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Explained: What is the Controversy Around Profiteering in Sale of Covid-19 Rapid Kits to ICMR

Representative image. (Image: Reuters)

Representative image. (Image: Reuters)

Congress leader Rahul Gandhi on Monday demanded Prime Minister Narendra Modi to take the strictest action against the alleged profiteering in coronavirus rapid test kits procurement.

New Delhi: The Indian Council of Medical Research (ICMR) on Monday directed states to stop using rapid antibody test kits procured from China after their results showed inconsistencies. The statement came after several states raised concerns over performance of tests.

"It needs to be stressed that the ICMR hasn't made any payment whatsoever in respect to these supplies. Because of due process followed (not going for procurement with 100% advance amount), the government doesn't stand to lose a single rupee," the Centre said.

Meanwhile, Congress leader Rahul Gandhi demanded that Prime Minister Narendra Modi should take the strictest action against the alleged profiteering in coronavirus rapid test kits procurement.

"Even when the entire country is fighting COVID-19, some people do not miss out on making unfair profits. Shame, disgust at this corrupt mentality. We demand from the Prime Minister that strictest action should be taken on these profiteers soon," Gandhi tweeted on Monday afternoon.

He said that the country will "never forgive" those making an unfair profit by selling testing kits.

Earlier in the day, Congress leader Ahmed Patel had targeted the Central government over antibody test kits being purchased for Rs 600 per piece by the ICMR, which were being imported for Rs 245 each. Delhi High Court had on Sunday directed that COVID-19 related tests should be made available to the general public at the lowest cost possible as the country is going through an unprecedented medical crisis affecting public order.

What is the dispute?

At a time when India is facing an unprecedented crisis because of the coronavirus pandemic, a legal dispute between an importer and a distributor has exposed massive profiteering in the delivery of coronavirus testing kits to the Indian Council of Medical Research (ICMR).

According to the details provided in Delhi High Court, SARS CoV-2 Antibody test kits procured from China, whose delivered cost was Rs 245 per test, were sold to the ICMR for Rs 600 per test, a huge mark up of 145 per cent.

The case came to light when Rare Metabolics Life Sciences Pvt Ltd and Aark Pharmaceuticals, distributors of Wondfo Biotech’s SARS CoV-2 Antibody kits imported by Matrix Labs approached the Delhi High Court to get their contract enforced.

What exactly is the case?

Matrix Labs is the sole importer of SARS Cov-2 Antibody kits manufactured by China’s Wondfo Biotech. Rare Metabolics entered into an agreement with Matrix Labs for distribution of these kits in India and expressed a desire to import 1 million of these tests. Rare Metabolics also signed an agreement with Aark Pharmaceuticals and appointed them distributors of these kits in India.

The ICMR placed an order of 500,000 kits with Aark at a price of Rs 600 plus GST.

Matrix Labs sold the kits to Rare Metabolics for Rs 400 per test and Rare Metabolics and Aark Pharmaceuticals supplied them further to ICMR for Rs 600 (plus GST) per test. In the first batch, Matrix delivered 276,000 of these tests to Rare and Aark for ICMR.

The total amount to be paid by Rare Metabolics and Aark to Matrix Labs for these 500,000 kits was Rs 21 crore (including GST). Out of this Rs 12.25 cr has already been paid to Matrix. Matrix demanded payment of the remaining amount before delivery of the remaining 224,000 tests to Rare Metabolics and Aark.

At this point Rare Metabolics approached the Delhi High Court seeking the delivery of the remaining 224,000 tests which were to be delivered to ICMR. Rare Metabolics argued that the payment will be made as soon as it is received from ICMR.

Rare Metabolics also told Delhi HC that Matrix had entered into a separate agreement to supply 50,000 kits to the Tamil Nadu government at the ICMR approved price (Rs 600 plus GST) via Shan Biotech & Diagnostics. Out of these 50,000 tests 24,000 have already been delivered.

These Wondfo SARS Cov-2 Antibody test kits have run into trouble with the ICMR and states for inaccurate results. After facing faulty results in states, ICMR asked states to not use them till it re-verified their results.

What is the Delhi High Court saying?

"The Court is of the view that a profit mark-up of Rs. 155, i.e. 61 per cent on the landed cost price of Rs. 245, is much on the higher side and in any case more than sufficient for the seller, for the kits/tests to be made available in India for urgent extensive tests through the country, especially in these present extraordinary circumstances of the worldwide pandemic... Public interest must outweigh private gain. The lis (litigation) 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," said the Delhi HC.

After hearing both sides, the court said in its order on Friday that the tests "are required in the country on an urgent basis in view of the worldwide pandemic" and directed that the remaining 224,000 kits would be delivered to ICMR the moment they arrived in India.

The court further directed that the remaining amount of Rs 8.25 crore (at Rs 600 per test) to be paid to Matrix would be done within 24 hours of receiving payment from ICMR.

Of the remaining 500,000 units, out of the initial order of 1 million, 50,000 has to be kept aside for Tamil Nadu government, the court said and added that the remaining 450,000 units be sold at the price of Rs 400 to any government, governmental agency or private entity.