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Assessing Competition Impediments in Indian Pharmaceutical & Agriculture Marketing Sector

This paper evaluates the distortions in competition caused by government policies in the agricultural produce and pharmaceutical sectors in India, and proposes reforms to promote competition.

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Assessing Competition Impediments in Indian Pharmaceutical & Agriculture Marketing Sector

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  1. Assessing Policy based Competition Impediments in Pharmaceutical and Agriculture Product Marketing Sector in India CUTS International Swati Thapar, Research Associate

  2. Outline of the Presentation

  3. Competition & its Legislation in India • A situation in a market place in which firms/entities or sellers independently strive for the patronage of buyers in order to achieve a particular business objective, such as profits, sales, market share, etc. • Competition & its legislation in India has been reactive so far: • Given the market oriented economic planning, a pro-active competition legislation is needed for the country

  4. National Competition Policy

  5. Need for Competition

  6. Aim of the Paper • This paper assesses competition distortions existing in Agriculture Product Marketing and Pharmaceutical sector in India, as a result of government policies, rules and regulations governing the sector

  7. Overview: Agriculture Product Marketing Sector • Provisions under various laws affect limit, restrict or distort the elements of competition • Affects the livelihood of majority of the population that it supports

  8. Competition Impediments: Agricultural Produce Marketing Act • APMCs vested with wide powers to regulate the sale, storage & marketing of agricultural produce within the state • Distort market by preventing direct access of framers to retailers and to end-consumers • Lack of transparency in price discovery of agricultural produce

  9. Competition Impact Assessment – Agriculture Product Marketing Sector • The Essential Commodities Act (ECA), 1995 (Amend –) – Since the provisions in the act authorise the government to grant a license, permit or authorisation process as a requirement of operation, it creates natural barriers affecting prospective entrants or significantly raise costs of entry or exit by a supplier. ECA thus limits the number of suppliers. • The Food Corporations Act (FCA), 1964 (Amend - August, 2001) – This act, by making a single entity, the Food Corporation of India (FCI), responsible for all the range of activities across the food sector, grants exclusive rights for a supplier to provide goods or services. There is a possibility of abuse of power by the FCI which then, might limit the number or range of suppliers (farmers) to supply food grain/stuffs and hence also, limits the choices/quality available to customers.

  10. Overview: Pharmaceuticals Sector • 65% of the population lacks regular access to essential medicines in India • Ambiguity in legislations, abuse of dominance by patented pharmaceutical giants distort competition

  11. Competition Impact Assessment – Pharmaceuticals Sector • Drugs and Cosmetics Act, 1940 (amended as on 1995) • Schedule M ensuringGood ManufacturingPractices (GMP) WHO norms for product quality Blanket provision setting high-standards SME’s can’t comply • Definition for the term spurious drugs under Section 17B(b) Loose definition Includes legitimate generics Limits free operation in market • Impact on Competition - • limits the ability of suppliers to compete & significantly raises cost of entry or exit by a supplier • limits the choice and information available to consumers

  12. Competition Impact Assessment – Pharmaceuticals Sector • Indian Patent Act, 1970 (amended as on 2005) • Section 3 (d), ‘What are not Inventions’, Non-Patentable Inventions provides safeguard to ever greening of patents efforts by big pharmaceutical companies to delay generic entry into the market & prolong monopoly status • Section 84, Compulsory Licensing Gives consumers no optionbut to purchase the highpriced patented drugs • Impact on Competition- • limits the ability of some types of suppliers to provide a good or service • Grants exclusive rights to some suppliers • Limits choice available to consumers

  13. Agenda for Competition Reforms; Agriculture Product Marketing Sector • Immediate need to review APMA, its implementation & practices of APMCs. • Introduce competition: demand side & supply side in the agriculture sector • Assessment of powers & nature of FCI operations

  14. Agenda for Competition Reforms; Pharmaceuticals Sector • Government support to boost SMEs: financial & technical support • Definition of spurious drugs needs to be revisited and clarified • Sensitize Patent Office & DIPP • Compulsory licences: Effective administration to promote generic competition and serve public health objectives

  15. Concluding with the (Draft) NCP • Competition Policy is a broader term which includes all government policies and laws whereas competition law is a specific statute with a predefined mandate to adjudicate on violation(s) of the law • is a proactive and positive effort to build a competition culture in an economy • Infusing NCP principles in legislations provide a consistent approach to dismantle barriers to competition, optimal allocation of resources and granting economic agents appropriate, incentives to pursue productive efficiency, quality and innovation.

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