Government to give priority to suppliers sourcing maximum local input materials in procurement of medicines

In yet another move to promote the manufacture of pharmaceuticals in India, the government has issued revised guidelines to give preference to suppliers who use more locally-available input materials in public procurement medicines.

According to the latest guidelines issued by the Department of Pharmaceuticals, the government would implement the revised Public Procurement (Preference to Make in India), Order 2017, which has introduced a concept of Class-I, II and non-local suppliers, based on which they will get preference in government purchases of goods and services.

A Class-I supplier will use local content equal to or more than 80 percent, Class-II suppliers will use 50-80 percent of local content, while a Non-Local supplier will use less than 50 percent. Class-I and Class-II suppliers will get higher priority.

The guidelines will be applicable to all central sector/centrally-sponsored schemes for procurement made by states and local bodies, if the scheme is partially or fully funded by the government of India. The public procurement of pharmaceuticals involve many types of medicines such as antibiotics, vitamins, pain, anti-diabetes, cardiac, among others meant for government hospitals.

The decision is expected to benefit various drug companies, ranging from the larger ones to smaller units.

In case the procurement value exceeds Rs 10 crore, suppliers are required to provide a certificate from the statutory auditors or from a practising cost accountant or chartered accountant giving the percentage of local content. The others have to provide self-certification mentioning the percentage of local content used.

The DoP has formed a five-member committee headed by the chairman and managing director of Karnataka Antibiotics & Pharmaceuticals, and includes one representative each from the National Institute of Pharmaceutical Education and Research (NIPER), the National Pharmaceutical Pricing Authority (NPPA), Central Drugs Standard Control Organisation (CDSCO) and Joint Director (Pricing), DoP for verification of the certificates.

Local content means the amount of value added (sourced) in India to the total value of the item procured, excluding net domestic indirect taxes and the value of imported content in the item including all customs duties as a proportion of the total value in percent.

The order has put in a fee of Rs 2 lakhs to file a complaint in case of doubt on the claim of other parties.

"It is the policy of the Government of India to encourage 'Make in India' and promote manufacturing and production of goods and services in India with a view to enhancing income and employment," the DoP order said.

India relies heavily on imports of active pharmaceutical ingredients, intermediates and excipients that are used in making drugs. The government, to encourage local manufacturing, has made 53 bulk drugs eligible for a production-linked incentive (PLI) worth Rs 6,940 crore, in a move aimed at reducing the country's dependence on Chinese raw materials in pharmaceutical manufacturing.

The government expects the scheme to benefit up to 136 manufacturing units, generating incremental sales of Rs 46,400 crore and significant additional employment generation over the next eight years.

Mahesh Doshi, National President, of Indian Drug Manufacturers Association, welcomed the much-awaited decision. "It's a good move, and it encourages local production," he told Moneycontrol.