Massive 145% profiteering exposed in coronavirus rapid test kits sold to ICMR

KEY HIGHLIGHTS

• The $3 per test SARS CoV-2 Antibody test kits are being imported from China's Wondfo
• Its landed price, including air freight (Rs 20), to importer Matrix Labs is Rs 245 per test
• ICMR placed an order to buy 5 lakh kits on March 27, 28 @Rs 600 (plus GST) per test
• Importer Matrix Labs sells to distributor Rare Metabolics Life Sciences at Rs 400 per test
• Rare Metabolics contracted to ICMR at the government approved rate of @Rs 600 (plus GST)
• 2.76 lakh have been delivered to ICMR; remaining 2.24 lakh tests are about to land
• Rare Metabolics intends to sell 1 million kits; order was placed with Matrix for 5 lakh kits
• Matrix Labs has an order to supply 50,000 kits to Tamil Nadu through dealer Shan Biotech and Diagnostics at Rs 600 per test
• Of this, 24,000 have already been supplied; 26,000 more are yet to be delivered

A legal dispute in Delhi High Court between the distributor and importer of COVID-19 rapid test kits being shipped from China has unearthed massive profiteering and over-pricing in kits sold to Indian Council of Medical Research (ICMR). Observing that 61 per cent mark-up on such test kits is on the "higher side" but "more than sufficient", the Delhi High Court single bench of Justice Najmi Waziri disallowed a 145 pc mark-up from landed price of Rs 245 to ICMR's purchase price of Rs 600 per test. Instead, Justice Waziri slashed price for every kit by 33 per cent from Rs 600 to Rs 400 per test.

The order was against a petition by Rare Metabolics, the sole distributor of rapid antibody test kits imported by Matrix Labs, the respondent in the case, from China's Wondfo Biotech.

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The dispute was over release of the remaining 2.24 lakh kits--of the 5 lakh imported from China--to be sent to ICMR. Importer Matrix Labs had argued that it had only been paid Rs 12.25 crore of the Rs 20 crore (plus GST) or Rs 21 crore import. As per the agreement, the balance amount of Rs. 8.25 crores had to be first paid to the importer before any monies received from ICMR.

Rare Metabolics filed a petition before the Delhi High Court seeking release of the remaining 2.24 lakh test kits so that they can be supplied to ICMR as per the agreement. The petitioner argued that under its bi-partite agreement with Matrix Labs, no other company can market them in India. The company also said that it has already paid Rs 12.75 crore, which cover the freight cost for 5 lakh test kits. Rare Metabolics assured that payment due to Matrix Labs will be remitted as soon as it is received.

Dispute arose after Matrix Labs demanded upfront payment, whereas the petitioner maintained that the payment could only be made after ICMR released the funds. The petitioner informed the court that the consignment of 2.76 lakh rapid antibody tests has already been supplied to ICMR for which payment is still awaited.

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This payment will be made after the tests meet ICMR's standards. ICMR has put the rapid tests on hold after detecting faulty results from the Wondo kits. The Chinese firm has denied that they were faulty kits.

Matrix Labs countered that the agreement based on the understanding that the payment will be upfront, especially with regards to the consignment supplied to ICMR. Rare Metabolics stated that the "communication was under duress and contrary to the understanding between the parties".

The respondent also informed that court that it has received an order for 50,000 antibody test kits from Tamil Nadu government through dealer Shan Biotech and Diagnostics, of which 24,000 kits have already been supplied.

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"The Court is of the view that a profit mark-up of Rs. 155, i.e. 61 per cent on the landed cost price of Rs. 245, is much on the higher side and in any case more than sufficient for the seller, for the kits/tests to be made available in India for urgent extensive tests through the country, especially in these present extraordinary circumstances of the worldwide pandemic... Public interest must outweigh private gain. The lis between the parties should give way to the larger public good. In view of the above, the kits/test should be sold at a price not beyond Rs. 400 per kit/test inclusive of GST," the Delhi High Court ordered.

Following the Delhi High Court order, both parties have agreed to sell antibody test kits in India at the court-mandated price of Rs 400 per kit, inclusive of GST.

After listening to both parties, Delhi High Court decided that 2.24 lakh tests shall be delivered to ICMR, the moment it land in India. The balance amount of Rs. 8.25 crore has to be first paid to importer Matrix Labs within 24 hours of petitioner receiving monies from ICMR, before they are adjusted for any purpose. The court also ordered remaining 26,000 kits from the Tamil Nadu government's order to be provided directly to the stated the moment they reach India.

"So, from the other 5 lakh kits/tests, 50,000 shall be excluded for the State of Tamil Nadu and the remaining 450,000 would be available to the respondent to be disposed-off in terms of the above, directly to any Government or governmental agency or any private entity which has received due approval to carry out such tests," the court ordered.

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