Amidst Coronavirus Pandemic, 145% Profiteering by Private Labs Exposed

As India fights its battle against the novel coronavirus (COVID 19) pandemic with over 27,892 confirmed cases and 872 deaths, private entities are using this opportunity to make heavy profits. A legal dispute in the Delhi High Court led to the expose of a massive profiteering of 145% in the selling Rapid Anti-Body test kits to the Indian Council of Medical Research (ICMR), the government’s nodal agency.

As India fights its battle against the novel coronavirus (COVID 19) pandemic with over 27,892 confirmed cases and 872 deaths, private entities are using this opportunity to make heavy profits. A legal dispute in the Delhi High Court led to the expose of a massive profiteering of 145% in the selling Rapid Anti-Body test kits to the Indian Council of Medical Research (ICMR), the government’s nodal agency. 

The ICMR on 17th April 2020 announced a revised testing strategy wherein it advised the use of Rapid Anti Body tests for surveillance in COVID 19 hotspots. Following this India started importing the test kits from Chinese firm Wondfo Biotech. The Test kits were imported from China by Matrix Labs at a cost of Rs. 245/test. On March 27th the ICMR made a purchase order of 5 Lakh test kits with Aark Pharmaceuticals. Another private firm Rare Metabolics Life Science Pvt. Ltd. signed an agreement with the importer Matrix Labs to become the sole distributer of the kits. Rare Metabolics then had an agreement with Aark Pharmaceuticals to make them the distributers. 

Importer Matrix Labs who originally bought the kits at Rs. 245/kit sold these kits to Rare Metabolics at a rate of Rs. 400/test. The same kits were then sold to the ICMR at Rs. 600/kit which is a huge mark up of 145%. The shady deal was unearthed when the Rare Metabolics petitioned the Delhi High Court claiming breach of contract by Matrix Labs as it signed a separate agreement with the Government of Tamil Nadu via M/S Shan Biotech and Diagnostics to supply them 50,000 test kits at Rs. 600/test. The petitioner claimed that this deal should be struck down as the Rare Metabolics owns the distribution rights. The petitioner further informed the court that out of the 5 lakh test kits, 2.76 lakh of them were already delivered to the ICMR and asked the court to order the release of the remaining 2.24 lakh kits.

The respondent Matrix Labs argued that only Rs. 12.25 crore out of the Rs. 21 crore has been paid by the petitioner and as per the agreement the remaining Rs. 8.25 crore has to be first paid by the petitioner. The petitioner’s counsel Jayant Mehta informed the court that the amount shall be remitted to the respondent as soon as the ICMR releases the funds to the petitioner.

Upon hearing the case the court noted that the “profit mark-up of Rs.155 i.e 61%” is on the “higher side”. The single-judge bench consisting of Justice Najmi Waziri ordered the kits should “be sold at a price not beyond Rs. 400 per kit/test inclusive of GST”. The Delhi High Court order stated that “The country is going through an unprecedented medical crisis affecting public order … Public interest must outweigh the private gain. The lines 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 also ordered that 50,000 kits have to be kept aside for Tamil Nadu government and the rest should be released to the ICMR as soon as it arrives in India. Notably, the ICMR on 27th March 2020 has ordered all the states to stop using the earlier supplied Rapid Anti-Body test kits and to return them. A letter to the Chief Secretaries of States/UTs signed by G.S. Toteja, ADG, ICMR states that “ICMR, thereafter, has also evaluated the kits of Guangzhou Wondfo Biotech and Zhuhai Livzon Diagnostics in field conditions. The results have shown wide variation in their sensitivity, despite the early promise of good performance for surveillance purposes. In view of this, States are advised to stop using these kits procured from the abovementioned companies and return them to be sent back to the suppliers.” This comes in the backdrop of many states like Rajasthan and West Bengal complaining of inaccurate and faulty kits.

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