Following the judgment, the ICMR now says it has not paid a single rupee, and the remaining order has been cancelled.

ICMR agreed to pay 25 times the price for rapid test kits Delhi HC judgment shows
Delve Health Monday, April 27, 2020 - 17:13

A court dispute between the distributor and importer of COVID-19 tests has revealed that the Indian Council for Medical Research (ICMR) has agreed to pay almost 2.5 times the price at which rapid antibody test kits are imported into India from China. In fact, because the ICMR set the price at Rs 600 per kit, even state governments like the government of Tamil Nadu are paying this exorbitant amount per kit, while the import cost per kit into India is just around Rs 245. And these kits – made by WONDFO in China – have been faulty in quality checks conducted in ICMR.

The issue came to light because of a dispute between the company that is importing these kits into India, the company that signed an agreement to distribute the kits in India, and a third company that was subcontracted by the second company – from whom ICMR is actually buying the kits. 

The kits are made by WONDFO in China, which sold them to importer Matrix Labs at USD 3 per kit, plus freight charges. This works up to approximately Rs 245 per kit, at Rs 75 per dollar. That is, Matrix got the kits at Rs 245 per piece. 

Now, a company called Rare Metabolics Life Sciences Pvt Ltd signed an agreement with Matrix Labs to import 10 lakh test kits into India, and distribute them exclusively in the country. Meanwhile, ICMR ordered 5 lakh test kits from another company, Aark Pharmaceuticals, at Rs 600 per test kits. According to ICMR’s latest press release, “For Wondfo, evaluation committee got 4 bids and the corresponding quotes received were Rs. 1,204, Rs. 1,200, Rs. 844 and Rs. 600. Accordingly, bid offer of  Rs. 600 was considered as L-1.”

The deal between the companies was that Aark would get the kits from Rare Metabolics, which would in turn get the kits from Matrix Labs. 

After 2.76 lakh kits were imported and given to ICMR, a dispute arose between Rare Metabolics and Matrix Labs. While Rare Metabolics has already paid Matrix Rs 12.75 crore, Matrix – which is selling these tests at Rs 400 per kit to Rare Metabolics – wanted the remaining amount to be paid upfront before the supply is given to the company. However, Rare Metabolics – and petitioner no. 2 Aark Pharmaceuticals – contended in the Delhi High Court that they cannot pay Matrix until the ICMR pays them. 

While hearing the issue, the Delhi High Court noted that while the landed price of the test kits is just Rs 245 in India, the governments and other private parties are having to pay Rs 600 per kit; which means the intermediaries – who are not adding any value to the imported test kit – are together making a profit of about 145%.

The court then ordered that the companies should supply the remaining 2.24 lakh test kits (at the agreed price of Rs 600 per kit), and once Rare Metabolics and Aark Pharmaceuticals get the money from ICMR, they should settle the agreed amount to Matrix before they spend money on anything else. 

Further, the court said that the intermediaries should limit their profit to an overall 61% in the time of a pandemic. Other than the 5 lakh kits that ICMR has ordered, and another 50,000 kits that the Tamil Nadu government has ordered, at the price of Rs 600 per kit, the court has said that Matrix can sell the other kits it imports into India at not more than Rs 400 per kit, inclusive of GST.

“The Court is of the view that a profit mark-up of Rs. 155/- i.e 61% on the landed cost price of Rs. 245/- is much on the higher side and in any case more than sufficient for the seller, for the kits/tests to be made available in India for urgent extensive tests through the country, especially in these present extraordinary circumstances of the worldwide pandemic,” Justice Najmi Waziri said. 

“The country is going through an unprecedented medical crisis affecting public order. People have been cloistered in their homes or constrained to stay wherever they were on 24th March 2020. The economy is virtually at a standstill for the last one month. There is an element of disquiet apropos one’s safety. For people to be assured that the pandemic is under control and for governments to ensure and for agencies engaged in the frontline battle to safeguard people’s health, more kits/tests should be made available urgently at the lowest cost, for carrying out extensive tests throughout the country,” the HC said. 

“Public interest must outweigh private gain. The lis between the parties should give way to the larger public good. In view of the above, the kits/test should be sold at a price not beyond Rs. 400/- per kit/test inclusive of GST,” the court ordered. 

Govt defends, says no money was paid

Meanwhile, the government has released a press statement on the pricing of rapid testing kits and stated that out of four tenders, the cheapest one was chosen. The government statement said that out of companies who offered to supply the kits, kits of 2 companies (Biomedemics and Wondfo) were identified for procurement as both had the requisite international certifications.

Explaining why they didn’t import directly from Wondfo, the release said, “ICMR also tried to procure the kits directly from Wondfo company in China through CGI. However, quotation received from direct procurement had the following issues:

> Quotation was FOB (Free on Board) without any commitment on logistics issues.

> The quotation was on the basis of 100% direct advance without any guarantees.

> There was no commitment on timelines.

> Rates were communicated in US dollars without any clause for accounting for fluctuations in prices.

Hence, it was decided to go Wondfo’s exclusive distributor for India for the kit who quoted an all inclusive price for FOB (logistics) without any clause for advance.”

The government also justified that since it was a “first ever effort by any Indian agency to procure such kits,” the “rate quoted by the bidders was the only reference point.”

“First, rapid kits have a very limited role to play. We have followed due process. The tender was finalised and after supply, when faults were found, ICMR did a field check and then we cancelled tender. No money was paid,” Lav Agarwal, Joint Secretary of the Health Ministry, told the media during the daily briefing on Monday.

So what happens now?

While the Delhi High Court has allowed the companies to sell the test kits at Rs 400 per piece, the Union government has now said that it will not be buying any kits from Wondfo.

“After receipt of some supplies, ICMR has again conducted quality checks on these kits in field conditions.  Based on scientific assessment of their performance, the order in question (Wondfo) along with order in respect of another make found under-performing have been cancelled. It needs to be stressed that ICMR has not made any payment whatsoever in respect of these supplies. Because of the due process followed (not going for procurement with 100% advance amount), GoI does not stand to lose a single rupee,” the press release by Ministry of Health and Family Welfare said. 

ICMR asks states to return rapid testing kits 

Meanwhile, the Indian Council of Medical Research on Monday issued a revised advisory for states, asking them to stop using rapid testing kits and return them all to the suppliers.

The ICMR advisory says that the biomedical research body has evaluated the kits of Guangzhou Wondfo Biotech and Zhuhai Livzon Diagnostics in field conditions and the results have not been satisfactory.

“The results have shown wide variation in their sensitivity, despite early promise of good performance for surveillance purposes. In view of this, states are advised to stop using these kits procured from the above mentioned companies and return them to be sent back to the suppliers,” the ICMR statement said. 

It added that the states should continue to rely on RT-PCR throat or nasal swabs for the diagnosis of COVID-19.

“ICMR advocates that RT-PCR throat/nasal swab test is the best use for diagnosis of COVID 19. RT-PCR test detects the virus early and is the best strategy to identify and isolate the individual. Several States have procured rapid antibody test kits and on their demand, ICMR has also provided these kits with clear instructions that they are to be used only for surveillance purposes,” the ICMR statement added.

On April 21, ICMR had asked all states to put the use of rapid testing kits on hold after Rajasthan stated that it no longer be using the kits. Rajasthan Health Minister Raghu Sharma had told the media that the kits gave only 5.4% accurate results, and not the expected of 90% accuracy.

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