Corruption allegation on the government in rapid antibody test kit procurement and its truth

    ICMR (Indian council of medical research), had a plan to buy a 5,00,000 rapid antibody test kit from Wondfo, Infotech china. But, ICMR did not buy directly from the manufacturer Wondfo, instead, they gave an order to Rare Metabolics, who is the only distributor of Wondfo in India. Rare Metabolics had a fixed rate of 600 Rs/ Kit and taken an order for 5 Lakhs kits which cost around 30 crores. 

Rare Metabolics are distributers, but because the manufacturer is from a foreign country [China], they need an importer of products. [Many times, assembling also required of received product which mostly done by importer company, who further, sell those assembled products to distributors, and distributors sell those products to end-users.] 

If we take an analogy of mobile phones, Apple who is in the U.S. is the main manufacturer of apple phones. [Here little tricky thing is for apple, they also outsource this task to falcon company to manufacture the phones [or it some parts]. But falcon does not sell those phones. It just manufactures and returns back to apple, who is the actual owner of the product. Similarly, it may possible that Wondfo also outsources the manufacturing of rapid antibody test kit [or its parts] internally to other companies in china]. They first need to find distributer in India to sell those apple phones [Till today they are not selling directly to the public in India but through distributors only]. Now it is possible that they ship phones in parts and distributors may do not have the facility to assemble those parts to give the final shape of the phone. In that case, the distributor finds importer who first buys those phones from Apple and later sells to distributer in the final form, and later this distributor sells those phones in their only shops or they further distribute in local shops. 

Similarly, Rare Metabolics has given an order to Matrix Labs to import those rapid antibody test kits from Wondfo, infotech, china. [Here I have tried to explain chain by the analogy of phones. But Whether rapid antibody test kit required assembly, and whether Rare Metabolics did not have the facility to import directly from the manufacturer is not confirm but they used this chain to get the final product delivered, is confirm]. Rare Metabolics who is selling this product in Rs 600 is bought by Matrix Labs in just Rs 245 including GST. So, Rs 355 profit earned by Matrix Labs and Rare Metabolics combined per one rapid antibody test kit. 

How this information comes out? 

Rare Metabolics already delivered 2.76 lakhs test kits to ICMR, which ICMR further distributed to a different state. Some days ago, many states reported that these kits are not giving accurate results. Because of that ICMR put a hold on the use of these kits. ICMR has not released money for 2.24 lakhs test kits because they are faulty and as per their agreement with Rare Metabolics, Money only paid if product clear scientific assessment of their performance. But the products are failed to do so, and the Government of India has not released Money to the distributor. 

ICMR had demanded to deliver 2.24 lakhs kits from Rare Metabolics, but a distributor company Matrix Lab denied delivery of remaining test kits because Rare Metabolics did not pay all money but only paid 12.5 crores. 

Because of this dispute, Rare Metabolics filed a petition in Delhi High court against Matrix Lab. Because as per agreement between Rare Metabolics and ICMR, Rare Metabolics have to supply all 5 Lakhs ordered kits and no other company can sell these kits except them. [ Tamilnadu government also placed ordered of 50000 rapid antibody test kits with them]. In court, when Rare Metabolics made the argument that they already paid 12.5 crores which are more than the actual cost of 5 Lakhs test kits [245*5L = 12.25 crores]. This argument revealed that the actual cost of this test kits is 245 Rs for Matrix Labs and they both companies actually taking around 150% of the profit from the government of India. 

Later High court gives a ruling to fix the maximum price of test kits 400/kit which allows around 61% profit to sellers and also ordered to release the remaining 2.24 lakhs test kits to ICMR. 

Then, the question is why the government of India had not tried to buy those test kits directly from Wondfo Infotech? 

As per the press release made by Ministry of Health and Family Welfare today, ICMR has not finalized the deal with directly with the manufacturer because they are not giving any commitment on logistics issue [ if a container has been damaged or packing has not proper or in route product had damaged, they would not take any responsibility]. The government must pay 100% in advance to the manufacturer without any guarantees. They are also not ready to give any commitment to the timeline. The rate also mentioned in the dollar without any clues what if fluctuation happens in price. [It is like you have to buy the product online, you have to pay money in advance, they will not give any estimated time for delivery and even it is not guaranteed that will not damage one. Moreover, if price changes you have to pay the difference at the delivery time] 

So, ICMR tried to buy these kits with a local supplier of these two companies. when they attempt the first time, suppliers had not responded because of the high demand for such test kits. When second-time ICMR attempted to purchase these kits, they get a response and they asked a quotation for two Chinese companies one was obviously Wondfo and the other was Biomedemics. 

For Wondfo, the 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 price. [This the price is directly given by the manufacturer only, so the price was not increased because of middle companies but the manufacturer itself wants high profit. ICMR also mentioned that the first time they have involved in such procurement]. 

This is how the final price decided is Rs 600/kit. So, there is not any such corruption done to buy ICMR or government of India, but they failed in negotiation with the company. The product is also available cheaply directly from the manufacturer but without any guarantee. Then a company like Rare Metabolics is ready to give commitment and guarantee but with a higher price. Similarly, like when someone wants to move a household from one place to other places, local movers and packers may ready with less rate but do not give guarantee whether they reimburse if any item damaged during moving, but branded company like Agrawal packers and movers may charge more but ready to give the guarantee.