The Comptroller and Auditor-General of India (CAG) has indicted the Union Health Ministry for “inadequate management of the pharmaceutical procurement procedures and operational principles for acquisition of medical equipment” in Central Government hospitals and under various programmes of Central Government Health Scheme (CGHS).

The lapses result in financial losses and affect the objective of providing diagnostic and therapeutic services to the public, the CAG said in its performance audit report, tabled in Parliament, adding that expenditure on purchase of supply and materials including medicines and medical equipment constituted about 13 to 16 per cent of total expenditure of the Ministry during 2002-07.

The report said that the procurement process was characterised by “ad hoc and arbitrary decisions”. In the absence of the Ministry’s own manual of purchase procedure, it said the only available manual prescribing procurement procedures specifically for medical stores organisation was the Medical Stores Depot Manual 1980, which was stated to be under revision.

The report said out of the total expenditure of INR 459.21 crore on purchase of medicines for CGHS dispensaries in Delhi during 2002-06, the value of purchase of medicines made through local chemists was INR 366.33 crore, which constituted 80% of the total purchase.

Similarly, the percentage of locally purchased medicines in CHGS Hyderabad, Bangalore, Allahabad, Patna, Kolkata, Mumbai, Pune and Guwahati during the year 2002-07 accounted for 74 to 91% of total purchases.

It pointed out that based on the variation in discount rates between the minimum discount rate offered by suppliers under centralised purchase system and maximum discount offered by local chemists, the department incurred extra avoidable expenditure of INR 41.21 crore in local purchase of medicines.

The CAG pointed out that the irregularities pertaining to cartel formation, serious suspicions about the quality of drugs and delays in settlement of the claims of chemists persisted in CGHS supply, since effective correctives had not been taken by the Ministry and the failure of the Department to make proper estimates of procurement requirements from time to time resulted in medicines valued at INR 5.87 crore becoming time barred in Government Medical Store Depots and CGHS stores.

The CAG also deplored the total lack of system for sharing the information on cost and quality of commonly used items of machinery and equipment costing less than INR 50 lakh in each hospital to bring about economy in their purchase.

It is critical of the Health Ministry for not devising a long-term and well-documented plan for procurement of equipment either centrally in the Ministry or at the level of individual hospital.

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