A legal dispute between private companies has left ICMR without antibody testing kits

On April 24, 2020, the Delhi High Court ordered that antibody kits from Chinese company Guangzhou Wondfo Biotech Co. Ltd should be sold to the Indian Council of Medical Research (ICMR) at Rs 400, about 33% less than what the ICMR had earlier committed to buy them for--Rs 600.

The order was passed in a case involving a dispute between two Indian companies, one of whom had alleged that the other ”siphoned off” antibody kits ordered by the Indian government to sell them to other clients, documents reviewed by IndiaSpend show.

The controversy is not just about the “siphoning” of testing kits or even the “high price” at which India may have been buying these kits. It is also about the fact that the kits are faulty, failing on the grounds of sensitivity and specificity. On April 27, 2020, three days after the Delhi High Court order, the ICMR itself issued a circular asking all state governments to immediately stop using the Wondfo antibody tests.

The ICMR does not want these faulty kits anymore, but it is unclear if it will have to pay for these rejected kits anyway. The Delhi High Court, before the ICMR had said that these kits were faulty and not to be used, had ordered that payments be properly made for the kits. IndiaSpend has sent queries on whether ICMR will have to pay for this, to ICMR’s director general Balram Bhargava and will update this story when there is a reply.

“It is as if the two companies went to court over a parking violation, but then the court also found that they were not wearing a seat-belt,” said an executive from a diagnostic company to IndiaSpend. 

Allegations of “siphoning” of the antibody kits

The details of the price that the ICMR was paying for these kits (Rs 600) and the mark-ups may not have come to light had the two Indian companies not gone to court.

Delhi-based Rare Metabolics Life Sciences was contracted by the ICMR to supply antibody tests to India at the rate of Rs 600. But they did not have an import license and entered into an agreement with a Chennai-based importer, Matrix Labs, to import the kits from China. The Chinese company which was to supply the kits was Guangzhou Wondfo Biotech Co. Ltd.

The reason Rare Metabolics took Matrix Labs to court, however, was not about the “high price” or the faulty nature of the Wondfo kits. It was with the allegation that Matrix Labs had “diverted, deflected, stole, siphoned off 24,000 tests, contrary to the contract, with the intention to sell in the open market at higher costs and thereby putting ICMR that is spearheading the COVID pandemic response in an embarrassing spot with shortage of test kits". This is recorded in their court petition reviewed by IndiaSpend.

According to the agreement between the two companies, Matrix Labs was supposed to supply the kits exclusively to Rare Metabolics but a lawyer representing Matrix Labs told IndiaSpend on the phone that they did indeed portion off some of the shipment to deliver it to states such as Tamil Nadu who had also ordered the same Wondfo antibody testing kits.

“We did have an exclusive contract with Real Metabolics but they could not get any orders except from ICMR and they negotiated the price at Rs 600,” said Amitabh Chaturvedi, a lawyer representing Matrix Labs in the Delhi High Court. “Matrix Labs was also getting orders from different parts of the country but Real Metabolics was not agreeing to supply at a good rate and was also demanding exclusivity. So we said we cannot help it even if it will be a breach of exclusivity… they wanted to profit. But we made it clear to the court that we are happy to sell at Rs 400.”

Real Metabolics also told the court that Matrix Labs as the importer was supposed to deliver the kits in Delhi, but somehow delivered it to the ICMR in Chennai. The consignment reached at midnight on April 17, 2020, but contained 264,000 tests and not the 300,000 that were to be supplied to the ICMR. When the person on duty objected to receiving the package because it fell short, another 12,000 tests were included with a new delivery note that recorded a total delivery of 276,000 tests, according to the petition.

Thus, Rare Metabolics says, Matrix Labs “siphoned off 24,000 tests before delivery to ICMR, thus violating the agreement in these times of pandemic and national suffering”. Real Metabolics had also paid Matrix Labs for all 300,000 tests.

On this, Chaturvedi said, the government of Tamil Nadu had also ordered 50,000 Wondfo kits and Matrix Labs took the decision to supply part of the Tamil Nadu government’s order by taking it out of the ICMR’s order. However, now even the Tamil Nadu government has suspended use of these kits after they were found faulty.

Real Metabolics also says that there have been discrepancies in some of the delivery notes issued by Matrix Labs.

Rare Metabolics thus approached the court asking that Matrix Labs be restrained from diverting any more of the 700,000 antibody kits that they are supposed to import from China. The court went a step further, and fixed the price of the kits. 

And in this dispute between the companies, the ICMR found itself in a fix, with there being no centrally procured antibody kits available for use in the country at the moment.

Although the Delhi High Court ordered that payments to the companies involved be made, the government issued a statement on April 27, 2020: “It needs to be stressed that ICMR has not made any payment whatsoever in respect of these supplies. Because of the due process followed (not going for procurement with 100% advance amount), GoI does not stand to lose a single rupee.” 

The Chinese Embassy in India has responded to the controversy in a statement that says both companies blacklisted by ICMR--Guangzhou Wondfo Biotech and Zhuhai Livzon Diagnostics--had been validated by India’s National Institute of Virology. “It is unfair and irresponsible for certain individuals to label Chinese products as "faulty" and look at issues with preemptive prejudice,” says the statement from Ji Rong, the spokesperson of the embassy. 

(Bhuyan is a special correspondent at IndiaSpend.)