Why India Desperately Needs a Public Procurement Policy for Pharmaceutical Drugs

India lacks a cohesive policy governing the procurement and recall of pharmaceutical drugs. REUTERS/Fayaz Kabli
07 July, 2016

India’s pharmaceutical drug regulation system is fractured. Drug monitoring in the country is sparse; it is split between far too many agencies—36 independent state regulators, and one central. Yet, the country lacks a cohesive policy governing the procurement and recall of drugs. The reasons behind this fragmented system are many. For one, under the seventh schedule of the constitution, public health, sanitation, hospitals and dispensaries are listed as matters on which state governments are allowed to legislate. This allows them to develop their own regulatory policy and to not be held accountable by any central body.

Additionally, India has never devoted sufficient resources to developing and implementing drug regulations standards. With no overarching laws protecting against the procurement or executing the recall of NSQ (or “not of standard quality”) drugs—those that fail to meet dosage and quality standards—substandard medication has flooded the market, and is more often than not, consumed by patients. At best, such drugs have no therapeutic effect. At worst, they contribute to a rise in anti-bacterial resistance, and reduce the potency of effective medicines. Year on year, the procurement of these drugs also causes a massive waste of public funds.

Without any cohesive policies governing them, pharmaceutical companies continue to mint money at the cost of patients’ health. And while the companies are to be blamed, the government is also complicit—successive administrations at the centre have failed to build a consensus between different states and central schemes in adopting a uniform procurement policy. The rising level of NSQ drugs in various government schemes and bodies—which, despite much evidence and admonition, the centre has been unable to control—makes the need for an umbrella procurement policy abundantly clear.

In 2007, in a performance audit it conducted of the Ministry of Health and Family Welfare, the Comptroller and Auditor General of India red-flagged irregularities in the drug procurement system of the Medical Stores Organisation—an office attached with the health ministry. The MSO is tasked with procuring drugs for healthcare and research in a government hospitals and dispensaries, as well as for a number of government health programs such as Reproductive and Child Heath, Tuberculosis and the Central Government Health Scheme, or CHGS, which provides medicines to retired and serving government employees. The CGHS serves about 30 lakh citizens, and operates through a network of 361 dispensaries, 19 polyclinics, 73 laboratories and 17 dental units. (It also includes 3 yoga centres.)

In the audit report, the CAG said that it had “serious suspicion about the quality of drugs” procured under the CGHS, and that it “suspected formation of a cartel of local chemists” that supplied drugs to the scheme. The report highlighted that, in the absence of a procurement policy delineated by the health ministry, schemes such as CGHS and bodies such as the railways and the armed forces—which have their own hospitals—had developed individual policies for buying medicines. For instance, at the time the CAG report was written, the CGHS was purchasing drugs based on the procedure laid down in a Medical Stores Depot Manual, a guideline that was written in 1970. This manual was revised in 2008, but the revision, even with measures marked out to control the influx of NSQ drugs, remained largely ineffective due to poor implementation.

In fact, the CAG audit unearthed a complete failure on the ministry’s part to prescribe a system to assess the quality of medicines being supplied by drug manufacturers. About 80 percent of the drugs for the period under audit—2002–2007—were secured from domestic suppliers, but, contrary to what was specified by the health ministry, local authorities had conveniently foregone the practice of drawing drug samples for testing. Instead, most of central-government hospitals had relied on the test reports submitted by the drug suppliers themselves.

Consequently, patients consumed these sub-standard drugs. Even in cases where the medical officers did file specific complaints on the quality of the medicines, a crumbling laboratory infrastructure made sure that the tests results were received too late. In two cases, the CAG report said, the lab report was received a year after the drugs had been consumed. In 20 other cases, 70 percent of the drugs had been administered before the lab results came in. The CAG report also noted that purchase of drugs from local sources led to “avoidable” expenses—additional expenditure incurred by the MSO by purchasing drugs locally, at higher costs—to the tune of Rs 41 crore.

The CAG report caught the attention of the Public Accounts Committee, a select committee of the parliament that audits the central government’s revenue and expenditure. In 2008, the PAC began to hold hearings on the CAG’s findings. The outcome of these hearings was detailed in the PAC's 2010-2011 report, and was placed before the fifteenth Lok Sabha. The PAC report found that in two years alone, 7,387 drug samples of 1,16,993 tested as NSQ—a distressing 6.3 percent.

When, during its inquiry, the PAC questioned the healthy ministry, it responded with an assurance that it had a “full-fledged federal drug authority set-up” and were about to recruit 400 additional inspectors. There has not been much improvement on this front. According to data submitted by the health ministry to the Rajya Sabha last year, as of September 2015, there were only 1,467 drug inspectors in the entire country, against an estimated requirement of more than twice that number.

The ministry, in its action-taken report before the PAC, listed out a slew of measures it had taken to check the flow of NSQ and spurious drugs in the country. But these measures have been largely ineffective. This failing was made evident in a 2015-16 PAC report, placed before the sixteenth Lok Sabha. The PAC observed, for instance, that during the year, under the CGHS in Kolkata, drugs later declared to be NSQ were issued to patients without the receipt of test reports ascertaining their efficacy. In Mumbai, medicines worth Rs 28.45 lakh received by a medical store depot between 2009-2012 were declared sub-standard. Moreover, of these, medicines worth Rs 15.66 lakh were consumed by patients.

The situation is not much different in the Indian Railways (IR). The Railways provide medical and health services to about 64 lakh beneficiaries including serving and retired employees as well as their dependent family members, through 129 hospitals and 588 clinics. Between 2008 and 2013, IR provided treatment to 11.67 crore patients.

One would assume that a high number of patients would result in a more robust monitoring system, but evidently, it is not so. A 2014 CAG audit report on the management of hospitals under the IR notes that in 20 hospitals spread over eight railway zones—south-east central, north western, east coast, eastern, western, northeast frontier, north-east, and west central railways—NSQ drugs worth over Rs 21.45 lakh were supplied. Of the 20, six hospitals prescribed the drugs before receipt of lab results certifying them as standard-quality medicines. Astoundingly, in Kolkata, 93.8 percent of the drugs were consumed before the test results came in.

The report also pointed out that the railways failed to put existing resources such as Railnet—an information platform meant for railway employees—to any use in centralising drug procurement. “The unfit reports found in the Zonal Railways should be made available on railnet for information to other zones,” it said.

Dinesh Thakur, a former Ranbaxy employee who blew the whistle on the unethical practices of the pharmaceutical company, filed a Right to Information application with the ministry of Railways asking for the name of the firms that have all been blacklisted for procurement by IR. To his surprise, he learnt that IR had no consolidated list of firms that had been barred from supplying drugs. IR simply sent his RTI application to different railway zones. Thakur later found out that every discrete railway zone had its own blacklist, and that none of these were possibly shared with other zones. Simply put, a supplier barred from supplying in one zone could very well be supplying in another.

Zones such as the southern railways, northern railways, south-central railways, and the east-coast railways all replied to the RTI saying that they had not blacklisted any manufacturer. Other such as the western railways, north-western railwaysnorth-east frontier railways and the eastern zone, had blacklisted some major firms such as Biocon and RPG LifeSciences (for one drug each); others such as Sandoz, Alembic Pharmaceuticals, and some Abbot Manufacturers companies, were barred from supplying all of their products.

Had the IR drafted a consolidated blacklist with names of all the manufacturers barred from supplying drugs, it would have served to inform other zones in real-time and assist them in executing purchases with diligence and caution.

The situation of NSQ drugs is even worse in hospitals under the defense domain. A 2012 CAG audit report of Armed Forces Medical Stores found that share of sub-standard drugs rose from 15 percent in 2006-07 to 31 percent in 2010-11.

Another ineffective aspect of the regulatory system is that the rules proposed by these central bodies and schemes focus only on small redemptive measures instead of strong regulation.

For instance, the CGHS blacklisting guidelines, listed in the MSO manual, classify defects into categories, and prescribe punitive measures according to the category of the defect. For instance, if on testing, a drug is found to contain a defect belonging to the first category, the supplier whose batch is was taken from could be barred for three years. If this happens a second time, the supplier is barred from ever providing drugs. But these measures ignore the bigger problem: in case of an NSQ batch, the source of the drugs—and not its supplier—needs to be examined. If the drugs have been sourced from a “Good Manufacturing Practices,” or GMP, certified facility—a facility where drugs are produced according to set guidelines and meet quality standards—then the entire operation deserves a thorough investigation for non-compliance and possible ban, not just the supplier.

The ministry of defense too, follows the same policy as the CGHS for the armed-forces hospitals. In the case of IR, a team of railway officers is held responsible for conducting an inspection of the manufacturing site, and determining if it is complying with GMP. But even in IR, the facility not complying with the norms will only be de-registered. The actual regulatory action—of shutting down the facility and informing other stakeholders—is not provided for.

The rising number of NSQ drugs indicates that existing policies are failing Indian patients, and must be changed. A centralised umbrella law on public procurement of drugs will eliminate variation in practices followed by the states and many government organisations, and bring in much-needed accountability of drug manufacturers. The policy will not only help curb extraneous public expenditure, it can affect the millions who are slowly falling prey to sub-standard drugs.

Kaushal Shroff is an independent journalist. He was formerly a staff writer at The Caravan.