How elements of the Indian state purchase drugs

by Harleen Kaur, Ajay Shah, Siddhartha Srivastava.

There is one well known problem in India: the problem of drug quality. A significant fraction of the drugs purchased and consumed are sub-standard.

There is another well known problem in India: the difficulties of government contracting. When state organisations choose to buy instead of make, they face difficulties in the entire pipeline from bid preparation to tendering to contract disputes to contract renegotiation to payments. Weaknesses in government contracting are a cross-cutting problem that hamper the emergence of state capacity in all fields.

Research on government drug purchase thus lies at the intersection of two literatures: the drug quality literature in the field of health and the government contracting literature in the field of public administration.

Government purchase of drugs is particularly important for three reasons:

1. The government is a large buyer of drugs, and the people would become more healthy if the quality of government-purchased drugs could go up.
2. If procedures for drug purchase by the government are improved, this could potentially have an impact on the optimisation of an important subset of firms who may then improve their quality standards, and this would impose positive externalities upon private buyers of drugs.
3. There are some policy pathways based on information about government testing of drugs, where the release of test data into the public domain, as a side effect of a well structured government purchase procedure, can also reshape the incentives of private firms in favour of higher quality.

A research literature on government drug purchase is required. For all researchers looking at this field, obtaining basic institutional knowledge is a bottleneck. A first building block of this is a description of how various elements of the Indian state buys drugs. This is the kind of paper that everyone wants to read but nobody wants to write. We have made a first attempt at this descriptive paper.