A decade-long investigation into abuse of market dominance by 12 Delhi-based private hospitals came to an end with the anti-trust regulator – Competition Commission of India (CCI) – dismissing the allegations of overcharging in-patients for medicines, consumables, diagnostic tests and room rents.
In an order passed on May 21, the anti-trust regulator held that the hospitals did not abuse their dominant position, saying the evidence collected by the Director General (DG) did not establish excessive or unfair pricing. Director General is the head of the investigation wing of the Competition Commission of India (CCI).
The case originated from a 2015 complaint filed by Vivek Sharma against Becton Dickinson India Pvt Ltd and Max Super Specialty Hospital, Patparganj, alleging that syringes sold through hospital pharmacies carried higher MRPs than those available in the open market.
Following investigation, the DG expanded the probe to 12 super-specialty hospitals in Delhi and examined whether hospitals abused dominance in the aftermarket for admitted patients by compelling them to purchase medicines, devices and diagnostic services from in-house facilities at inflated prices.
However, the CCI disagreed with the DG’s conclusions in the case. The Commission noted that the hospital allowed patients to procure medicines, consumables and diagnostic services from outside vendors, unlike many other hospitals examined during the probe.
The regulator also rejected the DG’s comparison of hospital room tariffs with hotel prices, observing that hospital rooms are not substitutable with hotel accommodation because they are equipped for clinical care and emergency response.
On medical tests and imaging services, the Commission found that the DG’s comparison with standalone diagnostic centres yielded mixed results, with some tests at the hospital priced higher and others lower than outside labs. It further said hospital laboratories incur higher operating costs because they function round-the-clock and provide faster turnaround times.
The regulator also ruled that comparing hospitals’ procurement prices for medicines and consumables with retail selling prices was not an appropriate methodology for determining excessive pricing, since procurement costs do not include overheads such as storage, supply-chain and inventory management expenses.
The CCI also observed that hospitals are legally permitted to sell medicines and consumables at the manufacturer-fixed maximum retail price and there was no evidence that these hospitals charged above MRP.
The order also contains broader observations on competition in healthcare markets. The Commission held that patients seeking elective treatment generally have sufficient information to compare overall treatment costs before admission and retain the option to switch hospitals, making it inappropriate in this case to define a separate aftermarket for in-patient services.
Accordingly, the CCI closed the proceedings against the hospital and disposed of pending applications.
Welcoming the ruling, Association of Healthcare Providers of India (AHPI) said the order provided clarity on healthcare delivery practices and recognised the integrated nature of super-speciality healthcare services.
“We welcome the Competition Commission of India’s order recognizing that hospitals provide integrated healthcare services and are not engaged in the standalone sale of medicines, consumables, or diagnostics,” said Girdhar Gyani, director general of AHPI.
