Black marketing during the pandemic comes from longstanding, systemic flaws

Post-Mashelkar Committee, let me quote from CDSCO (Central Drugs Standard Control Organisation). “Assistance has also been provided under the World Bank assisted Capacity Building Project to upgrade testing facilities and to establish new drug testing laboratories so as to enhance the capacity of laboratories to test large number of samples…. The Drugs & Cosmetics Act, 1940 has recently been amended by the Drugs & Cosmetics (Amendment) Act, 2008 for providing more stringent penalties to those involved in the trade of spurious drugs.”

Some offences have become non-bailable. There are specially designated courts and regulatory infrastructure has been strengthened. There is also a whistle-blower scheme. Has this improved matters? Probably, but pharmaceutical products shouldn’t be produced in the equivalent of garages and good manufacturing practices, and their enforcement, is a generic issue, not something we wake up to amid a pandemic. If governments purchase pharmaceutical products on L1 basis, it’s understandable that consumers should be price-sensitive, regardless of whether the drug is fake, sub-standard or expired. How many checks are there on chemists who sell without prescriptions and the nexus with doctors? Temporary outrage over fake RT-PCR test reports is misplaced, unless we decide to clamp down on everything fake.

We should also be careful about indiscriminately using terms like hoarder and black-marketeer. A hoarder is anyone who stocks up items. Expecting a lockdown, if I stock up on bottles of liquor, I am also a hoarder. So is a person who holds on to shares of a company, hoping for a better price. Of course, under excise laws, there is a limit on how many bottles of liquor can be held. In a similar vein, the crime isn’t hoarding per se but of selling a drug without a licence. Data on prosecutions, and convictions when prosecuted, of crimes under Drugs and Cosmetics Act, are an unhappy revelation. Incidentally, courts have ruled police officers can’t register FIRs, arrest and prosecute (for cognisable crimes) under this law. That’s the job of drugs inspectors.

The notion of a black market is different, though the two can be related. For instance, it can be a shadow market where one evades taxes. But in this context, it means charging a premium when there is a shortage. When there is a shortage, temporary or otherwise, prices will be higher than expected. This is no different from surge pricing used by cab companies, or ambulances charging exorbitant prices now. A black market occurs when the price at which a product is sold is higher than an administratively determined price. We are agitated at remdesivir selling for Rs 70,000 a vial because that price is significantly above MRP. Action not taken in the best of times now strikes back at us in the worst of times.

This column first appeared in the print edition on May 13, 2021 under the title ‘Inaction is expensive’. The writer is chairman, Economic Advisory Council to the Prime Minister. (Views are personal)