Lack of transparency in tender specifications for bulk purchase of medicines on the part of the health department of Kerala has invited widespread complaints from outer state drug manufacturers.

The drug companies which participated in the state government tenders for 2003-04 allege that the government incorporated a last minute secretive clause of 15 % price preference to Kerala based drug companies thereby killing the chances of almost all outside participants in the tender process.

Companies feel that they have been misled to pay Rs 25,000 as non-refundable registration fee for participating in the tenders even as the government had hidden plans for favouring home companies.

Interestingly, none of the official documents give any hints of the price preference granted to the state based companies. The first notification issued by the Central Purchase Committee (CDC) of the Kerala State Health and Family Welfare Department on 24 - 03 - 2003 talked about the entire rules and regulations related with the tender process.

It had even stated that all companies who need to qualify for the tender should renew their registrations by paying Rs 25,000. Here the government had given a concession to the state based companies, as they were required to pay just Rs 10,000. But the notification had no mention of the price preference.

Once the list of qualified companies were finalized, the CDC asked the companies to furnish the rates at which they can supply the medicines. The official letter (dated 08 /07 / 03) in this regard (the complete set of tender) also talked about all other requirements except the price preference.

Most of the companies who had been expecting their rates to be approved and to be called for a price negotiation meeting (a usual process) were taken for a ride when they realized that they were never considered as the government had given 15% price preference to the state companies.

The final rate contract of CDC for medicines, surgical consumables, blood grouping serum and blood bank kits, which came on September 15, 2003, had two rates for home bred and outer state companies. For instance, if a Delhi based company was to get Rs 11.40 for 10x10 strip of paracetamol 500mg tablets, the government rates sanctioned for Kerala based companies for the same product ranged between Rs 12.54 to Rs 12.85.

Companies outside the state feel that while the state government is free to protect its industry, the terms could have been made clear thereby allowing the companies to either revise their rates or opt out of registering themselves with the CDC.

There are also complaints of discrepancy in the tender document and the final rate contract. The companies point out that while the government had invited the rates for supply of paracetamol oral suspension 150 ml / 5 ml, as per the rate contract, permission has been given to supply paracetamol 125 ml / 5 ml.
Companies allege rampant foul play in the whole process which allowed select few companies to quote for the real demand, while others were kept in dark. They say that the government had not issued any modification of tender document before the closing date.

The companies also find fault with the department's decision to give more price to Kerala based companies. "Giving price preference to local companies during the selection process is understandable. But what could be the reason of differential pricing? The government should have asked all selected companies to supply the medicines at the least quoted price. Let them announce a state quota and thereby give volume preference. But allowing different prices is nothing but discrimination," they complained.

While the Kerala government is facing complaints due to their over-enthusiasm to protect local companies, local drug companies in Tamil Nadu has moved the court of law protesting against the TN State Government's decision to withdraw all price preferences allowed to state level companies, it is learnt.