Published on 11/09/2017 3:57:23 PM | Source: Emkay Global Financial Services Ltd

Competition commission lens on Healthcare sector - Emkay

Posted in Broking Firm Views - Sector Report| #Pharma Sector #Emkay Global Financial Services Ltd. #Sector Report

Competition commission lens on Healthcare sector

Key highlights

* The CCI has announced a study on the competitive practices in the Healthcare industry, including Hospitals, Diagnostic Labs, Doctors, Pharma Companies and Pharmacists, among other participants.

* The objective of the study is quite explicit in that it seeks to understand the prescription/referral patterns of medical practioners and networking/tie-up, among the various participants.

* CCI’s track record in curbing unethical practices in other industries is mixed. We don’t expect this move alone to significantly change industry dynamics. However, this move has to be seen as part of the increasing regulatory scrutiny of the Healthcare sector in recent years, driven in part by government’s intent to lower overall healthcare cost. 


* The Competition Commission of India (CCI) has announced commissioning of a study (link here) to undertake situation analysis, to understand the prescription and referral pattern of Hospitals and Medical Practioners and tie-ups, among the various stakeholders of the Healthcare sector. The study would be initially confined only to Delhi and select districts of NCR as part of a pilot study, but will later be expanded in a possible phase two. The study will focus on the following aspects.

* Formal/informal tie-ups for referrals

* Exclusive arrangements for procurement of medicines/implants/consumables

* Prescription patterns – Branded Vs Generics

* Prevalence of NOC practices among pharma associations/pharmacists

* Emergence of e-market place for pharmaceuticals


Emkay View

While the initiation of the CCI study appears negative for the industry, by itself is unlikely to mean much, especially given the mixed track record of CCI. However the CCI study could shed light on certain industry structures; for e.g., the high fixed margin for distributors and other channel partners, which has negative implications for the margins at many hospital pharmacies as well. Overall the move by CCI to scrutinize industry practices needs to be seen in light of the government’s continuing regulatory crackdown to make healthcare more affordable for the masses. 


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