The Health Ministry has for the past two years been purchasing drugs from the open market at retail prices for its extensive Central Government Health Services network instead of the earlier practice of sourcing from smaller drug companies at deeply discounted rates.

In separate petitions to Prime Minister Atal Behari Vajpayee and Health Minister Dalit Ezhilmalai yesterday, the All-India Government Pharmaceuticals Suppliers' Association (AIGPSA) has called for their urgent intervention to save the industry from financial ruin caused by the discriminatory policies of Health Ministry officials.

The manufacturers, have alleged in their petition, that the loss to the exchequer from this shift is estimated to be more thanRs 50 crore as the Government health network has been purchasing medicines at maximum retail prices from the open market instead of procuring them from small-scale manufacturers at much reduced rates. What is worse is there is no check on the quality of these purchases as most of the drugs are outside the Ministry's Drug Price Control Order (DPCO).

Sources in the Health Ministry admit that small-scale manufacturers had till recently been supplying around 80 per cent of the requirements of various Central and State Government institutions, including the CGHS dispensaries, hospitals, para-military forces and central jails.

The established practice for the Ministry was to shortlist essential medicines to be supplied to Government hospitals and other organisations. The list of drugs, known as `Vocabulary of Medical Stores' (VMS), was drawn up by a panel of medical experts including officials from the Health Ministry after evaluating various pharmaceutical units for the efficacy of the products, qualitycontrol and their technical know-how.

The procurement and distribution of the medicines was done through a chain of Government medical store depots located in Guwahati, Calcutta, Hyderabad, Chennai, Mumbai, Karnal and Delhi. This list was made available to all dispensaries and hospitals so that they could select the medicines as per their requirement and only if the product was not available was local purchase allowed to meet emergency situations.

The last such revision of the VMS list was made in 1996 after placing advertisement in the media and giving ample opportunity to manufacturers to present their case for inclusion of their drug in the list.

Deviating from this practice, Health Ministry officials have for two years now sat on the VMS listings, forcing all Government institutions to buy drugs and medical supplies directly from open market.

Alleging a `conspiracy' by foreign drug multinationals and some health officials, the AIGPSA said even after the present Health Minister gave directions thatthe old rates be applied till the new VMS is approved, the officials continued to discriminate against them by allowing only 28 days for the purchase procedure in September this year and then closing it again.

The uncertainty about orders and the crores worth of proposals pending with the Health Ministry or at the medical depot level has led to the closure of some units, drug manufacturers allege.