Explained: ICMR overpaid for Chinese COVID-19 testing kits?

New Delhi, Apr 27: The Indian Council of Medical Research (ICMR) on Monday asked the states to stop using COVID-19 rapid testing kits procured from China due to their poor quality even as the government said not a single rupee will be lost in cancelling the orders as payments were not made to the Chinese suppliers.

In a communication to chief secretaries of all states and union territories, the ICMR asked them to stop using the kits saying it found "wide variation" in effectiveness of the equipment supplied by the two Chinese firms despite the promise of good performance.

"The ICMR has not made any payment in respect of these supplies. Because of the due process followed (not going for procurement with 100 per cent advance amount), Government of India does not stand to lose a single rupee," the health ministry said, in the midst of a raging controversy over the procurement.

Meanwhile, the opposition 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.

India procured around 5 lakh rapid antibody test kits from the two Chinese firms, Guongzhou Wondfo Biotech and Livzon Diagnostics, and they were distributed to several states reporting rising cases of the coronavirus infection.

What is the dispute?

At a time when India is under the grip of the coronavirus pandemic, a legal dispute has araised 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).

Reportedly, 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.

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.

According to the companies, the ICMR had placed an order with Rare Metabolics for 5,00,000 Covid-19 rapid antibody test kits at Rs 600 each on March 27 and 28 for a total order value of Rs 30 crore.

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 2,76,000 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 5,00,000 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 2,24,000 tests to Rare Metabolics and Aark.

The court had been moved by Rare Metabolics, which was seeking the release of test kits by Matrix Labs, the importer of the kits. Matrix was seeking full payment upfront before delivering them.

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 Delhi High Court capped the price of imported antibody test kits at Rs 400 each, less than the rate of Rs. 600 approved by the Indian Council of Medical Research (ICMR).

The court is of the view that a profit markup of Rs 155 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," the bench said in its April 24 ruling.