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This article is written by Surya P Maurya.

Introduction

The pandemic has had a very serious impact on overall health care services in India and it has become more disruptive by the failed market system. During the COVID-19 pandemic, the problems faced by the people have been exacerbated by the institutional lack of necessary supplies like oxygen, medicines and unavailability of hospital beds. Huge demand for hospital beds, medicines, medical devices gave hoarders and black marketers an opportunity to fill their pockets. Fake Remdesivir and other essential medicines were being manufactured and sold in different parts of India at a very high price. The rural markets are more vulnerable to these predators. Many cases have been reported where it was found that cheap antibiotics were being sold as Remdesivir and fire extinguishers oxygen cylinders. Many people have lost their family members and friends during the first and second wave pandemic due to hoarding of beds, medicines and medical equipment.

Third wave of COVID-19 pandemic is expected to hit India in the coming months, therefore, the need of the hour is to take strong action against such hoarders and black marketers to curb black marketing of essential medicines, beds and also sale of fake medicines and medical devices.

Many laws exist in India to deal with such unfair practices such as Indian Penal code (1860), the Essential Commodities Act (1955), the Drugs and Cosmetics Act (1940), the Prevention of Black-marketing and Maintenance of Supplies of Essential Commodities Act (1980), the Legal Metrology (Packaged Commodities) Rules, the Disaster Management Act (2005) and the Epidemic Act (1897). Various agencies involved at different levels are now tasked with proper implementation of these legislations to prevent such type of hoarding and black marketing during the upcoming third wave of this COVID-19 pandemic.

What is Black Marketing?

Black Marketing is an exchange of goods and services which takes place outside the reach of government agencies. There is no clear definition of ‘Black Marketing’ given under any statute in India but the Supreme Court has attempted to deal with this issue. In the case of Rameshwar Lal Patwari v. State of Bihar[1], Supreme Court has held that black marketing has at its base a shortening of supplies because black market flourishes best when the availability of commodities is rendered difficult. Hon’ble Court has further stated that it has a definite tendency to disrupt supplies when scarcity exists or scarcity is created artificially by hoarding to attain illegitimate profits. Indulging in black marketing is conduct which is prejudicial to the maintenance of supplies.

The goods and services involved in these transactions may be illegal, meaning dealing in those goods and services are prohibited by law, for example, prohibited drugs, prostitution, counterfeit currency, trafficking in human etc. or there can be a transaction of legal commodities and services in a prohibited manner. Black marketers involved in these transactions are motivated to earn profits and evade tax. Due to the illegal nature of these transactions they are generally done in cash. The impact of Black marketing on economy is always negative and devastating because these activities are not recorded and taxes are not paid.

We have seen one of the worst forms of Black marketing in India during the COVID-19 pandemic i.e., Black marketing of essential medicines and equipment. Organised criminal groups have adjusted to the opportunities arising from the COVID-19 pandemic to exploit the vulnerabilities and gaps existing in health and criminal justice systems.[2] Many cases of Black marketing and selling of fake medicines have been reported during the pandemic. False medical products raise serious concern for public health system as these products cannot treat any disease instead it may cause serious health problems.

What is Hoarding?

The term ‘Hoarding’ can be defined as the purchase of a commodity with the intention to sell it in future at a higher price when it is understock or not available in the market. In Kamla Prasad v. Distt. Magistrate[3], the Supreme Court held that the word ‘hoard’ in the context means ‘to amass and deposit in secret and that is the reason why the petitioner did not display the stock position in respect of these scheduled commodities in his business premises was that he wanted to hoard and conceal them as the same would create scarcity of the commodities in the market and vitally affect the maintenance of services and supplies essential to the community’.

This is an act of creating illegitimate monopoly over the market and taking undue advantage of people who are helpless and have no other option but to purchase the commodity from the hoarder. Hoarding and Black marketing are interrelated as the persons involved in hoarding purchase large quantity of basic or essential goods and sell it in the black market at extremely high prices when goods are high in demand. During the COVID-19 pandemic we have witnessed that how hoarding of oxygen concentrators and medicines created panic shortage. Oxygen concentrators were imported from China and were being sold at an exorbitant price of Rs. 50,000 to 70,000 a piece as against its cost of Rs. 16,000 to Rs. 22,000.[4] Generally in the process of hoarding, there is involvement of a single person who acquires large quantity of goods but in some cases it has been seen that more than one persons are involved who enter into an agreement with the supplier(s) to limit the supply of goods in the market.

Laws prevailing in India to curb the current menace of black marketing and hoarding of COVID-19 medicines and equipments

During the COVID-19 pandemic when many people were suffering due to institutional lack of medical supplies, some greedy people saw it as an opportunity to fill their pockets from helpless people. Government has failed completely to curb the malpractices of hoarding and black marketing in various parts of India. In this situation, it becomes important to discuss the current prevailing laws to deal with the rise of hoarding and black marketing of medical essentials.

The Essential Commodity Act, 1955

Section 3 of this Act empowers the Central Government to control the production and distribution of essential commodity from time to time. Central Government can control price of such commodities also and non-compliance government’s direction may lead to imprisonment.[5]

In exercise of powers under this Act, Central Government has notified the Drugs (Price Control) Orders in 2013.[6] This order prescribes maximum retail price (MRP) at which the drug shall be sold to the consumer. Therefore, selling of any drug in excess of the maximum retail price is contravention of the Drugs (Price Control) Orders, 2013 and the same is punishable under the Essential Commodities Act. The Drugs Pricing Control order 2013 was issued by the National Pharmaceutical Pricing Authority which operates under the Ministry of Chemicals and Fertilizers. National Pharmaceutical Pricing Authority set maximum pricing for drugs and also monitor the prices.

The Prevention of Black Marketing and Maintenance of Supplies of Essential Commodities Act, 1980

This law was enacted with an object to provide for detention in certain cases for the purpose of prevention of black marketing and maintenance of supplies of commodities essential to the community and for matters connected therewith.

Section 3 of this act empowers the government officials of the rank of District Magistrate, Police commissioner, or a Secretary of the State government to pass preventive detention order of any person who is acting in any manner prejudicial to the maintenance of supplies of commodities essential to the community. This Act allows for preventive detention of any person who could be either themselves committing as well as the detention of any person instigating someone else to commit an offence under the Essential Commodities Act, 1955.[7]

Section 6 of this act provides that any detention order made under section 3 shall not be invalid or inoperative by the reason that the person was detained outside the limits of the territorial jurisdiction of the Government or officer making the order, or that the place of detention of such person is outside the said limits.[8]

Section 13 provides that the maximum period for which any person may be detained in pursuance of any detention order shall be six months from the date of detention; Provided that nothing contained in this section shall affect the power of the appropriate Government to revoke or modify the detention order at any earlier time.[9]

However, for the application of any provision of this act with respect to a particular commodity, it is necessary that such commodity is declared to be an “essential commodity” by the government under the Essential Commodities Act, 1955.

On March 31, 2020, the National Pharmaceutical Pricing Authority, issued an order stating that medical devices would now be classified as ‘drugs’, and will be regulated under the Drugs Pricing Control Order, 2013 read with the Essential Commodities Act, 1955.

Through this order, the maximum retail price of the medical devices was monitored by prohibiting any person from increasing the maximum retail price of any drug by more than 10% of the maximum retail price during preceding twelve months. Disobedience of this order may result in penalty upon such person who may be a manufacturer, importer or any other person.[10]

After this order the National Pharmaceutical Pricing Authority issued an Office Memorandum on 29th June, 2020 to monitor maximum retail price of two very medical equipment used during COVID-19 Pandemic, Pulse Oximeters and Oxygen concentrators. Along with this memorandum a notice was also issued to all importers and manufacturers to submit maximum retail price details under the Drugs Pricing Control Order, 2013. This again reminded that the maximum retail price of medical devices cannot be increased more than 10% in next twelve months.[11]

Although the hike in maximum retail prices is being monitored after this order, the above mentioned two medical devices have yet to been declared as essential commodities under the specific provisions.

However National Pharmaceutical Pricing Authority in an order on 25th September, 2020, noted that Medical Oxygen is an Essential Public Health Commodity and the price limit for Liquid Medical oxygen was set at Rs 15.22 per cubic meter, and for Oxygen Inhalation in a cylinder was set at Rs 25.71 per cubic meter.[12] This order was extended in March 2021 for a further six months.

The Drugs and Cosmetics Act, 1940

This Act was enacted with an object to regulate the import, manufacture, distribution and sale of drugs and cosmetics. We saw many examples of fake Remdesivir being produced marketed in during the COVID-19 pandemic. The problem of fake and sub-standard drugs isn’t new but during the second wave of current pandemic it became worst.

Section 17A of this Act defines ‘Adulterated drugs’ as drugs (a) which consists in whole or in part, of any filthy, putrid or decomposed substance; or (b) if it has been prepared, packed or stored under insanitary conditions whereby it may have been contaminated with filth or whereby it may have been rendered injurious to health; or (c) if its container is composed, in whole or in part, of any poisonous or deleterious substance which may render the contents injurious to health; or (d) if it bears or contains, for purposes of colouring only, a colour other than one which is prescribed; or (e) if it contains any harmful or toxic substance which may render it injurious to health; or (f) if any substance has been mixed therewith so as to reduce its quality or strength.

Section 18 of this Act provides that the ‘State Government’ may by notification, prohibit the manufacture and sale of any drug which is not of a standard quality, or is misbranded, adulterated or spurious.

Penalty for manufacture, sale, etc., of drugs in contravention has been provided under Section 27. This section states that any drug deemed to be adulterated under section 17A or spurious under section when used by any person for or in the diagnosis, treatment, mitigation, or prevention of any disease or disorder is likely to cause his death or is likely to cause such harm on his body as would amount to grievous hurt within the meaning of section 320 of the Indian Penal Code solely on account of such drug being adulterated or spurious or not of standard quality, as the case may be, shall be punishable with imprisonment for a term which shall not be less than ten years but which may extend to imprisonment for life and shall also be liable to fine which shall not be less than ten lakh rupees or three times value of the drugs confiscated, whichever is more.[13]

This Act as we can see clearly tries to addresses the problem at hand but it fails due to poor implementation. Mashelkar Committee report of 2003 on ‘A comprehensive examination of drug regulatory issues, including the problem of spurious drugs’ states that “…although the Drugs and Cosmetics Act has been in force for the past 56 years, the level of enforcement in many States has been far from satisfactory. The non-uniformity in the interpretation of the provisions of laws and their implementation and the varying levels of competence of the regulatory officials were the main reasons for this less than satisfactory performance… the problems in the regulatory system in the country were primarily due to inadequate or weak drug control infrastructure at the State and Central level…”.[14] The Committee noted with dismay that most of the prosecution cases pertaining to offences related to spurious drugs remain undecided for years. There is no greater deterrent than a ‘severe’, ‘sure’ and ‘swift’ punishment.[15]

The Epidemic Diseases Act, 1897

This Act was enacted with an object to prevent the spread of Dangerous epidemic diseases. The provisions of the Epidemic Diseases Act were invoked in March, 2020 when the coronavirus started spreading throughout the country. Disobedience of any regulation/order made under this Act is punishable under Section 188 of the Indian Penal Code, 1860.[16] The scope of this Act has been widened when many unethical and illegal activities were reported during the pandemic. Persons who were found to be indulged in these malpractices were charged with other provisions under the Indian Penal Code as well such as for cheating under section 420, criminal breach of trust under section 405 etc.

Judicial crackdown on ‘hoarding’ and ‘black marketing’

The central government and various state governments took it upon themselves to fight with the malpractices of Hoarding and Black marketing but due to widespread cases of these unethical practices and lack of proper dedicated legal mechanism to deal with it, governments were seen to be struggling. Meanwhile, the Courts have started taking actions that were necessary to combat the unethical practices of hoarding and black marketing. Several High Courts, especially during the second wave of ongoing pandemic have directed the concerned authorities to crack down on hoarding of medical supplies.

During the second wave of this COVID-19 pandemic, the Delhi High Court in the case of Bram Health Care Private Ltd. v. Union of India[17] had directed that all the medicinal supplies and equipment are to be sold at either maximum retail price or below such price. The HC also observed while acknowledging huge demand of oxygen, essential medicine, medical equipment and the unethical practices surrounding it, that it was the time to fix the maximum retail price of these medical supplies for proper management and treatment of covid. Court also issued certain directions regarding the overcharging of ambulance services and other essential services.

In Manisha Chauhan v. Govt. (NCT of Delhi)[18], Delhi High Court asked the Central government as well as the Delhi government not to wait for court orders for taking strict action against hoarding and black marketing of medicines and medical equipment needed for COVID-19 patients. Petitioner in this case had sought setting up of fast-track courts to deal with the cases of hoarding and black marketing of covid essential medical supplies.

The High Court of Uttarakhand in Anu Pant v. State of Uttarakhand[19], called for affixing of QR Codes on Remdesivir packets. The Court was of the opinion that it is the constitutional mandate and the moral duty of the State to protect its people from the pandemic. The State must provide real-time critical information to its citizen. The state could not act in a reckless manner during this situation. The Court issued a number of directions to the State government, and also urged the government to motivate those people who have recovered to donate their plasma. Further, it stated that in case any pharmacist is discovered to be hoarding, or selling Remdesivir over the permissible price, the concerned Drug Inspector shall take action against the concerned pharmacist, but strictly in accordance with law.

The Allahabad High Court also directed the State government to take strict action against those who are hoarding medical supplies and are involved in their black marketing.

The Hon’ble Supreme Court in its suo moto order[20] during the second wave of COVID-19 pandemic, directed the central government to take action against the selling of many covid essential medicine and equipment at unreasonable price. The court also highlighted the problem of fake medicine being sold in the market.

The Court also directed the Central government and governments of the States/Union Territories to file fresh affidavits about the steps taken to ensure due availability of essential drugs, including Remdesivir and Favipiravir among other prescribed drugs and the modalities which have been set up for controlling prices of essential drugs, for preventing hoarding and for ensuring proper communication of the requirements at the level of each District by the District health authorities or Collectors to the Health Departments of the States and thereafter by the states to the Union Ministry of Health and Family Welfare so that the projected requirements are duly met and effectively monitored on a daily basis.[21]

Suggestions to curb ‘hoarding’ and ‘black-marketing’ of medical supplies

  • Hoarding and Black-marketing of medical supplies during medical emergency situation should be made an offence under the India Penal Code and shall put under non-bailable and cognizable offences category.
  • Setting up a task force in every district to deal exclusively with these problems.
  • Affixing of QR Codes on all essential medical supplies to curb sell of fake items as suggested by the Uttarakhand High Court.
  • Removal of ambiguity and lack of coherence in the prevailing legislation to prevent the rampant acts of hoarding and black marketing.
  • Proper execution and implementation of the directions given by concerned authorities regarding sell of medical supplies at or below the maximum retail price.
  • Carrying out an audit of supply, distribution and utilization of oxygen supply in the hospital to prevent hoarding cases.
  • There shall be a uniform plan for disaster management for the whole of the country to be called the National Plan under the Disaster Management Act.
  • Notification should be issued under the Essential Commodities Act to classify concentrators which is still out of its ambit as “essential commodities till the pandemic is completely over.
  • To curb this problem entirely, people should also take their responsibility to not to involve in such activities and should stop buying products from black markets.

Conclusion

The second wave of this ongoing pandemic has ended with so many difficulties. The country faced a severe shortage of medical oxygen which resulted in so many deaths. Parallelly, acts of Hoarding and Black marketing of essential medical supplies have acted as straw that broke the camel’s back that is our entire healthcare system. As we are heading towards the third wave of the COVID-19 pandemic, the need of the hour is to deal with these problems with utmost priority. If strong action is not taken to prevent these unethical practices, it will create a burdensome situation for not only for the government but also entire country. Therefore, at this time of pandemic, every individual needs to understand his/her responsibility and do not get involved in any such activities. To be victorious against the third wave, we need to respond collectively.

References

[1] AIR 1968 SC 1303

[2] WHO, Global Surveillance and Monitoring System for substandard and falsified medical products: executive

summary (Geneva, 2017), p.5. Available at https://www.who.int/medicines/regulation/ssffc/publications/GSMS_ExecutiveSummary_EN.pdf?ua=1

[3] (1975) 1 SCC 314

[4] Outlook Web Bureau, 29 May 2021, Oxygen Concentrator Hoarding Case: Delhi Court Grants Bail To Businessman Navneet Kalra, Outlook, https://www.outlookindia.com/website/story/india-news-oxygen-cylinder-hoarding-case-delhi-court-grants-bail-to-businessman-navneet-kalra/383863, Accessed on 3rd July, 2021.

[5] Section 3 The Essential Commodity Act, 1955

[6] https://www.nppaindia.nic.in/wp-content/uploads/2018/12/DPCO2013_03082016.pdf, Accessed on 4th July, 2021

[7] Section 3 The Prevention of Black Marketing and maintenance of supplies of Essential Commodities Act, 1980

[8] Section 6 The Prevention of Black Marketing and maintenance of supplies of Essential Commodities Act, 1980

[9] Section 13 The Prevention of Black Marketing and maintenance of supplies of Essential Commodities Act, 1980

[10] https://pib.gov.in/PressReleaseIframePage.aspx?PRID=1609670, Accessed on 5th July, 2020 at 1PM

[11] Office Memorandum by National Pharmaceutical Pricing Authority for Monitoring MRP of Pulse Oximeter and Oxygen Concentrator under DPCO, 2013, http://www.nppaindia.nic.in/wp-content/uploads/2020/06/OM-on-Pulse-Oximeter-and-Oxygen-Concentrator-29.06.2020.pdf, Accessed on 5th July, 2021 at 1:30 PM

[12] Gazette Notification: Price cap for Medical Liquid Oxygen and Oxygen Inhalation (Medical Gas) in cylinder, http://www.nppaindia.nic.in/wp-content/uploads/2020/09/222006-1.pdf, Accessed on 6th July, 2021

[13] Section 27(a) of The Drugs and Cosmetics Act, 1940

[14] Report of the expert committee on a comprehensive examination of drug regulatory issues including the problem of spurious drugs, https://pharmaceuticals.gov.in/sites/default/files/MashelkarCommitteeReport.pdf, Accessed on 7th July, 2021 

[15] Bibek Debroy, (May 13, 2021), Black marketing during the pandemic comes from longstanding, systemic flaws, The Indian Express, https://indianexpress.com/article/opinion/columns/black-marketing-during-the-pandemic-comes-from-longstanding-systemic-flaws-7312722/, Accessed on 7th July, 2021

[16] Section 2(1) of the Epidemic Diseases Act : ‘When at any time the [State Government] is satisfied that [the State] or any part thereof is visited by, or threatened with, an outbreak of any dangerous epidemic disease, the [State Government], if [it] thinks that the ordinary provisions of the law for the time being in force are insufficient for the purpose, may take, or require or empower any person to take, such measures and, by public notice, prescribe such temporary regulations to be observed by the public or by any person or class of persons as it shall deem necessary to prevent the outbreak of such disease or the spread thereof, and may determine in what manner and by whom any expenses incurred (including compensation if any) shall be defrayed.’

[17] Bram Health Care Private Limited v. Union of India, 2021 SCC OnLine Del 1834

[18] Manisha Chauhan v. Govt. (NCT of Delhi), 2021 SCC OnLine Del 2018

[19] Anu Pant v. State of Uttarakhand, 2021 SCC OnLine Utt 432

[20] In Re: Distribution of Essential Supplies and Services During Pandemic, 2021 SCC OnLine SC 355

[21] Ibid.


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