Delhi HC Caps Price Of Chinese COVID-19 Test Kits After Case Reveals 145% Profit Margin In Deals

The Delhi High Court, on Sunday, April 26, had instructed three private companies that were importing COVID-19 testing kits from China to fix the selling price at Rs. 400 per unit which was earlier being sold at a price of Rs. 600 per kit, the rate approved by the Indian Council of Medical Research (ICMR).

Stressing on the "unprecedented medical crisis" that the country is facing, the court ruled out that the test kits should be made available at the lowest price and "public good must be prioritised over private gain."

"The litigation between the parties should give way to the larger public good," a single bench of said Justice Najmi Waziri, reported Livelaw.

"In view of the above, the kits/tests should be sold at a price not beyond Rs 400 each."

What happened?

According to the details of the case provided in Delhi High Court, the test kits procured from China whose delivered cost was Rs 245 per unit were sold to the ICMR for Rs 600 per kit, entailing a massive profit margin of 145%.

The variation came to fore when Rare Metabolics Life Sciences Pvt Ltd and Aark Pharmaceuticals, the two distributors of testing kits imported by Matrix Labs approached the Delhi High Court concerning a legal dispute.

Details of the case

Matrix Labs is the sole importer of SARS Cov-2 Antibody kits (testing kits) manufactured by China's Wondfo Biotech.

Rare Metabolics entered into an agreement with importer Matrix Labs for distribution of these kits in India.

In a separate agreement, Rare Metabolics appointed Aark Pharmaceuticals to be the distributors of these kits in India.

ICMR placed an order of 5,00,000 kits with Aark Pharmaceuticals, reportedly at a price of Rs 600 plus GST.

Matrix Labs (importer) sold the kits to Rare Metabolics for Rs 400 per kit and the distributors supplied the kits further to ICMR for Rs 600 (plus GST) per kit.

In the first batch, Matrix Labs delivered 276,000 of these tests to Rare and Aark for ICMR's requisition.

Price Disparity

According to reports, the total amount that ought to be paid by Rare Metabolics and Aark (distributors) to Matrix Labs for the 5,00,000 kits was Rs 21 crore (including GST).

Out of the total, a sum of Rs 12.25 crore has already been paid to Matrix Labs.

Reportedly, Matrix Labs demanded clearance of the remaining amount before delivery of the remaining 224,000 kits to both the distributors.

On encountering such a situation, Rare Metabolics approached the Delhi High Court filing a plea seeking the delivery of the remaining 224,000 tests which were to be delivered to ICMR.

Rare Metabolics, later added that the outstanding payment will be made as soon as it is received from ICMR.

Rare Metabolics also told the Court that importer had entered into a separate agreement to supply 50,000 kits to the Tamil Nadu government at the price approved by ICMR (Rs 600 plus GST) through another distributor, Shan Biotech & Diagnostics.

Reports suggest that out of the 50,000 test kits, 24,000 have already been delivered.

Delhi High Court Ruling On Profiteering

It is significant to note that these are the same Chinese COVID-19 testing kits that have stirred controversies for inaccurate results.

After several states reporting faulty results, ICMR had asked the states to immediately stop the use until further notice.

"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 (litigation) 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," said the Delhi HC.

The court directed that the remaining amount of Rs 8.25 crore (at Rs 600 per test) to be paid to Matrix Labs would be done within 24 hours of receiving payment from ICMR.

Also added that the remaining 450,000 units would be sold at the price of Rs 400 per unit to any government, governmental agency or private entity.

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