The government decision to insert a preferential purchase clause in favour of drug PSUs in all central government and PSU medicine procurement schemes has attracted wide spread criticism from all sections of the industry. Calling the step retrograde, industry associations representing small and medium pharma companies wanted similar preferential purchase clauses to be applicable to drug SMEs as well.

The Union Cabinet had given its approval to the Central government departments, PSUs and other Central government bodies for preferential purchase of 102 drugs and pharmaceuticals exclusively from Pharma CPSUs and their subsidiaries last week.

The government had decided that the Purchase Preference Policy (PPP) in respect of a maximum of 102 medicines would be valid for a period of five years. It had also stated that PPP would be applicable to purchase of 102 drugs made by State Governments under health programmes which are funded by the Centre.

Currently, PPP is extended only to Pharma Central Public Sector Enterprises (CPSEs) and their subsidiaries, where Pharma CPSEs own 51 per cent or above, shareholding. It would be applicable to maximum of 102 medicines as notified by Department of Chemicals & Petrochemicals from time to time.

"The government should attempt to provide a level playing field for all players in the drug manufacturing sector. Such preferential agreements are the primary reason for the downfall of drug PSUs. Same opportunities should be given to everyone. Big players may not need this offer, but certainly the SMEs should be considered on equal footing," Dara Patel, Secretary General, Indian Drug Manufacturers Association (IDMA) opined.

It should be noted that the Ministry of SSIs had also sought the inclusion of SSIs in the preferential purchase agreements of public sector institutions.

T S Jaishankar, chairman, Confederation of Indian Pharmaceutical Industries (CIPI) said "The government should put an end to this unreasonable sops to drug PSUs. They are trying to impress the Left Parties at the cost of exchequer. Which drug PSU is Schedule M compliant? Who is going to compensate the small scale drug manufacturer for the money he has invested in upgrading his facilities to Schedule M? No body is concerned about the investment made by SSIs. This purchase preference decision is very, very unfair and beyond any reason."

The total purchases of Central Government Department [CGHS, Defence, Railways, ESIC, National Rural Health Mission (NRHM), National Aids Control Organization (NACO) etc.] are estimated to be approximately Rs 2,000 crores. The purchases of state governments account for another Rs 1,500 to Rs 2,000 crore per annum for their health programmes. The decision is bound to create an exclusive market for drug PSUs.