Karnataka's Lok Ayukta investigating the drugs scam intends to write to all the Zilla Panchyats seeking information on drugs purchased by them from various agencies and their names. The Lok Ayukta is taking this step as the investigations have revealed that the agencies producing fake letter of authorization from the drug companies could have entered into a nexus with the Zilla Panchayats officers.

The racket involves transactions on paper for drugs that were never supplied to the Zilla Panchayats. There are also instances where an authorized agency supplied only half of the ordered drugs from the company but billed the Zilla Panchayats for the entire consignment.

In the health sector, only one percent of the State budget goes to the purchase of the drugs. Out of this 60 per cent is allocated to the Zilla Panchayats and 40 per cent goes to the government medical stores. Both the Zilla Panchayats and the government medical stores purchase drugs from the public sector or the private agencies.

"This is precisely where the racket is taking place," Lok Ayukta sources told Pharmabiz.com. Many a time the agencies produce fake letters of authorization and claim to be suppliers of reputed drug companies. They enter into a transaction with the Zilla Panchayats for sale of drugs, which they cannot supply.

In other cases, agencies, which are duly authorized, supplied only half the consignment and or ordered less by the Zilla Panchayats while billing for the full amount, the sources said.

"We suspect that it is often done with the connivance of the Zilla Panchayat officers. That is why we intend to write to the Zilla Panchayats to give all the details of the transaction made in the recent years, Lok Ayukta officials said. "The funds allotted to the Zilla Panchayats to purchase drugs have gone not only for the purchase of unwanted drugs but also spurious drugs. Payments were also made to the agencies for quantities not actually supplied."

Many transactions have been made for life saving drugs, which were meant for the poor patients in the government hospitals.

A possible nexus between fake suppliers and Zilla Panchayat officers could have resulted in the loss of crores of rupees to the government and also impacted the health of the poor rural patients, informed the officials from the Lok Ayukta.

Interestingly, such cases were reported in Bangalore Zilla Panchayat even after the raid by the Lok Ayukta on the drugs control department.

A senior official said that one agency had supplied drugs worth Rs.3.92 lakh on March 31 this year to the Bangalore Zilla Panchayat. This agency had forged an authorization letter saying that it was an agent of Hindustan Antibiotics Limited (HAL). The agency is Harishta Enterprises using the name of HAL placed an order for drugs with district health office of Bangalore Rural for nearly Rs.5 lakh worth drugs. The authorities approved the purchase of drugs and ordered the supply on the same day. 'Order and supply' for a non-existent consignment was made on the same day and the invoice contained no batch number which is mandatory, sources said.

Another agency supplied on March 15, 2003,drugs worth Rs.4.62 lakh from Embiotic Laboratories Pvt. Ltd., Bangalore. However a letter received by the Lok Ayukta said that it has not made any supplies of Cephalexin, an antibiotic, worth Rs. 2.55 lakh.

The Lok Ayukta officials informed that these were not just some of the isolated cases as there are several small companies, which sold the drugs to government hospitals by producing fake documents and letterheads of major companies. Their modus operandi is to appoint agents who pose as distributors of major drug companies or directly write letters on fake letter heads. "Authorities do not bother to check the credentials of these companies before sanctioning orders," sources informed.

Lok Ayukta sources pointed out that this meant that supply to that extent was only on a paper transaction and misappropriation of that much of money had taken place. Interestingly, both the agencies are located in Rajajinagar and have the same license number.

Lok Ayukta further informed that there is an established network involving six to seven persons with political connections behind the racket.