CCI closes abuse of dominance case against 12 Delhi-NCR hospitals for overcharging patients

The Competition Commission of India (CCI) on Thursday closed abuse of dominance proceedings against 12 super-speciality hospitals in Delhi-NCR over allegations that admitted patients were charged excessive prices for room rent, medical tests, medical devices, consumables and medicines.

A coram of Chairperson Ravneet Kaur and Members Anil Agrawal, Sweta Kakkad and Deepak Anurag held that no case of contravention of Section 4 of the Competition Act, 2002 was made out against the hospitals.

The case arose from information filed in 2015 by one Vivek Sharma against Becton Dickinson India and Max Super Specialty Hospital, Patparganj.

Sharma had alleged that Becton Dickinson, in collusion with Max Patparganj, printed a higher maximum retail price (MRP) on disposable syringes sold at the hospital’s in-house pharmacy, compared to the same product sold in the open market.

The CCI initially ordered an investigation into the allegations. The Director General (DG) found that the allegation of collusion between Becton Dickinson and Max Patparganj had not been substantiated. The Commission then ordered a supplementary investigation into the larger question of “aftermarket abuse” by super-speciality hospitals.

The DG later examined 12 hospitals and concluded that they were dominant in their respective markets for in-patient healthcare services. The DG found contravention of Section 4 between 2015 and 2018 on five parameters: room rent, medical tests, medical devices, consumables and medicines.

The hospitals were:

1) Max Super Specialty Hospital, Patparganj;

2) Max Smart Super Specialty Hospital, Saket;

3) Max Super Specialty Hospital, Shalimar Bagh;

4) BLK Max Super Specialty Hospital;

5) Max Multi Specialty Centre, Panchsheel Park;

6) Max Multi Specialty Centre, Pitampura;

7) Fortis Flt Lt Rajan Dhall Hospital, Vasant Kunj;

8) Fortis Escorts Heart Institute and Research Centre;

9) Sir Ganga Ram Hospital;

10) Indraprastha Apollo Hospital;

11) Batra Hospital and

12) St Stephen’s Hospital.

However, the CCI disagreed with the DG’s final conclusions.

It held that the relevant market could not be narrowed down to each hospital as a separate market. Instead, it considered the broader market for provision of healthcare services by super-speciality hospitals in Delhi-NCR.

The Commission also held that patients do not visit hospitals to buy standalone goods like medicines, consumables or medical devices. They visit hospitals for treatment, of which these items form a part.

On excessive pricing, the CCI applied the two-stage test. Under this test, it must first be shown that the price is excessive in relation to cost. It must then be shown that the price is unfair in itself or when compared to competing products. The Commission held that this test was not satisfied.

On room rent, the CCI said that hospitals cannot be compared with hotels. Hospital rooms, it said, are not mere lodging facilities, but are meant to cater to clinical needs and have patient beds, trained medical staff and emergency response systems.

It also rejected a mechanical comparison between hospital labs and standalone diagnostic centres. The Commission noted that hospital labs operate round the clock and may provide faster turnaround times.

On medicines and consumables, the CCI said that the DG’s comparison of procurement price with selling price was insufficient. Procurement price does not account for overheads like storage, supply chain management, operational costs and inventory costs, it held. The CCI also noted that selling medicines or consumables at MRP is not by itself illegal.

It, therefore, closed the proceedings against the hospitals and disposed of all pending applications.

Vivek Sharma appeared in person in the Max Patparganj matter.

Senior Advocate Jayant Mehta appeared with Advocates Abir Roy, Vivek Pandey, Aman Shankar, Sasthibrata Panda, Biyanka Bhatia, Shreya Kapoor and Om Shelat from SARVADA Legal for all Max Hospitals.

Senior Advocate Rajshekhar Rao appeared with Advocates Kunal Mehra, Danish Khan, Aakrit Aditya Sharma and Ajay Sabharwal from Phoenix Legal for the Fortis hospitals.

Senior Advocate Sajan Poovayya appeared with Advocates Harman Singh Sandhu, Manika Brar, Supritha Prodaturi, Rahul Shukla, Shivek Sahai Endlaw, Varalika Mendiratta and Raksha Agarwal from Shardul Amarchand Mangaldas for Indraprastha Apollo Hospital.

Advocate Manu Bajaj appeared for Sir Ganga Ram Hospital.

Advocates Tahir Ashraf Siddiqui, Mayur Punjabi and Balwant Chaubey appeared for Batra Hospital & Medical Research Centre.

Advocates Shruti Sharma, Shreya Sharma and Nishant Kandpal appeared for St Stephen’s Hospital.