Delhi HC exposes companies profiteering from COVID antibody test kits; ICMR cancels procurement order

27 April 2020
On 27 April, the centre cancelled an order to procure antibody test kits by a Chinese manufacturer, Wondfo. The previous day, a Delhi High Court judgment revealed that the procurement order by the Indian Council of Medical Research had allowed intermediary companies to inflate the costs for the test kits by nearly 145 percent.
Biplov Bhuyan / Hindustan Times / Getty Images
On 27 April, the centre cancelled an order to procure antibody test kits by a Chinese manufacturer, Wondfo. The previous day, a Delhi High Court judgment revealed that the procurement order by the Indian Council of Medical Research had allowed intermediary companies to inflate the costs for the test kits by nearly 145 percent.
Biplov Bhuyan / Hindustan Times / Getty Images

On 26 April, in what can only be described as inadvertent whistle-blowing, a dispute between three private companies over the distribution of antibody kits in India revealed that the centre had allowed the costs of COVID-19 antibody tests to be inflated by nearly 145 percent. In a judgment that favoured none of the companies, it was the Indian Council of Medical Research that suffered the most. The court disclosed that the ICMR offered to pay Rs 30 crore for five lakh test kits, at an inflated price that offered a profit of Rs 18.75 crore to the intermediary companies. As news of the judgment emerged the next day, the centre seemed to struggle to find a response, ultimately issuing a press release announcing that it had cancelled the procurement order for the test kits.

The antibody kits were manufactured by a Chinese company called Wondfo, and the day after the high court judgment, the ICMR issued an advisory to all state governments not to purchase kits from that manufacturer because it had led to inaccurate results. Meanwhile, in the press release issued that day, the central government stated, “It needs to be stressed that ICMR has not made any payment whatsoever in respect of these supplies.” It added that the Indian government “does not stand to lose a single rupee.” But neither the centre’s press release nor the ICMR’s advisory explained why the central government had placed such a large order, at highly inflated costs, for unreliable test kits in the first place.

The dispute arose when two distribution companies, Rare Metabolics Life Sciences and Aark Pharmaceuticals, filed a petition in the Delhi High Court against an importer, Matrix Labs, for not honouring a contract to supply antibody test kits. On 28 March, the ICMR had placed an order for five lakh antibody tests with Aark. The three companies had entered into an agreement through which Matrix would import the test kits, provide them to Rare Metabolics, which would then supply them to the ICMR through Aark Pharmaceuticals. According to the petition, Matrix delivered 2.76 lakh kits on 17 April, and threatened to not deliver the rest until Rare Metabolics paid the full amount in advance, prompting them to take the matter to court.

The dispute between these three companies brought the terms of procurement of the antibody kits into the public domain, which exposed the massive profiteering in this deal. Through the course of the proceedings, it was revealed that Matrix Labs imported the kits for just Rs 225 per kit, sold it to Aark for Rs 420 per kit, which in turn sold it to the ICMR at Rs 600 per kit. The ICMR had approved a 145 percent mark-up on the testing kits amid a public-health crisis where these kits are desperately necessary at affordable costs that can allow mass testing.

In the judgment, Najmi Waziri, a judge of the Delhi High Court, disallowed the inflation and instructed the companies to sell the tests to the ICMR at a price of Rs 400 per kit. Waziri noted that the cost of import of the test kits was Rs 245 per kit—calculated at $3 per kit, or Rs 225, and Rs 20 for freight charges—adding to a total of Rs 12.25 crore for five lakh kits including the freight charges, and Rs 11.25 crore excluding them. Waziri added that Matrix would then supply these kits to Aark for a sum of Rs 20 crore, “at an apparent 45% profit of Rs 7.75 crores,” and an additional one crore as the goods and services tax. The ICMR, the judgment noted, would pay a total of Rs 30 crore according to the agreement, “for a similar evident profit of Rs.9 crores despite no value addition to the imported medical material.” In effect, the ICMR had agreed to pay Rs 30 crore for kits that cost Rs 11.25 crore to be imported.

Vidya Krishnan is a writer and journalist. Her first book, Phantom Plague: The Untold Story of How Tuberculosis Shaped our History, will be published by PublicAffairs in 2021.

Keywords: COVID-19 Delhi High Court Indian Council of Medical Research
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