Recently, Implant Files, a global investigation by the International Consortium of Investigative Journalists (ICIJ) revealed the unethical use of medical devices and the nexus between companies, doctors and hospitals in 36 countries.
The Indian Express investigated the phenomenon in India and unearthed a range of alleged irregularities: doctors’ corruption via promos and freebies; prescribing patients products which they don’t require, thereby putting their health at risk; spending crores of rupees on conferences and seminars to push products; and evading tax on such expenditure using the loopholes in the law.
According to a 2013 internal document accessed by the Indian Express as part of the investigation, Medtronic envisaged partnerships with 88 hospitals in various Indian cities, known as the Healthy Heart For All initiative. These hospitals were chosen with the target on paper: “keeping in mind 20-50 implants were to be done per month”. Medtronic offered to help the hospital attract new patients with a financing programme, backed by marketing campaigns. Working with a consulting firm hired by Medtronic, hospitals published advertisements in newspapers promoting Healthy Heart and organised promotional events.
These hospital partners conducted free screenings in their nearby areas and villages for heart ailments, and one in 10 was referred to the hospital for additional tests for a Medtronic pacemaker, coronary stent or defibrillator. Records show that as the programme was scaled up, Medtronic roped in Arogya Finance, a non-banking financial company (NBFC), to provide loans to purchase their products. Allegedly, Medtronic funded the NBFC by providing “unsecured borrowings” worth Rs 3.61 crore. It is interesting to note that the financing company was offering loans only to patients using Medtronic’s products. A stent that cost around Rs 30,000 in the market was being sold for Rs 1.2-1.5 lakh
According to a news report, the Maharashtra FDA, while investigating prices of various medical devices, found that Medtronic pacemakers, also used in the Healthy Heart Initiative, were being offered for free to distributors who allegedly sold them to patients at “exorbitantly high” prices.
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For instance, the report reveals that a patient paid 200% more than the import cost for Medtronic’s flagship pacemaker Relia RED. The ICIJ investigation accessed an internal Medtronic document dated 2014, which states that more that 14,600 have been screened and 9,186 patients received treatment. In the next four years, hospitals adopting the programme had jumped to 100 in 25 cities.
The revelations of the investigation are no doubt immoral and unethical, but could also fall under the illegal practice of cartelisation, which is subject to heavy penalties under the Competition Act, 2002.
Section 3 of the said Act states:
“No enterprise or association of enterprises or person or association of persons shall enter into any agreement in respect of production, supply, distribution, storage, acquisition or control of goods or provision of services, which causes or is likely to cause an appreciable adverse effect on competition within India. Any agreement entered into in contravention of the provisions contained in subsection (1) shall be void.”
Medtronic and its partner hospitals seem to have clearly acted with the purpose of product promotion and adversely affected competition. This violates Section 3 of the Act.
A recent policy note of the Competition Commission of India (CCI) acknowledges the presence of vertical arrangements and lack of transparency in healthcare services. It notes that information asymmetry and lack of agency do not allow consumers to make an informed choice of services and service providers. The private interests of healthcare providers, like the exclusive arrangements with an in-house pharmacy or diagnostic lab, affect the market dynamics and compromise consumer interests. The above-mentioned partnership clearly compromises the competition and affects consumer welfare.
CCI, incorporated under the Competition Act, has the duty under Section 18 to eliminate practices having an adverse effect on competition and to protect the interests of consumers and ensure freedom of trade carried on by other participants in Indian markets.
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Section 19 of the Act empowers the CCI to inquire into anti-competitive practices on receiving information about it from any person, consumer or association, and in case of absence of any such a source, the CCI can take action on its own motion against such cartels reported in the investigation. It also empowers both the Central and state governments to inform the CCI to investigate and penalise the offending person or company.
Since the practices revealed during the investigation – reaching out to hospitals by the said manufacturer – potentially amounts to cartelisation and hence are actionable under competition law, the CCI should take note of the Implant Files and take suo motu action against Medtronic and its partner hospitals for their past actions.
The CCI should not wait for a complaint from individuals or governments to initiate an investigation. Such suo motu action would serve its purpose as the regulator to protect consumers from the exploitation of powerful corporations and hospitals, a constitutional obligation to protect the right to health.
Shirin Syed is a legal researcher based in Aurangabad, Maharashtra.