COVID19: Rapid Test Kits Supplier Would Have Earned a Massive 145% Profits, says Delhi HC
A trial in Delhi High Court has revealed massive profiteering and over-pricing by two firms in the COVID-19 test kits sold to Indian Council of Medical Research (ICMR). The $3 per test SARS CoV-2 antibody test kits are being imported from China's Wondfo Biotech and sold to ICMR at Rs600 or Rs30 crore for five lakh test kits.
While hearing a plea by Rare Metabolics Life Sciences to seek release of 7.24 lakh rapid test kits and other COVID-19 related material being imported by the respondent from China, the single bench of Justice Najmi Waziri found that the supplier had earned a massive profit of over 140%.
ICMR had placed an order with Rare Metabolics for 500,000 test kits at Rs600 each on 27th and 28 March 2020 for a total cost of Rs30 crore.
Rare Metabolics routed the order through Matrix, which is licensed to import medical material. Matrix imported the kits at Rs245 each, or a total of Rs12.25 crore, the court said.
It then supplied the kits to Rare Metabolics for Rs21 crore. Rare Metabolics then sold the five lakh test kits to ICMR for Rs30 crore.
The court observed that Rare Metabolics in turn made a profit of Rs9 crore "despite no value addition to the imported medical material". Of the Rs30 crore, which is to be paid by ICMR, Rs18.7 crore constituted the intermediaries' margin, the court says.
"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 24 March 2020. The economy is virtually at a standstill for the last one month. There is an element of disquiet apropos one's safety. Public interest must outweigh private gain. The lis between the parties should give way to the larger public good," the court observed.
The Delhi High Court then capped the maximum price of each rapid test kit imported by Matrix Labs at Rs400, including GST.
"For the people to be assured that the pandemic is under control and for the 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 throughout the country," said Justice Waziri while capping the price of the medical kits.
While the firms have delivered 276,000 kits to the ICMR, the court has instructed that the remaining 224,000 kits be delivered when the consignment lands in India.
Meanwhile, the union ministry of health and family welfare said that no payment has been made by the ICMR for the faulty Chinese testing kits for Covid-19.
Addressing a press conference, Lav Agarwal, joint secretary in the ministry, said that ICMR cancelled the order as soon as it found out that the kits were faulty.
"The ICMR followed the due process to finalise tenders for the purchase of rapid testing kits, based on sensitivity and specificity. When complaints from the field arose, ICMR reacted promptly and cancelled the orders. No payment was made to the vendors. No payment has been made by the ICMR to the companies whose testing kits were found to be faulty," Mr Agarwal told the media.
The ICMR had earlier clarified that it followed proper procedure for the procurement of the rapid testing kits from a Chinese company.
In a statement, the ICMR says that it tried to procure the kits directly from Wondfo company in China, but due to the terms and conditions regarding guarantee of the product and 100% advance payment, it decided to procure the kits from Wondfo's exclusive distributor for India, which quoted an all inclusive price for free on-boad (FOB) (logistics) without any clause for advance.
The quotation received for direct procurement had issues like being FOB without any commitment on logistics and 100% direct advance payment without any guarantee.
"There was no commitment on timelines. Also, the rates were communicated in US dollars without any clause for accounting for fluctuations in prices," ICMR says.
Separately, the ICMR has on Monday directed state governments to stop using rapid antibody test kits procured from China-based Guangzhou Wondfo Biotech and Zhuhai Livzon Diagnostics after their results showed wide variations.