competitive' practices have been discontinued. The body has also been asked to write to the Organisation of Pharmaceutical Producers of India, and the Indian Drug Manufacturers Association that they do not need the AIOCD NOC to appoint new stockists and that manufacturers, stockists and wholesalers are free to offer discounts to consumers. The Competition Commission action was triggered by a complaint filed by Peeveear Medical Services, a Kerala-based pharmaceuticals distributor. Peeveear had applied to Janssen Cilag Pharmaceuticals in 2010 for distributorship. The manufacturer, after completing all formalities, appointed Peeveear as its distributor in March 2011. But in April, the manufacturer discontinued supply of drugs to Peeveear after informing it by an email that this was being done as the documents submitted by the firm were not authenticated by AIOCD. Peeveear Medical Services then moved the commission alleging that "AIOCD was misuing its dominant position by imposing unfair and discriminatory conditions which limited / denied market access to genuine distributors unless they submit to its diktats." The commission asked its director-general to probe the allegations and submit a report. The report, submitted on December 29, 2011, confirmed that AIOCD issued NOC to pharma companies for appointing new distributors, although there was no such legal provision. The report also observed that AIOCD's say in fixing trade margin was institutionalised in MoUs signed between the chemists' association and pharma companies. AIOCD at times resorted to pressuring companies to stop supplies to retailers who engaged in anti-association activities.

Mumbai Mirror