India's top hospitals face CCI scrutiny over inflated prices of medicines and medical devices

India's fair trade regulator has asked three of the country's biggest hospital chains to explain how they set rates of medicines and medical devices or potentially face penalties.

The Competition Commission of India (CCI) demanded the answers after concluding an elaborate investigation on inflated drug pricing, triggered by a complaint from a consumer aggrieved at the cost of a syringe.

Max Healthcare, Fortis Healthcare and Apollo Hospitals, which run hospitals in the National Capital Region, received notices from CCI asking them to furnish details on the pharmacies, vendors and companies from which they procure their bestselling drugs and medical devices, said people familiar with the matter.

The CCI issued the notices late last year after receiving information from these hospitals on their top drugs and medical devices by value and volume, the people said, asking not to be identified.

A spokeswoman of Max Healthcare said an investigation is presently under way and the hospital is extending its full cooperation to CCI authorities. The regulator, Fortis and Apollo had no comment.

The CCI investigation is the first such action against the high out-of-pocket prices of medicines set by hospitals, which operate unencumbered by regulation. The CCI scrutiny could potentially rein in the prices of medicines and healthcare equipment. or at the very least, bring in transparency in the way hospitals sell these items, according to competition lawyers.

Vinay Shukla, leader of the antitrust, private equity and M&A practice at Nishith Desai Associates, a law firm, said it will be interesting to see how this case unfolds because there are no proper regulations for pricing of services by hospitals.

"The pandemic has brought pricing arbitrariness to the forefront and therefore the CCI investigation seems opportune," Shukla said.