THIRUVANANTHAPURAM: Unchecked intermediary agencies and deliberate procurement delays have inflated Keralam’s annual public drug bill by 50%, driving state expenditure from an estimated Rs 600 crore to Rs 900 crore, and prompting the health department to launch a major clean-up of the public healthcare supply chain.
A review by the department following the recent medicine shortage found that artificial supply delays routinely forced the Kerala Medical Services Corporation Ltd (KMSCL) into emergency purchases carrying markups as high as Rs 192 crore for half-yearly procurements. Intermediaries, allegedly backed by vested groups, exploited these loopholes to collect steep commissions, it was found.
An internal audit of the public healthcare supply chain uncovered a network of 22 intermediary agencies involved in drug procurement, most of which emerged over the past decade. Operating as mandatory liaison agents or authorised dealers, these entities effectively blocked medicine manufacturers from participating directly in government tenders.
While the quotes appeared compliant on paper, internal records show massive price inflation. For instance, at Thiruvananthapuram’s SAT Hospital In-House Drug Bank, where direct manufacturer supply is encouraged, insulin is procured at Rs 73 per unit. Under KMSCL’s agency-driven system, the same insulin was billed at Rs 99.65, generating a Rs 18.5 crore price difference across just four months.
Overall, price differences for all medicines procured through these intermediaries during a six-month stretch in the last financial year totalled Rs 192 crore.
“The agencies create artificial shortages to pave the way for emergency purchases at inflated costs,” said a source. “Under the guise of emergency procurement, these agencies even bring in blacklisted firms, showing complete disregard for quality controls and expiry dates.”
Citing one instance, the source noted that a rare oncology drug was bought through emergency channels at Rs 80 per unit instead of its standard Rs 64, despite low demand that easily allowed for routine procurement.
The health department has now formed a specialised six-member inspection panel headed by retired SP G Gopakumaran Nair, who had probed KMSCL drug procurement cases while with the Vigilance and Anti-Corruption Bureau.
‘Inventory mgmt critical for stability’
The squad includes undersecretary (health) Bijukumar T, assistant drugs controller Vinod V, In-House Drug Bank chief pharmacist A Biju, a KMSCL pharmacist, and retired medical education technical officer Dr Suresh Kumar G. The team is authorised to conduct unannounced physical audits across all 14 district drug warehouses and two sub-warehouses to reconcile physical stock against digital records, prevent stock manipulation, isolate near-expiry items and monitor waste disposal compliance.
The department is already dissolving KMSCL’s internal quality control wing and transferring oversight directly to the State Drugs Control office. Officials cited evidence that the secrecy of sampling data had been compromised under the old system.
Health officials also emphasise that fixing logistics and inventory management remains critical to long-term stability. The state is establishing a fixed annual purchasing calendar and standardised operating procedures (SOPs) for distribution to public hospitals.
“It is not that the agencies are the sole problem in the system; inherent inefficiencies must also be addressed,” Biju said. “Drug purchases can be managed far more efficiently simply by tightening inventory control and logistics.”
Way forward
Recommendations to improve drug availability
Procure directly from manufacturers
Make planned purchases
Improve inventory management
Streamline the logistics from warehouses to hospitals
Govt panel’s duties
Conduct routine inspections and surprise raids across all 14 district drug warehouses and two sub-warehouses
Match physical stocks with digital logs in the Drug Distribution Management System (DDMS)
Identify, flag and isolate near-expiry and slow-moving medications before they spoil.
Probe artificial supply shortages, emergency buys linked to illegal intermediaries
