Molecule v Market: Rethinking ATC-4 Classification in Indian Pharmaceutical Merger

Introduction

On 6 July 2026, the National Company Law Tribunal ('NCLT'), Ahmedabad Bench sanctioned the amalgamation of J.B. Chemicals & Pharmaceuticals Limited into Torrent Pharmaceuticals Limited. The scheme finally came into effect on the day of the winding up of J.B. Chemicals, which was two days later, and its brands, plants and distribution network became instantly part of Torrent, turning it into one of the largest branded pharmaceutical businesses in India. The NCLT order is procedural. It is a test of solvency and shareholder consent, rather than competitive effect but it closes the door on the decision that actually mattered for competition: the Competition Commission of India's ('CCI') order of 21 October 2025, which cleared the deal against a package of voluntary modifications rather than structural divestiture.

The problem this raises is specific. The CCI’s market definition and remedy practice applied here as it has been applied for a decade, is not built to catch how pharmaceutical market power actually accumulates, through portfolio breadth, distribution leverage and repeated acquisition rather than share in a single molecule. The Torrent–JB review illustrates that gap rather than an isolated lapse in it, and the NCLT's sanction this month means the gap, in this case, is now permanent. There is no further competition review left to correct it.

A Pattern, Not an Anomaly

The CCI itself described Torrent–JB as the second largest transaction in Indian pharmaceutical history, behind only Sun Pharmaceutical's 2015 acquisition of Ranbaxy Laboratories. Both transactions involved one of India's largest drug makers absorbing a rival with substantial overlap in branded formulations: Sun Pharma's four billion dollar acquisition of Ranbaxy Laboratories brought together two companies competing across cardiovascular, central nervous system and gastrointestinal therapies, while Torrent's ₹19,500 crore acquisition of J.B. Chemicals combined two portfolios overlapping most heavily in cardiovascular, gastrointestinal and diabetes segments. The comparison is the clearest evidence of how far remedy practice has shifted. In Sun–Ranbaxy, the Commission found combined shares of 90 to 95 per cent across seven formulation markets, at paras 32 to 33 of the order and ordered divestiture of all seven brands, along with regulatory data and manufacturing know how, to an approved buyer under active monitoring. In Torrent–JB, a transaction the regulator itself ranked nearly as large, the outcome was divestment of one brand, Calcigard, a five year licence on a second, Vizylac, and price caps on a handful of overlapping products. Two transactions of comparable scale, a decade apart, produced structural remedy in one case and largely behavioural remedy in the other. The trend of pharmaceutical consolidation in India has not abated in those 10 years, rather it has grown, and a similar absence of structural divestiture marked the Commission's October 2024 clearance of Mankind Pharma's ₹13,630 crore acquisition of Bharat Serums and Vaccines, a deal with overlaps in the women's health and critical care segments. What changed is that Section 31 of the Competition Act, 2002, which allows parties to offer modifications before a full inquiry, has moved from exception to default practice, and Torrent–JB was cleared on that default rather than tested against it.

Scale alone does not explain the difference in how the two deals were treated. Sun–Ranbaxy was valued at roughly four billion dollars including debt, while Torrent–JB closed at close to one and a half billion dollars and both fell within the range where Indian merger review is expected to apply its fullest scrutiny. If transaction size were driving remedy choice, the two orders should have looked far more alike. The more plausible explanation is that early negotiation of modifications under Section 31 altered the structure of the review before the Commission reached a full structural inquiry.

European merger-control literature points in the same direction. Structural remedies tend to be less time intensive in terms of whether they need to be monitored after the transaction closes, while behavioural commitments involve regulators having to monitor commercial conduct for years post-transaction. Recent pharmaceutical enforcement in the European Union has increasingly favoured structural solutions where concentration risks are significant, as in the European Commission's January 2025 clearance of Cooper's acquisition of Viatris's European consumer healthcare business, which was conditioned on divestitures in overlapping over-the-counter categories. The comparison does not mandate that the CCI adopt a new legal standard – it merely proposes that the CCI think through the need for a more measured remedy framework for pharmaceutical consolidation.

Two Blind Spots, One Cause

The Commission's “rule of reason” approach, which assumes that the relevant market is at the ATC-4 level, the fourth of five tiers in the WHO's Anatomical Therapeutic Chemical classification system under which a drug is grouped by its specific chemical substance rather than by the condition it treats or its broader pharmacological class, is a good approximation, as two molecules in the same therapeutic class are not necessarily substitutes. When applied literally, however, it fails to understand how prescribing is done. Brand familiarity, patient adherence to established brands, and an existing relationship with a sales representative are also factors in a cardiologist's decision-making process, rather than mere substitutability at the molecule level. A company that dominates several cardiovascular brands occupies a position across a broader prescribing journey and in Torrent's case, its larger market share of APIs and CDMO capacity will create a barrier for generic competitors that entry costs cannot be measured by any individual molecule's market share. The Appreciable Adverse Effect on Competition ('AAEC') test under Section 6 is meant to address this kind of “accumulated leverage”. If the market has already been sliced too thin, however, it will be impossible for such leverage to enter into view in the first place.

This is not abstract in the Torrent–JB case either. The CCI's own notice on the deal records overlap between the two companies specifically in the cardiovascular, gastrointestinal and diabetes segments, the very categories where Calcigard and Vizylac sit. A cardiologist making prescriptions at that intersection is precisely the decision-maker that the ATC4 test fails to recognise, as it pertains not to the extent of a single firm's share in an entire therapeutic domain, but rather to the competition between individual molecules. In this sense, portfolio power surpasses the theoretical aspects grounded in portfolio economics; it embodies a concrete competitive edge that a molecule-by-molecule examination is fundamentally designed to neglect.

This deficiency in scope is also evident in the Commission's handling of time. The AAEC standard is intended to be progressive; however, it prioritises readily quantifiable aspects such as existing competitors, controls by the National Pharmaceutical Pricing Authority ('NPPA') and minor fluctuations in market share over long-term factors like distribution density, the exclusion of smaller generic competitors and successive acquisitions that slowly transform a therapeutic sector. Torrent's own acquisition history illustrates the point directly. This is not its first pharmaceutical acquisition, and each previous transaction had to be assessed individually, based on the market conditions at the time, and for which there was no need to consider the price of the previous transaction. This is because the test was not asked to look for a cumulative pattern in any given transaction, nor will it ever show one as such. It’s the same “blind spot” as the market definition problem only on another dimension both miss the point that it is a snapshot of a narrow market and not a unit of competitive harm.

Why the Remedy Choice Compounds the Problem

The undertakings the CCI accepted here are also the type most vulnerable to being worked around. When there is a price cap on Nifedipine, it doesn't prevent a merged entity from using its sales resources on an uncapped alternative in its own category. A five year licence on Vizylac preserves the licensee's legal rights, but it does not eliminate the merged firm's incentive to redirect promotional effort and sales resources toward its own competing products within the same therapeutic segment. Both are standard, well documented tactics in dominant-firm strategy, not hypothetical risks, and a behavioural undertaking asks a regulator to police them indefinitely rather than removing the overlap that creates the incentive. A structural remedy, divesting a brand with its know how and commercial infrastructure attached, removes that incentive permanently. Structural remedies are more difficult to negotiate, for that reason. When the Commission repeatedly settles for the lighter alternative, it signals to every future acquirer, at the pre-filing stage that a thin package will do. The NCLT's sanction of the scheme this month is the point at which that signal, in this instance, becomes final: the October 2025 modifications are now the only constraint on the merged entity, with no further competition review to revisit them.

What the Framework Still Allows

None of this argues against consolidation itself. Scale can support Active Pharmaceutical Ingredient self-sufficiency and strengthen India's position in export markets, and the case here is not that Torrent–JB should have been blocked. It is that the tools used to assess it should match what is at stake in a sector where 43.4 per cent of India's health spending is still paid out of pocket, and that the existing statute already permits this: market definition can still start at ATC-4 while accounting for portfolio and distribution effects, AAEC assessment can treat cumulative consolidation as a central factor rather than an afterthought, and structural divestiture can remain the default in cases of high concentration, with behavioural commitments reserved for cases where a monitoring mechanism is realistically enforceable.

The Torrent–JB merger may yet prove competitively benign. But it is now final, its competition safeguards are fixed, and the pattern behind it, narrow market definition, light remedies, a present-focused test, applied consistently across a consolidating sector, is the more durable concern. The Commission has the authority to correct it. What the NCLT's order this July confirms is that, once a scheme like this is sanctioned, that authority has nothing left to act on.

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This article has been authored by Pramitee Singh and Akshat Jain, students at Maharashtra National Law University, Aurangabad. This blog is part of RSRR's Rolling Blog Series.