Indian Tender business Scenario Analysis

1
A THESIS
Submitted in partial fulfillment
Of the requirements for the degree of
Master of Business Administration (Pharmaceutical)
BY
OM PATEL
Batch 2011-2013
DEPARTMENT OF PHARMACEUTICAL MANAGEMENT
National Institute of Pharmaceutical Education and Research
Sector-67, S.A.S. Nagar (Mohali)-160062,
Punjab, India.
June-2013

CERTIFICATE
This is to certify that the work entitled, “Scenario analysis: public
procurement of drugs through tender business in India” has been
carried out by Mr. Om Patel under my direction and supervision.
Date: __________________
Place: S.A.S.Nagar, Mohali
Signature: ______________________________
Name: ______________________________
Designation: ______________________________
Department: ______________________________

National Institute of Pharmaceutical Education and Research
Sector – 67, S.A.S Nagar (Mohali) – 160062,
Punjab, India
DECLARATION
I hereby declare that the present work embodied in this thesis entitled, ‘Scenario
Analysis: Public procurement of drugs through tender business in India’ has
been carried out by me under the direct supervision of Dr. Naresh Kumar,
Consultant, NIPER.
This work has not been and will not be submitted in part or in full in any other
university or institution for any degree or diploma or to any other organization for
commercial purpose.
Date: ______________
Place: S.A.S.Nagar (Mohali)
Mr. Om Patel
Department of Pharmaceutical Management,
NIPER, Sector-67,
S.A.S. Nagar, Mohali-160062
Punjab, INDIA

4
ACKNOWLEDGEMENT
With immense pleasure, I am deeply grateful to my esteemed guide Dr. Naresh
Kumar (Consultant/Professor, NIPER), under the guidance of whom this project has
been done. They have been very generous with both their time and their patience in
providing inputs for effectiveness of the project, generosity with which information &
ideas were shared and for displaying confidence in my ideas and potential. I
acknowledge his advice and guidance throughout the year.
I wish to thank Dr. Anand Sharma (Professor, NIPER), Dr. Sunil Gupta (Assistant
professor, NIPER), Dr. Anil Angrish (Assistant Professor, NIPER) for being my
advisor. I appreciate their assistance and feedback on my thesis.
This project could not have been completed successfully without help of Dr. Naresh
Kumar who not only guided me but also encouraged and challenged me throughout
the project period.
I owe a very special word of thanks to my friends for helping me immensely
throughout this work and supporting me morally without which it would have been
highly difficult for me to complete this work.
Besides all I am highly obliged to Mr. Brijesh Agrawal who helped me get the
responses from Distributors and Super stockists in Ahmedabad region and also Ms.
Upasana Kharb, Mr. Abhijeet Goon and Mr. Dhaval Shah who helped me in one or
the other way. Apart I am highly thankful to the various officers of Civil and other
Government Hospitals who guided me to have the information regarding the
Tendering system in the respective institutions.
I am also thankful to all other faculties, staff members and my colleagues who have in
any way been helpful to me in this project.
Above all, I am thankful to my parents for helping me attain this position in life. I owe
all my love and affection to them.
- OM ROHIT PATEL

Scenario analysis : Tender Business in India 2013
Dedicated to
All divine powers which made me what I am

1 National Institute of Pharmaceutical Education and Research, Mohali
Table of Contents
I. Executive Summary.................................................................................................................3
1. Introduction.........................................................................................................................5
1.1 Global Institutional purchase of Medicines ..................................................................7
1.2 Indian Institutional Market .........................................................................................13
1.3 SWOT analysis ...........................................................................................................16
1.4 Combined effect of the cut throat competition and Taxation system in India............17
1.5 Need of the Study........................................................................................................19
2. Literature Review..............................................................................................................20
2.1 Study of Indian Government Health Expenditure Pattern ..........................................20
2.2 A study on dependency of people on low cost medicines and compromise
with the quality ...........................................................................................................23
2.3 A study of TNMSC and Delhi model of drug procurement and comparison
with other purchase models ........................................................................................25
2.4 Health Insurance and Microinsurance ........................................................................30
2.5 Free medicine to all.....................................................................................................32
3. Research Methodology .....................................................................................................34
3.1 Primary Objective .......................................................................................................34
3.2 Secondary Objectives..................................................................................................34
3.3 Research Design..........................................................................................................35
3.4 Limitation of the study................................................................................................35
4. Data Analysis & Interpretation .........................................................................................36
4.1 Perceptual Plot of Bidders and their perceptions’ match with respectively
preferred TIA based on the attributes .........................................................................36
4.2 Multidimensional scaling of different TIAs as per the similarity ratings of
Bidders........................................................................................................................40
4.3 Correspondence analysis of specific attributes and their relevance with
different TIA...............................................................................................................41
4.4 Factor analysis of the attributes of TIA ......................................................................42
4.5 Preference plot of factor analysis to differentiate the TIAs........................................43
4.6 Bidders thinking and preferences for the current system............................................44
4.7 Doctors’ views on current system...............................................................................51
4.8 TIAs’ views on current system ...................................................................................52
5. Findings & Recommendations..........................................................................................55
6. Bibliography .....................................................................................................................58
7. Appendix...........................................................................................................................60

List of Figures
Figure 1. Institutional purchase ramificated ..............................................................................6
Figure 2. Comparative health spending as per WHO ................................................................9
Figure 3. The pattern of pharmaceutical distribution system in India .....................................18
Figure 4. The pattern of pharmaceutical distribution system in India, Figures in USD..........23
Figure 5. Comparative figures of health spending per person per year USD as per WHO.....24
Figure 6. National health expenditure breakdown...................................................................25
Figure 7. Comparative Analysis between available stock in Tamilnadu and Bihar................26
Figure 8. Break Up of Insurance coverage in India.................................................................32
Figure 9. A comparison of Chittorgarh, TNMSC procurement prices and Market prices. .....33
Figure 10. Discriminant plot of Type of TIA and Attributes...................................................37
Figure 11. Preference plot showing the discrimination between areas of bidders...................38
Figure 12. Preference plot of discriminant analysis of type of TIA and ratings to the TIAs ..39
Figure 13. Multidimensional scaled plot of the TIAs according to the similarity ratings.......40
Figure 14. Correspondence analysis based on the TIAs preferred ..........................................41
Figure 15. Factor plot of attributes ..........................................................................................43
Figure 16. Preference plot according to two factors (components).........................................44
Figure 17. Highest preferred TCs in tender business...............................................................45
Figure 18. Second highest profitable TCs in Tender Business................................................45
Figure 19. Third highest profitable TCs ..................................................................................46
Figure 20. Transparency expected ...........................................................................................46
Figure 21. Margin given by companies ...................................................................................47
Figure 22. Documents which are tough to produce .................................................................48
Figure 23. Effect of e-tendering system entry .........................................................................48
Figure 24. Quality vs. Unethical practices...............................................................................49
Figure 25. Quality vs. Allowance ............................................................................................50
Figure 26. Liaison officer ........................................................................................................50
Figure 27. States which are transparent ...................................................................................51
Figure 28. Preference to generic or brands ..............................................................................51
Figure 29. NLEM efficient ......................................................................................................52
Figure 30. Budgets of TIA.......................................................................................................52
Figure 31. Funding in TIAs .....................................................................................................53
Figure 32. To whom do they provide medicines .....................................................................53
Figure 33. Type of system followed by TIAs..........................................................................54
List of Tables
Table 1. Procurement methods globally in practice.................................................................12
Table 2. Procurement methods practised by some countries as per WHO..............................13
Table 3. State-wise government drug expenditure in India (2001-02) as per NSSO ..............15
Table 4. Trends in sate wise government drug expenditure in India.......................................21
Table 5. Trends in Access to Medicines in India — 1986-87 To 2004...................................22
Table 6. Start of some health expenditure coverage schemes .................................................31
Table 7. Covered population with health insurance schemes..................................................31
Table 8. Discriminant analysis of Attributes vs. Type of TIA.................................................37
Table 9. Factor analysis SPSS output of tests of significance and factor loadings .................42
Table 10. Interpretation of Factors...........................................................................................43

I. Executive Summary
Health care costs are the second most frequent reason for rural indebtedness. A major
component of health care costs is medicines. Studies show that in India the cost of medicines
is anything between 50 to 80 percent of the total cost of treatment. Currently, many of the
patients seeking care in Public Health Facilities have to buy medicines from retail shops and
these medicines are very costly for a variety of reasons. However, in Tamil Nadu, since 1995
all patients visiting Public Health Facilities (which in Tamil Nadu, constitute 40% of the total
number of patients per as NSSO 60th round figures) get all medicines free. This has been
possible because of setting up of an autonomous corporation in the Public Sector, the Tamil
Nadu Medical Services Corporation (TNMSC), which procures in bulk directly from
manufacturers, quality generic medicines through a transparent bidding process. TNMSC
then supplies these to the Public Health Facilities (PHFs) through a demand sensitive
passbook system instead of the traditional ‘supply driven’ inflexible system of distribution. It
supplies about 260 drugs to Public Health Facilities as per its Essential Drug List and 192
‘specialty’ drugs for secondary and tertiary care as per need. The TNMSC procurement prices
of quality generic medicines are very low; for many medicines they are one tenth and
sometimes even one fiftieth of the retail prices (see also table in Annexure). Hence even at a
budget of Rs. 29 per capita, (Budget of Rs. 210 crore for a population of 7.2 crore) plus
medicines supplied by the Central Government (about Rs 20 per capita), Tamil Nadu is able
to provide free medicines to all indoor and outdoor patients in all PHFs ‐ (from all PHCs to
all secondary and tertiary care hospitals under the State Government). The Government of
Kerala has adapted the TNMSC model. The governments of Bihar and Rajasthan are in the
process of doing so. These are the major states which go for the tendering process of the bulk
drug purchase. And the budget of all these states reaches up to the 6000 crore rupees which
comprises of state level and central level funding per year. Also the budget of the PSUs is
over and above these figures. The government plans to roll out a nationwide free medicine
scheme by November 2012 but somehow it has been hampered, which will offer quality
essential drugs to all the patients in state-run hospitals and treatment centres. The Planning
Commission has already allocated Rs 100 crore for the scheme for the current fiscal. The
entire programme, however, is estimated to cost Rs 28,560 crore over the 12th five year plan.
At present, the public sector provides healthcare to 22% of the country's population. The
ministry estimates that this will increase to 52% by 2017 once medicines are provided for
free from 1.6 lakh sub-centres, 23,000 primary health centres, 5,000 community health
centres and 640 district hospitals. So day by day the Tender Business is expanding like
anything. Many more states are now to sail on the same path TNMSC has been running. The
Rajasthan and Kerala are the states which have achieved huge triumph to get the similar level
to TNMSC. Institutional procurement is unique in the sense it is totally based on the lowest

price procurement and the reach to the highest no of people actually in need of the treatment.
Also it has been the vital portion in the GDP segment of healthcare in India.
 This project is basically done to understand the picture of institutional procurement of
medicine and mechanism to know which are the attributes affecting the Tender
inviting authority as well as the participants.
 Here, the primary search was done to get the views of all the stakeholders in the
tender system. Responses of the TIAs, Bidders and the concerned Doctors who are
associated to formulate the formulary list in the respective hospitals provide very
useful information necessary to carry out scenario analysis. The responses of
Chemists and super distributors or liaisoners from different parts of India provide the
in depth perceptual tool to analyse different types of Tender Inviting Authorities
(TIA) based on their attributes like their purchase pattern, structure of payments, rules
and regulation, their formulary list requirements and their transparency in the whole
procedure.
 The study provides the in depth analysis of the perception map of the participants and
the TIA, preference plots of the same and the multi dimensional view of the TIAs
according to their attributes perceived by the bidders.
 The study will provide the knowledge to the start up business firms to look after
certain point before entry. The study may be useful to know how to modify the
product portfolio according to different TIAs and how to play the game during the
bids, how to analyse the market according to features of different TIA and how to take
advantage of that. The SWOT analysis of the whole institutional sales market gives
the clear cut idea about current and future trends of this different market segment.
Also the brief study regarding how the Micro insurance segment can be merged in the
medicines public procurement segment with or without involvement of the third party
agents or the private players, provide the new avenue going to be open in the near
future in India.

1. Introduction
Tender business in India is very complex and very complicated as far as the pharmaceutical
industry is concerned. It is mainly based on the procurement of the drugs by the central
government, states government and private as well as PSU’s hospitals or procurement of
medicine under different schemes which are for the benefit of their employees. All the drug
procurement agencies are termed as the tender inviting authorities (TIA). Up till now in
India the drug procurement system has been decentralized; means the separate authority

was given to the each government hospitals to procure the drugs as per their need and their
preferences but now a days the system has been advanced and the centralized mechanism
has been adopted to procure and supply the drugs to each government hospitals. The
bench mark models for the drug procurement system is TNMSC (Tamilnadu Medical
Service Corporation) model and also the Delhi model of drug procurement.
Figure 1. Institutional purchase ramificated
This has been the real labyrinthine network under which the whole sell-purchase streams
flow. Each step in this diagram is having its own and vital importance in the tendering system
and its important to understand it very carefully for the participants to take advantage out of
that. The whole structure in India is still very vague and very decentralized in nature due to
no concern by the respective state governments to improve the quality of the provided
medicines and the time gap between the actual demand and its fulfilment. Many of the
government annual reports say about the huge stock out or the waste of the over stocked
inventories and due to the small lifetime of certain drugs its uselessness in many regards give
us the idea that how much India still needs to improve its self in terms of the saving of the
money, time and improving the efficiency. Almost all the developed countries in world are
showing the figures that people living there are covered by the health insurance as far as
health risks are concerned and their 70 to 80 percent health costs are covered by mostly

insurance or the government. Just the reverse picture to that in India statistics show that the
people are insured for just 10 to 20 percent and they have to incur 80 percent or more out of
pocket cost as far as the health spending is concerned.
Many of the developing countries have started using the guidelines of WHO for the public
procurement of the medicine as large and they have started opening their economies to allow
the penetration of the private insurance companies and have shown immense interest in
starting highly efficient tendering system and centralized pooled procurement. Same is the
case with the TNMSC of India but still it lacks to match its standards to the WHO guidelines.
Despite not matching the level criterion of the WHO or the criterions followed by the
developed countries the TNMSC have been the highest efficient system in India. This shows
the poor picture of the whole Tendering system in India.
1.1 Global Institutional purchase of Medicines
As far as the global medicines public procurement is concerned the figure is showing huge
difference in terms of percentage of the overall health spending by the respective government
so far as developing countries are concerned and a bit less in developed countries because
these countries are highly secured due to the high penetration of the health insurance
schemes.
In 2009, the world spent a total of US$ 5.97 trillion on health at exchange rates or I$ 6.6
trillion (International dollars taking into account the purchasing power of different national
currencies). The geographical distribution of financial resources for health is uneven. There is
a 20/80 syndrome in which 34 OECD countries make up less than 20% of the world's
population but spend over 80% of the world's resources on health.
OECD countries spend a larger share of their GDP on health (12.4%), as compared to 6.5%
to the African (AFR) and 3.7% in South East Asian (SEAR) regions of WHO respectively.
This translates to per capita spending of I$4205 (US$ 4341) in OECD countries compared to
I$159 (US$ 83) in countries in the AFR and I$120 (US$ 48) in SEAR regions respectively.
Linking this to epidemiology, the figure shows that though the poorer WHO regions like
AFR and SEAR account for the largest share of the global burden of disease (over 50% of
global disability-adjusted life years lost) and 38% of the world's population, they spend only
2.5% of global health resources.
The Western Pacific (WPR) region without the four OECD Member States, Australia, Japan,
New Zealand, and Republic of Korea, accounts for 24% of the world's population (dominated
by China), about 16% of the global burden of disease but only 4.8% of the world's health
resources. The region of the Americas (AMR) and Europe (EUR), excluding the OECD
countries, account for 12.7% of the world's population, 11% of the global burden of disease
and spend only 7% of health resources. Richer countries with smaller populations and lower
disease burden use more health resources than poorer countries with larger populations and
higher disease burden.
Also all the major WHO and WTO member countries are very well aware about their
tendering process:

 Russia has been a huge economy so far as public procurement is concerned. And it
has not been fully digitalized so there were many issues reported of corruptions in the
public procurement of medicines. So the Russia has made new rules and regulations
to decrease the corruption practises in 2005.
 Mexico and other Latin American countries are saving more than expected USD
compared to five years later scenario (Only Mexico is saving more than 355 million
USD per year) by comparative price negotiations in tendering system
 Mexico and other countries are spending 56% of their drugs budget for patented
medicines which builds part of less than 15% of total inventory. But in India there is
no such provision for the separate procurement or the focused procurement for the
patented medicines
 UK is having separate 5 step tendering process from the start of the floating of the
tenders and to the end of the rate contracts
 China is having three step tendering check point by which they operate the public
procurement of medical equipments and medicines. In china they put focus more on
the needs of the end user rather than affordability and accessibility like India and so
they don’t focus on restricting the budgets for the medicines or likely essential
commodities
 Australia and New Zealand are fully digitalized as far as the procurements are
concerned. And all the submissions and bid are open on the government web portals
and all the things are done very transparently
Some online links to visit the online tender portals of developed and developing countries:
Europe:
 http://epin1.epin.ie/
 http://www.epsu.org/projects/procure/Defaultpr.cfm
 http://www.europrocure.com/general.html
USA:
 http://www.arnet.gov/
 http://www.bidcast.com/
 http://www.clasonet.com/index.html
 http://www.govcon.com/opportunities/CBD/
Singapore:
 http://203.120.163.3/ipmas/index.html
Mexico:
 http://www.compranet.gob.mx/
Japan:
 http://www.jetro.go.jp/cgi-bin/gov/govinte.cgi
China:
 http://www.accesschina.com/project1.htm
Australia:
 http://www.dfat.gov.au/mpu/mpu.html
Switzerland:
 http://www.svme.ch/

Figure 2. Comparative health spending as per WHO
Selection of drugs: Selection of drugs for procurement by the public sector should be based
on the national essential drugs list. The methodology for selection of essential drugs can be
found in The Use of Essential drugs, WHO Technical Report Series No. 895, Geneva 2000
(4).
Quantification of drug needs: To avoid wastage through over-stocking or stock-outs of
pharmaceuticals, a reliable system of quantification of drug needs is required. Estimating
Drug Requirements, A Practical Manual, WHO/DAP/88.2 (5) is a useful guide for
quantification of needs.
‘This has been the crucial portion where India lacks at large because lots of reports made on
the tendering system in BIHAR, UTTARPRADESH, CHATTISGARH etc. show the waste of
more than 50 percent of drugs in this publicly procured medicine stocks.’
Procurement: Procurement is being done through various methods such as tenders,
competitive negotiations or direct procurement. The aim is to provide quality drugs at the
lowest possible cost when needed.
22
7
17
50
56
52
12
15
29
48
20
7
6
60
44
15
28
38
20
15
11
10
44
73
44
22
38
42
53
70
46
49
73
79
78
29
45
75
60
54
68
83
83
84
34
20
39
28
6
6
35
15
25
3
7
14
16
11
11
10
12
8
12
2
6
6
Equatorial Guinea
Bostwana
South Africa
Uganda
Nigeria
Mauritius
USA
Canada
Bahamas
Mexico
Spain
Netherlands
France
Inida
Srilanka
Thailand
Maldives
China
Australia
Japan
New Zealand
UK
Comparative Gov health spendings
Out of pocket cost Government spending Others

Storage and Distribution: Correct storage of drugs to avoid deterioration and waste is
essential, as is a proper stock inventory control system that can be computerized. Drugs
should be available when needed. A system that enables coordination between drug needs
and supply will ensure adequate distribution of drugs from the central source to the health
facilities.
‘Here also India lacks in terms of the availability of the needed medicine at the time or
emergency, it is like the dream to get the medicine on time from the side of government in
certain areas of the India.’
Use: In addition to being available in the required quantities when needed, drugs have to be
used rationally. If not, drugs can be useless and even harmful. In addition to serious health
consequences, irrational drug use leads to waste, thus increasing the cost of running a drug
supply system. The adoption of the essential drugs concept, use of standard treatment
guidelines, monitoring of drug use and interventions for improvements are all important tools
that should be actively used.
Core principles of pharmaceutical Procurement recommended by WHO and adopted by the
Asia Pacific region developing countries:
Selection of drugs for optimal drug use is important not only from a medical point of view
but also to optimize use of funds for pharmaceuticals. Purchase of substandard products from
unknown or dubious suppliers represents a health hazard as well as a waste of funds. Drugs
should be available at the right quantity when and where they are needed. If drug estimates
are too high leading to overstocking, products may expire before the stock is used. Purchase
of substandard drugs and wastage due to overstocking increase the total cost of drugs.
Suppliers who deliver the goods according to the agreed schedules should be endorsed.
Based on the above considerations, the core principles of pharmaceutical procurements are:
1. Procurement of the most cost-effective drugs in the right quantities
2. Selection of reliable suppliers of quality products
3. Assurance of timely delivery
4. Use of the lowest possible cost
Also the WHO provides the necessary information that which kind of different tender format
can be used. In India very less concern is given on these aspects. In some countries, existing
laws and regulations are amended to more adequately address important issues that include
the following:
(1) Whether the tender should be open or restricted to prequalified suppliers
(2) The tender period
(3) How the quantities to be purchased are estimated
The following procurement methods are being used in actual practice:
A. Open tender

An open tender is a formal procedure whereby quotations are invited from a potential
manufacturer or supplier. Experience shows that contrary to expectations, pharmaceutical
companies generally respond to tenders even for relatively small quantities. As a result, too
many offers are submitted that overload the limited capacity of procurement agencies in
small countries and hence, the proper evaluation of the bidders, as well as the bids, cannot be
undertaken within the schedule of the tender process.
B. Restricted tender
A restricted tender, open only to prequalified suppliers, seems to work best in small
countries. Although initial evaluation of suppliers is time consuming, when a core of
prequalified suppliers has already been established, the recurring work for the procurement
agency and the overall workload is significantly lower than that in an open tender. Product
quality may be more easily assured through a restricted tender.
C. Competitive negotiations
Competitive negotiation means approaching a few selected companies and requesting price
quotations. Usually, this method results in higher prices.
D. Direct procurement
This is the simplest but perhaps the most expensive procurement method of all as it involves
direct purchase from a single supplier either at quoted prices or negotiated prices. This
method is well suited for emergency situations, but is not the preferred choice for routine
orders.
A restricted tender open for only pre-qualified suppliers could provide a better system for
quality assurance than an open tender. In a restricted tender, the pre-qualification of suppliers
is done independently of the evaluation of prices of the products. Therefore, the supplier
assessment can be done more objectively. With a restricted tender, pre-qualification can be
done continuously as prospective suppliers express their interests and before tenders are
conducted.
Assessment of suppliers in an open tender can be time consuming because of the large
number of bids. The period of evaluation of bids is a very busy one and assessment of
suppliers may not get done as thoroughly as it should.
Procurement
Method
Advantages Disadvantages
Open tender
Many Bids, some with low
prices and new suppliers can
be identified
High workload required in
evaluating bidders and selected
suppliers

Restricted tender
Fewer bids, prequalified
suppliers, quality easier to
ensure
Fewer bids and more limited
options, A system for
prequalification test for the
suppliers should be in place
Competitive
negotiations
Suppliers generally well
known and less evaluation
work
Generally higher prices
Direct
procurements
Easy and Quick High prices
Table 1. Procurement methods globally in practice (Source: WHO guidelines for public procurement of
medicines)
USA and Japan like developed countries are open markets for the world as far as public
procurement is concerned. They have very nice forecasting and the calculations for the need
and strategically made framework to invite the companies for the selected products which are
essential for the treatment of the patients at large.
Country Estimation Methods Procurement Methods
Fiji Consumption- Based Open Tender
Papua New
Guinea
Consumption- Based Open tender, direct procurement
Solomon Island Consumption- Based
Open tender, direct procurement,
service based
Vanuatu Population based Restricted Tender
Marshall Island Service and consumption based
Direct and negotiated consumption
based model
Northern
Mariana Island
Consumption- Based Direct procurement
Palau Consumption- Based Negotiated and direct procurement
American
Samoa
Service and consumption based Direct procurement
Cook Island Consumption- Based Negotiated and direct procurement
Kiribati Consumption- Based Open tender, direct procurement
Tokelau Consumption- Based Negotiated procurement

Tonga Consumption- Based Negotiated and direct procurement
Tuvalu Service and consumption based Negotiated and restricted
Western Samoa Consumption- Based Restricted Tender
Table 2. Procurement methods practised by some countries as per WHO
Developed countries procurement
Such countries show the less amount spent for the public procurement as they don’t need a lot
to cover the population in need of the healthcare medicine reimbursement because 70 to 80
percent risk is covered by the health insurance companies. Out of pocket cost is just 20 to 25
percent which is affordable. Much detailed information on the medicines’ public procurement
in such countries is not available.
1.2 Indian Institutional Market
India having 3,287,590 sq km (1,269,346 sq miles) area spreaded from the snow covered
Himalayan heights to the tropical rain forests of the south is the 7th largest country in the
world. It accounts for 2.4 percent of world’s surface of 135.79 million sq. kilometres.
Population wise India is second in the world and is expected to overshoot the world leader
China by 2050 with its growth rate of 1.93 percent. Currently it supports and sustains 16.7
percent of the world population. According to the 2001 national census Indian population was
1028 million with 532.1 million males and 496.4 million females with an overall literacy of
64.8 % and life expectancy of 61.8 years for males and 63.5 for females. Life expectance is
expected to reach 68.8 for male and 71.1 for female by 2020. The country has acquired all
round socio-economic progress during its post independence period and became one of the
top industrialized countries in the world (National Family Health 2006).
The 2010 budget of India has taken many measures to improve access to health care,
particularly for the poor and rural population. The budget allotment for the National Rural
Health Mission (NRHM) has been in-creased from Rs 19,534 crore in 2009-10 to Rs 22,300
crore which is a 14% increase over the year 2012. Also the budget of 37,330 crore has been
allocated to the Ministry of Health & Family Welfare in the year 2013-14 and NRHM will
continue to get the similar amount 21,213 crore in the same fiscal. It was estimated that by
the end of the year 2010 the insurance coverage for people below the poverty line will be able
to cover 20 percent of the Indian population covered under the National Rural Employment
Guarantee Act (NREGA) program there by making 10 million families covered by the
insurance scheme. It makes the eligible families to get hospital coverage up to Rs 30000
(Sujay Shetty 2010).

For administrative purposes India is divided into 28 states, 6 centrally administered Union
territories and the national capital territory of Delhi. The health expenditure is about 4.5% of
the GDP out of which 0.84 % is public expenditure and 3.32 % private and the remaining
from other sources including external flow. According to the National Health Profile 2006,
Government of India, the per capita health expenditure was rupees 1201 in 2005. The total
health expenditure measured by central and state governments was Rs. 2,84, 540 million out
of which 73.53% was the share of the states. As a share of total state expenditure, public
expenditure varied within a range of 3- 4% for all major states except Maharashtra where it
was 2.88%. In terms of spending 67.12% was for medical public health and 14.38% for
family welfare purposes. At the central level 40.70% of health expenditure was incurred by
defence, railways, post and telecommunications and re-imbursement for employees. Of the
total health expenditure, 55% was spent on allopathic system of medicine with considerable
variation in share between the centre and states. At the state level more than 60% of the
expenditure was incurred on allopathic drugs.
State Drugs
Materials
and supplies
Total
(Rs in
lakh)Health
expenditure
Drug
Expenditure
as % of
Health
Expenditure
Andhra
Pradesh
7923.09 4781.45 12704.54 131424.08 9.67
Assam 0 1530.1 1530.1 32690.82 4.68
Bihar 1996.9 206.29 2203.19 71348.49 3.09
Chhattisgarh 1822.47 680.22 2502.69 22587.1 11.08
Gujarat 1253.76 1440.06 2693.82 71547.95 3.77
Haryana N.A 3096.12 3096.12 31470.98 9.84
Karnataka 6927.17 856.82 7783.99 98633.19 7.89
Kerala N.A. 12420.68 12420.68 72931.59 17.03
Maharashtra 10 20295.91 20305.91 178379.51 11.38
Madhya
Pradesh
3965.86 3956.04 7921.9 66689.3 11.88
Orissa 1768.98 361.3 2130.28 42135.78 5.06
Punjab N.A. 916.32 916.32 61826.45 1.48

Rajasthan 3952.8 5092.25 9045.05 97311.61 9.29
Tamil Nadu 16428.68 1668.57 18097.25 118432.85 15.28
Uttar Pradesh 5938.25 1166.04 7104.29 135578.81 5.24
West Bengal 5005.25 793.23 5798.48 131948.35 4.39
Central Govt. 0.0 72649.23 72649.23 597700 12.15
All India 56993.21 131910.63 188903.8 1962636.86 9.63
Table 3. State wise government drug expenditure in India (2001-02) as per NSSO (Figures in Lac Rs.)
The expenses on purchase of medicines were higher in public hospitals in rural areas of states
like Haryana, Rajasthan, Jharkhand, Madhya Pradesh and Uttar Pradesh. In the urban areas
states like Bihar, Punjab, West Bengal, Rajasthan, Uttar Pradesh and Chhattisgarh spent more
for medicines. In the public sector, by and large, doctors fee has been negligible in total out
of pocket expenditure except in Chhattisgarh rural where it was 37.8% and Punjab urban at
17.2%. Cost of medicine incurred has been high across all states both in rural and urban
areas.
A brief about the history regarding rational use of drugs in India
The problem of irrational drug use and the need for a rational drug policy came into public
discussion in its current form in the 1970s. The Hathi Committee report of 1978 was a
significant turning point, alerting not only India but the world to the problem of rational drug
use. Another milestone was the Lentin Commission report of inquiry into deaths related to
use of spurious medicines. At the international level, the programme to ensure global
accessibility to quality assured and affordable medicines, particularly for the poorest among
the world population, was initiated by the World Health Organization about 25 years ago.
The first Model list of essential medicines of 1977 preceded the famous 1978 Alma Ata
Declaration on Health For All and is widely regarded as one of WHO’s most influential
public health achievements.
By the turn of the century over 150 countries had a national list of essential medicines, and
over 100 countries had a national medicines policy. Although initially aimed at the
developing countries, the concept of essential medicines is increasingly seen as relevant for
middle and high income countries as well. Most medicine budgets in developing countries are
below $3per person per year, with 38 countries having less than $2 per person per year.
Hence, it is vital that the countries work both to increase drug financing within overall health
financing, and to apply the essential medicines concept to achieve the best possible health
outcomes within available resources. Throughout the eighties and nineties, a number of civil
society organizations in India like the All India Drug Action Network (AIDAN), and the

National Coordination Committee on Drug Policy (NCCDP), the Delhi Society for Promotion
of Rational Use of Drugs (DSPRUD) and Health Action International (HAI) played a major
role in keeping this issue alive and in the public consciousness.
In the nineties the Tamil Nadu Medical Services Corporation (TNMSC) set a national and
international benchmark in the rational use of drugs in the public sector, especially as regards
procuring, logistics and capacity-building. Indeed the goal of universal access to essential
medicines is nearest achievement in this state because of the progressive policies of this
unique institution. However as of today despite such sustained efforts a rational drug use
policy is not in place in most other states of India. Many of the states are now on the path the
TNMSC has carved and like Delhi, Silvassa, Karnataka, Kerala, Goa, Madhya Pradesh,
Andhra Pradesh, Chattisgarh, Gujarat, Uttar Pradesh, Arunachal Pradesh and Sikkim have
started following the same kind of practises TNMSC has adopted. Many have achieved the
certain level of success and still many remains to touch the level of efficiency the TNMSC
has achieved. India needs to look after the certain issues as far as the availability of medicines
is concerned as follows.
Key procurement policy issues regarding the availability of the drugs
 At least 15% allocation of public funding for health to drugs
 State must procure all EDL medicines
 Separate AYUSH, EDL and centralised procurement at state level
 Prescription & Dispensing in accordance with Standard Treatment Guidelines (STG)
 A two-bid open transparent tendering process
 Quality generic drugs ensured
 Warehouses at every district level
 An autonomous procurement agency for drugs, vaccines & diagnostics
 An empanelled laboratory for drug quality testing
 Enactment of Transparency in Tender Act
 Prompt payments
1.3 SWOT analysis
Strengths
• Benchmark models like TNMSC are available as an example
• India has been the hub for providing low cost medicines, prices of generic drugs in
India are lowest in the world
• Lots of manufacturers are available for meeting the huge supply of medicine needed
• Being the second highly populated country it provides the platform for economies of
scale
Weakness
• Corruption at each and every level in majority of the states in India
• Low efficiency in forecasting the annual demand
• Low profile Essential drug lists

• Weak Regulatory network
Opportunities
• Club of the Procurement of drugs with the scheme of micro insurance
• Centralized procurement which can be more efficient rather than today’s ramificated
decentralized procurement system
• Government can do the PPP for better administration of the Tender system
• Opening up of the economy for insurance companies to decrease the burden on public
procurement
Threats
• Immense competition invites the scope of low quality products
• The whole system comprised of generics and low cost attributes discourage the
foreign players to entre due to very low profit margins
• In focusing on affordability and availability the R & D and Quality segments are
defocused
1.4 Combined effect of the cut throat competition and Taxation system in India
Direct impact of competition and Taxation system is to increase the corruption on every level
and to increase the number of channels between direct manufacturer and the consumer or the
TIA. The whole channel is as shown in the figure.
The Indian drug distribution system has a four or five no of layers: The Pharmaceutical
manufacturers, clearing and forwarding agents/depots/super stockist, stockists, wholesaler
and retailers.
Now the tax system is going to be the fully VAT based but till now the distribution set up in
the Indian pharma industry has been highly fragmented and has been evolved on the basis of
two tier tax system, viz. the central sales tax and local sales taxes. The inter-state sale attracts
the CST and inter-state transfer of goods doesn’t attract the taxes at large. Therefore in order
to avoid the CST, all the medium and big pharma companies have a CFA or the company
depot in each state of the country to transfer the goods as inter-state stock transfer.
In the practise each of the larger pharma company has one or more than one pharma CFA in
each state of India. Also it may be the case that not all the state warrant the CFA. If the 50 to
100 large pharma companies have more than 25 CFAs at large there will be 1500 or more
CFAs in the whole country. After the 1996 post liberalization this number has been increased
like anything. The major thing to understand is that when the stockists receive the goods from
the CFAs they receive the invoice in the name of Manufacturer but not in the name of the
CFAs
The fee of the CFAs is the fixed margin or the commission which depends on the turnover. It
ranges from the 2 percent to the 10 percent according to the nature of the product. These
CFAs are allowed to participate in the tenders on the name of the company. Now-a-days the
VAT system has decreased the effect of the two tier taxation system and so the importance of
the CFAs has been decreased and so the companies should avoid losing the margin of 2-10
percent and they should bid at that low price which gives them advantage to win the tender.

Figure 3. The pattern of pharmaceutical distribution system in India
.
If we talk about the effect of the cut throat competition, there has been the cases reported in
the Bihar and Uttar Pradesh region where the officers who tried to bring in the clear
transparency were gunned down due to loss of the profits by local players. Government of
Uttar Pradesh is reckoned to be the more corrupt than the most. A senior officer who tried to
decrease the corruption was gunned down in the July 2000. In the same state the budget for
the medicines for the Judges of the High Court in Allahabad is 50% of the budget for the
whole district, and Pilibhit (a small, poor and remote district) has the same drugs budget as
Lucknow. In both the cases procurement is managed so large purchases are done of glucose
drips and tonics etc. These are added indiscriminately to the prescriptions written by the
Government Doctors, who are rewarded by the local companies who dominate the local
procurement agency. The chief Medical Officer also takes the commission on the local level
where the purchase is of low quality, outdated drugs in the health centres. On an average
doctors’ prescription there will be perhaps 10 drugs out of which six would be useless and
only two will come from the hospital stores. There are Drug Mafias that are so well

entrenched without their permission no one can become health minister in that local region.
In the contrast picture the TNMSC model id fully centralised state authority driven model
where there are less scope of such discrepancies in the financial handling or the misuse of the
powers.
1.5 Need of the Study
As discussed above in the introduction portion the Indian Institutional Medicines
Procurement segment is untouched avenue in the pharmaceutical industry because very little
information regarding all the aspects is available. With that intrigue to know something more
in this regard and to know the basic perceptions of both the buyer and the supplier for each
other simultaneously with consideration of the view point of all other stakeholder in the
tendering system the study was conducted. In Indian context overall market is expected to
reach 10000 crore Rs. as far as the institutional purchase is concerned which is the overall of
the budgets of central plus state government funding, WHO, UNESCO and UNICEF like
organization’s grant for the betterment of the health in rural areas and partly funded by the
government employees in terms of micro insurance or other insurance schemes. Moreover the
Indian government is now planning to roll out the scheme called ‘Free Medicine to all’ under
which government is planning to make the centralized procurement system which will cost
around 28000 crore Rs for Five year plan means each year about 5500 crore spending by
central government on spending of drug procurement for public at large. One of the
objectives was to know how efficiently this funds and budgets are utilised to provide the free
medicines to the people who are in actual need of the medical treatment.
Having the idea about the new segment like public procurement adds the knowledge of the
different and untouched aspect of the Indian Pharmaceutical industry and unleash and
uncover the astonishing truth regarding the Government healthcare expenditure and
perceptions of those 15000 large to SME scale companies which build the entire generic drug
based Indian pharmaceutical industry.
Objectives of the study:
 To know the structure of the medicines public procurement system in India
 Mapping the stepwise process of existing tendering system
 To know about all the stack holder of this system
 To study the perceptions of TIAs for their bidders and vice versa the perceptions of
Participants to the different type of Tender Inviting Authorities.
 To find out the problems faced by the participant and the better options available with
the government
 To find out the solutions for the respective problems and to draw out the conclusion
regarding the current procurement system

2. Literature Review
2.1 Study of Indian Government Health Expenditure Pattern
In the current fiscal year the budget allocated to the Ministry of Health and Family Welfare
was about Rs. 37,330 crore which makes round about 2 to 3 percent contribution to the total
GDP of India. Public spending on drugs is extremely low, with huge variation between states
and across districts within a state. As evident in Table 2, data from 2010- 2011 indicates that
about 10-12% of the health spending in the states of Tamil Nadu and Kerala goes towards
procuring drugs as against the 2-3% spent on drugs by states like Jharkhand, Punjab and
Rajasthan. While there has been a significant improvement in drug procurement in the state
of Bihar during this period as a result of increased allocation of NRHM funds, the financial
allocation for drug purchase by the government and level of drug allocation and procurement
were extremely low in earlier years. Despite a recent steep rise, states like Bihar are still

spending a very little (Rs. 8 per capita) on drugs. Skewed priorities in drug spending by
governments are a stark reality in several states.
TRENDS IN SATE WISE GOVERNMENT DRUG EXPENDITURE IN INDIA
State Name
State wise Government Drug Expenditure in India
2001-02 2010-11
Overall
(Lakh)
Per Capita
(Rs.)
Drug
Expenditure
As % of HE
Overall
(Lakh)
Per Capita
(Rs.)
Drug
Expenditure
As % of HE
Assam 1530 5.7 4.7 8635 28.5 5
Bihar 2203 2.6 3.1 13350 13.8 7
Gujarat 2693 5.3 3.7 15431 26.4 7.6
Haryana 3096 14.7 9.8 6090 24.2 5.5
Kerala 12420 38.9 17 24861 72.3 12.5
Maharashtra 20305 20.8 11.3 20882 18.7 5.2
Madhya
Pradesh
7921 13 11.8 12213 17.1 9.3
Punjab 961 3.7 1.4 1545 5.6 1
Rajashthan 9045 15.9 9.3 3854 5.7 1.5
Uttar
Pradesh
7104 4.2 5.2 31481 15.9 5.3
Jharkhand - - - 2716 8.7 3.4
West Bengal 5798 7.2 4.3 21403 24.1 6.8
Andhra
Pradesh
12704 16.6 9.6 23458 27.9 10
Karnataka 7783 14.7 7.9 14831 25.1 6.3
Tamil Nadu 18097 28.9 15.3 43657 65 12.2
Himachal
Pradesh
- - - 1122 16.6 1.9
Jammu -
Kashmir
- - - 4550 39.2 4.3
Central
Government
72649 7 12.2 253368 21 15
All India 188903 18 9.6 503447 43 13
Source: HLEG Secretariat, based on state-wise Budget Documents and Demands for Grants.
Table 4. Trends in sate wise government drug expenditure in India

At the one end of the spectrum are states like Rajasthan and Orissa, which are reported to
have spent over 90% of resources on tertiary care medicines, followed by states such as
Gujarat, West Bengal and Punjab who have allocated over 70% of their drug expenditure on
tertiary care drugs. At the other end of the list are states like Chattisgarh, Tamil Nadu,
Jharkhand and Karnataka, where over half of all drug spending has gone into primary and
secondary care.
Governments need to commit a higher level of spending on drugs to reduce inter-state and
inter district disparities in drug spending which become barriers to access and affordability.
Advancing the cause of Universal Health Coverage is predicated on the assumption that
efficient use of resources will be achieved. Unnecessary spending on nonessential medicines
has to be reduced and irrational use eliminated. Improving overall governance and
accountability of medicine supply system is absolutely essential to make medicines available
to one and all.
India’s drug policies over the years have created an environment of duality. The country not
only produces enough drugs to meet domestic consumption, but as one of the largest
exporters of generic and branded drugs, is also known as the ‘global pharmacy of the south.’
India exports life-saving drugs to developing countries and also supplies quality drugs to the
rich nations at affordable prices. Despite this seemingly commendable performance, millions
of Indian households do not have access to drugs.2 This results from both financial (lack of
the necessary purchasing power) and physical (lack of public health facilities) barriers.
Evidence from large sample surveys of households over the last 25 years suggests that the
impediments to access of medicines have become steeper. During the mid 1980s,
approximately a third of the drugs prescribed during hospitalisation were supplied for free.
This declined sharply to only about 9 % by 2004. Free drug supply for out-patient care has
fallen from 18 % to about 5 % over the same period.
TRENDS IN ACCESS TO MEDICINES IN INDIA — 1986-87 TO
2004
Period
Free
Medicines
Partly
Free
On
Payment
Not
Received
Total
(In %)
In-patient
1986 -87 31.2 15 40.95 12.85 100
1995-96 12.29 13.15 67.75 6.8 100
2004 8.99 16.38 71.79 2.84 100
Out-patient
1986-87 17.98 4.36 65.55 12.11 100
1995-96 7.21 2.71 79.32 10.76 100
2004 5.34 3.38 65.27 26.01 100
Table 5. Trends in Access to Medicines in India — 1986-87 To 2004

During the same period, the number of hospitalisation episodes in which an ailing population
paid out-of- pocket (OOP), has risen dramatically from about 41 % to close to 72 %. As far as
out-patient care is concerned, the proportion of drugs fully purchased by households
decreased from as high as 80% in the mid-1990s to 65 % in 2004. Table 1 shows that since
medicines have started becoming unaffordable since the mid-1990s, by 2004, in over one-
fourth of outpatient episodes, patients did not receive medicines because they could not
afford them. Table shows how heavily the Indian population is dependent on private
chemists. The availability of free or partially free drugs in out-patient care is extremely low.
Figure 4. The pattern of pharmaceutical distribution system in India, Figures in USD.
This highlights the limited protection offered by the government and the preponderance of
private players in drug prescription and dispensing. State-wise evidence from Figure 1 shows
that people in some of the southern states appear to have relatively better access to medicines
than in the other states. The success of the Tamil Nadu Medical Services Corporation
(TNMSC) model is clearly reflected in the proportion of people able to obtain medicines free/
partly free from public health facilities. The Tamil Nadu figure is close to 25% in the case of
Tamil Nadu, followed by Karnataka, Kerala and Delhi. The lower percentage share in other
states indicates higher reliance on private chemists.
2.2 A study on dependency of people on low cost medicines and compromise with the
quality
As we all know it has been the weakness of Indian Government to spend less on the public
health or being inefficient to provide the low cost medication in the nation. As per the figures
available since 2004-05 to 2013 the India has been spending 2 to 3 percent of its GDP on the

healthcare segment and out of that only 8-10% is spent on the drugs and medication (See
Figure 5.)
Figure 5. Comparative figures of health spending per person per year USD as per WHO
Also as per the in the figure above the sources in India to spend money on public health are
quite less and the Insurance penetration is very less compared to other developed and
804
581
521
44
67
382
7960
4519
1741
525
3032
5751
4840
44
65
165
355
191
3945
3754
2702
2323
353.76
424.13
229.24
9.68
25.46
160.44
4218.8
3163.3
800.86
257.25
2213.36
4543.29
3775.2
12.76
29.25
123.75
213
103.14
2682.6
3115.82
2242.66
1951.32
Equatorial Guinea
Bostwana
South Africa
Uganda
Nigeria
Mauritius
USA
Canada
Bahamas
Mexico
Spain
Netherlands
France
Inida
Srilanka
Thailand
Maldives
China
Australia
Japan
New Zealand
UK
Comaprative analysis
Gov spending Total Health expenditure

developing countries. Indian healthcare is financed through a combination of sources
including:
 House hold and individual out of pocket cost build the majority portion
 Central and state government tax revenues
 Mandatory social Insurances
 Voluntary health insurance
 Micro insurance
 Other employer/mutual schemes not using public or private insurance companies
Also NSSO has estimated that poverty decline by a mere 0.74 % all over India from 2004-05
to 2010-11 and in reality there has not been significant change in the poverty of India. In the
states like Bihar, Assam, Arunachal Pradesh and Chattisgarh where people have to think
before spending money on their daily food and living, it is far beyond the horizon that one
can think them to spend on medication for better health. In this case the only one option with
them remains is of, to rely upon the government or other sources to provide them the better
health by free medication.
Figure 6. National health expenditure breakdown
As we saw in the earlier sections that due to the immense competition the high level of
corruption has lead the government to compromise with the less stock and low quality. There
is nobody to look for such major issues and raise the voice. The end victim of this whole
system is the lower and consumers who are living under the poverty line.
This is how they depend upon the low cost medicines and poor quality of the drugs.
2.3 A study of TNMSC and Delhi model of drug procurement and comparison with other
purchase models
TNMSC
 A major initiative taken by the TN State Government was to set up a Government
Company, Tamil Nadu Medical Service Corporation (TNMSC), with the primary
31%
27%
10%
6%
5%
5%
4%
3%
3%2%2%2%
NHE breakdown
Hospitalization
Professional
services
Rx
Health insuarnce
Nursing Home
Other
Structure and
equip.

objective of ensuring ready availability of all essential drugs and medicines in all the
Government health facilities by adopting a streamlined procedure for their
procurement, storage and distribution. It commenced its functions from January 1995.
 The first step taken by TNMSC was to finalise the list of essential drugs to be
procured. Keeping in view the WHO's Model List of essential drugs, the then existing
list of nearly 900 drugs was pruned to a list of 240 drugs. Now, TNMSC has 271
items of drugs and medicines on its list, accounting for around 90% of the budget
outlay for the purpose, leaving other drugs of small quantities to be purchased locally
by the institutions from out of the remaining 10% budget. The TNMSC follows
WHO's recommendation for the use of the international non-proprietary name (INN,
commonly known as generics) for each drug. In order to ensure the procurement of
only quality drugs at competitive prices, an open tender system is followed and
purchases are made only from manufacturers and not through agents or distributors.
Figure 7. Comparative Analysis between available stock in Tamilnadu and Bihar (Source: Selvaraj et al.
2010)
 It has been further stated that such manufacturers should have a GMP certificate and
also have a market standing for at least three years. A minimum turnover is also fixed
in order to eliminate the very small firms since such firms may fail to keep delivery
commitments. To eliminate sole dependence on one supplier, the next two lower
suppliers willing to match the lowest price were also approved.
 With the dual objectives of maintaining quality and preventing wastages and
pilferages, all tablets and capsules are procured with only strip or blister packing, as
against the earlier practice of bulk packing which required manual handling at the
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Bihar Tamilnadu
Stock out
Range
Available

time of distribution. Both inner and outer packages of all items are required to bear
the logo of TNMSC with a marking to show that the drugs are manufactured only for
the state government supply and are Not for Sale. On account of this, the credibility
and acceptability of the drugs by the public also improved immensely. Samples drawn
from different batches are coded and sent to private approved laboratories to ensure
effective quality control. In order to ensure a regular supply and for preventing
stock-outs, TNMSC has established a chain of go downs to stock all items of drug.
 Each district has their own warehouse as a point of distribution for all medical
institutions in the district. The suppliers are required to supply the drugs to the district
warehouses, which would keep a working stock of three months requirement at any
point of time. Each institution is given a passbook indicating its annual entitlement
(i.e. budgetary allocation) within which it can draw drugs from the district warehouse.
There is no need for an advance indent because any drug in the approved list could be
obtained within the entitled financial limit.
 One of the outstanding features of TNMSC is the total computerisation in all
aspects. Each district warehouse has a computer linked to the Head Office computer
via the Internet. As the receipt and issue of drugs at all the district warehouses level is
done using computers, the information on the inventory level for any drug at any
warehouse at any point of time is readily available with the central computer at the
Head Office, on the basis of which the stock position is effectively monitored and
reorder is effected to prevent any stock out situation.
 Further, on the basis of the inventory levels of all the warehouses, transfer of items
from one warehouse to another are effected so as to optimise the utilization of drugs
and to maintain minimum required stock levels. Other activities such as accounting,
quality control, warehouse monitoring and administration are also conducted through
computers for total error free strong logistic management. The solution starts from the
identification of drugs to the Management Information System (MIS).
 Computerisation of the entire operation has improved inventory management, and
cost control, and enhanced availability of drugs in government health facilities. This
innovation of the Government of Tamil Nadu in drug procurement and management
has improved availability of drugs in nearly 2000 government medical institutions
throughout the State. The competitive procurement system has resulted in savings in
the outlay on drugs to the extent of 36% of the allocation. Apart from better budgetary
control on drug consumption, medical institutions have become more cost conscious.
 This system of pooled procurement aimed at quality drugs and a transparent tender
system with well-defined pre-qualification criteria has resulted not only in substantial
(36%) savings on drugs, but also in a better perception in people in addition to
enhanced availability of drugs at all facilities. Though, there was considerable initial
resistance to this new pre-qualification procedure, it was accepted in due course,
because the selection process was fair and an objective criterion was adopted.
Although, the corporation has been permitted by the government to spend 5% of the
annual turnover on its overheads, it is only around 1.5% at present, with a better
inventory management, MIS and improved access to medicines.

Delhi Model
 The Delhi Society for Promotion of Rational Use of Drugs (DSPRUD) is a non-profit
organization which has introduced the centralized drug procurement system with the
government hospitals of Delhi in 1996 with the technical support of the WHO. The
objective of the Delhi model of procurement was to ensure availability of good
quality medicines with these hospitals and to promote rational drug use.
 Before the introduction of the system, it was nothing but a total chaos in the supply of
medicines with the hospitals in Delhi as in any part of the country. This is despite that
30-35% of the health budget of the government was spent on medicines.
 Each hospital in Delhi used to procure the drugs independently. The system was
ruined by mismanagement and corruption. Many of the drugs so procured by the
hospitals were rarely needed while the required medicines were almost perennially in
short supply.
 The introduction of this system has transformed the situation dramatically; the new
system procures drugs centrally for half a dozen main and many smaller hospitals run
by the Delhi government. Under the initiative, it was found that only a limited number
of basic drugs were actually needed for treatment in almost 90 per cent of the hospital
cases. These were identified and procured centrally for supply to the hospitals.
 Besides, in keeping with the WHO guidelines, the expensive combination drugs were
kept out of the supply list. As a result of this, the actual cost of drugs to the hospitals
was cut by as much as half. A sea change could be brought about the procurement
modalities, so that 75 to 90% of the medicines prescribed in the hospitals are now
being provided to patients free of cost.
 The pooled procurement system is now in place for all state-run hospitals and 150
primary health centres in Delhi. The system has resulted in a fall in drug prices to the
hospitals by 30-40 per cent, better quality assurance and less duplication of effort.
About 80 per cent of the patients in the hospitals run by Delhi Government are now
supplied all prescription drugs.
 The WHO has hence recommended extension of the Delhi Model to other states.
 Many states including Maharashtra, Rajasthan, Punjab, Tamil Nadu and Himachal
Pradesh are now implementing the programme with minor modifications. Moreover,
the components of the Delhi model are being implemented in countries like Thailand,
Myanmar, Vietnam, Laos and Kampuchea, as recommended by WHO. A list of 250
essential drugs was prepared for larger hospitals and a list of 100 for smaller
hospitals. The list is revised from time to time. The hospitals in Delhi now spend over
90 per cent of their drug purchase budget to buy these listed medicines and 10 percent
to buy drugs outside the list. Standard Treatment Guidelines covering 15 diseases
affecting adults and five childhood diseases have been drawn up for the benefit of
doctors working in primary health centres, which were also provided with an essential
drug list and important patient information.
 The pooled procurement system uses a two-stage tender system. This ensures that
only those companies that are capable of supplying products of adequate quality
receive orders. The tender process is limited to companies that fulfil the technical

criteria. Through a two-envelope system (technical bid and price bid), the drug
purchase committee of the society is able to ensure that the purchases are made from
companies complying with the Good Manufacturing Practices. A company which
does not fulfil the technical criteria of a minimum annual turnover of Rs 12 crore and
adherence to prescribed Good Manufacturing Practices (GMP), is automatically
disqualified for making a price bid. The companies are required to undergo GMP
inspections and random testing of products. There are instances of companies being
blacklisted for want of proper compliance with GMP and poor quality of products.
Doctors are asked to prescribe only products on the procurement list, although
hospitals are allowed to use up to 10% of their drug budget on unlisted products.
Andhra Pradesh state
 The state of Andhra Pradesh (AP) in India is the fifth most populous state with a
population of over 66 million. The public health care system of AP comprises of three
levels of service delivery and finance, viz. primary, secondary and tertiary care. The
nodal agency for purchase of drugs in AP is the Drug Procurement Wing of the
Andhra Pradesh Infrastructure State Development Corporation (APISDC).
 A centralized pooled procurement system was initiated in September 1998.
 Accordingly, only those suppliers, who had a stake in their long term reputation, and
adopted good manufacturing and trade practices, were allowed to participate in the
tender system, i.e. a technical bid was introduced before the actual financial bid.
 This two-part system of bidding and procurement has considerably improved the
supply and quality of drugs, and successfully discouraged the practice adopted earlier
by certain firms of quoting unreasonably low rates in their bids to be included in the
rate contract and then making up by short supplying and compromising on quality. A
notified committee draws the selected list for procurement and rate contracts are
finalized on the selected list of drugs centrally by another notified committee. Indents
are collected from hospitals and consolidated by the nodal agency and orders are
placed before the firm to make the delivery to the medical stores in each district with
following advantages:
1) The drugs when purchased in bulk may be bought for a lower price directly from the
manufacturers,
2) Transportation of these drugs is borne by the supplying firm and
3) Loss/theft during transport is the responsibility of the firm.
 A pass book system has also been introduced and generally institutions draw their
supply on a quarterly basis. A Primary Health Centre (PHC) can draw only 43 listed
items. The superintendents of district hospitals have 10% of the allotted funds at their
disposal for purchase of emergency medicines and the Superintendents of tertiary
hospitals have 20% of the allotted funds at their discretion for similar purpose. Drug
samples are drawn from district drug stores and sent to a recognised laboratory for
testing.
 This experience reflects that an autonomous organisation with a supportive board can
perform very well and approve the rates of procurement of drugs centrally, availing

the advantage of bulk/pooled procurement, yet effect the deliveries of supplies in
decentralised district drug stores, the cost of which is borne by the supplier. A single
window system for all inputs, processes and outcomes can work effectively with a
fairly close monitoring of flow of funds etc. The initial reluctance of the staff leading
to slow improvement in financial and inventory management was overcome through a
process of training and once the changes were set in motion, they proved to be very
effective and finally computerisation was also put into place.
2.4 Health Insurance and Microinsurance
Some astonishing facts regarding the Indian healthcare industry:
 Even among the BRIC countries India lags behind on Public and Private per capita
spend as a % of GDP
 75% Out of Pocket (OOP) spending - Too high by far and definitely not a healthy
model of financing
 40% of hospitalised are pushed below poverty line or into life long debt due to lack of
financial planning
 85% of In-patient Care delivered on the Private Hospital platform with unregulated
and variable pricing methods
These are the ground reality why the India needs the better health insurance penetration.
Another better option is health microinsurnace, now-a-days it is extending in India with high
CAGR.
Let us have a look on some of the health insurance schemes started by the government
These tables show that day by day new insurance policies are coming and more and more
people are enrolled under them. But the main thing is that under these schemes still the
medicines given free are not purchased efficiently or at the time of need the stock outs are
felt. So one of the issues is that government should take care about is to make the separate
tender system to procure the drugs to provide to the beneficiary of these schemes. Just like
many of the NGOs like RED CROSS, WHO, UNISEF used to do, procurement of medicines
separately for the special health scheme beneficiary.
1962 ESIS
1964 CGHS
1986 Mediclaim voluntary health insurance
1999 Privatization of health insurance
2003 Yeshasvini Health scheme
2007 Rajiv Arogyashri scheme
2008 RSBY

2009 Kalaignar
2009 RSBY Plus, Vajapayee Arogyashri scheme
Table 6. Start of some health expenditure coverage schemes
(Source: http://www.srtt.org/institutional_grants/pdf/compendium.pdf)
SCHEME
TOTAL COVERED POPULATION IN 2009-2010
(IN MILLION)
UNIT OF
ENROLLMENT
NO. OF
FAMILIES
NO. OF
BENEFICIARIES
CGHS Family 0.87 3
ESIS Family 14.3 55.4
RSBY Family 22.7 79.45
Rajiv Arogyashri
scheme
Family 22.4 70
Kalaignar Family 13.6 35
Vajapayee Arogyashri
scheme
Family 0.95 1.4
Yeshasvini Individual NA 3
Total Gov sponsored
scheme
Na 247
Private health Insurance Individual Na 55
Grand Total 302
Table 7. Covered population with health insurance schemes
(Source: http://www.srtt.org/institutional_grants/pdf/compendium.pdf)
Let us also have the look for opportunity in the insurance sector to expand like anything due
to untapped urban plus rural market.

Figure 8. Break Up of Insurance coverage in India(Source: Business World (India) – Oct 2007)
2.5 Free medicine to all
During the 12th Five Year Plan, a centrally aided scheme to provide for ‘free medicines for
all’ in Public Health Facilities was to be launched. What was supposed to there in this scheme
is that, all State Governments will be encouraged to constitute medical supplies corporations
on the lines of Tamil Nadu Medical Supplies Corporation (TNMSC) to supply free, quality
generic medicines mainly essential medicines to both indoor and outdoor patients who would
seek care in Public Health Facilities (about 50% of the total number of patients, including the
erstwhile 20% of unreached, very poor people). The total cost of the Scheme during the plan
period would be Rs 28675 crores for running costs and an additional Rs 1293 crores as one-
time capital costs. The centre’s contribution at 50 % would be Rs 15631 crores.
A centrally aided scheme to provide for ‘free medicines for all’ can be launched also for
those patients (about 50 % of all patients) who will seek care from private practitioners
working within the framework of Universal Health Care System. For these patients the
government will pay for the quality generic medicines to be bought in bulk. During the plan
period, the Scheme would cost be Rs 80,000 crores, out of which the Centre would contribute
Rs. 40,000 crores.
Somehow the government allocated 100 crore Rs. To make the central procurement agency to
work out the plan for this scheme but it couldn’t materialized within the time frame but in
near future the scheme can be launched. If it happens it will be the radical change in the
whole Indian drug procurement system but it has to cross a number of hurdles before to see
the market. How it will be very much beneficial to the people and government, let us see the
financial benefit based on the tendering prices and market prices.
Unsecured
83%
Community
Insurance
4%
CGHS
3%
Pvt. Sector (self
funded)
5%
ESIS
3%
Pvt. Health
Insuarnce
1%
Indian
Railways
1%
Break Up of Insurance coverage in India
Opportunity

Figure 9. A comparison of Chittorgarh, TNMSC procurement prices and Market prices retail basis.
(Source: http://www.tnmsc.com/tnmsc/new/html/pdf/drug.pdf and
http://www.tnmsc.com/tnmsc/new/html/pdf/spldrug.pdf)

3. Research Methodology
3.1 Primary Objective
To study the process of the public procurement system in India. Also to find out problems
and proper solutions for them.
3.2 Secondary Objectives
1. To find out the Satisfaction level of Participant with the current Tendering system

2. To find out the Therapeutic categories which are highly preferred to be profitable in
the public procurement and government also used to spend more on those categories
3. To find out TIAs preferences for the bidders and the current trends
4. Studying the doctors‘ attitude with respect to their views on making of the formulary
list and prices and quality of drugs
5. Perception mapping of participants and TIAs based on the attributes of the TIA’s
proceedings
6. To define the unmet need in the Tender Business.
3.3 Research Design
• Face to Face structured interviews.
• Open & Close ended Questions with more proportion of the latter.
• SAMPLING DESIGN:
• Sampling Frame–Ahmedabad, Vadodara, Mumbai, Delhi
• Research Design: Conclusive
• Sampling Technique: Convenient sampling
• Sample type & size: Participant distributors (Sample Size - 50), Doctors ( sample size
– 15), Tender Inviting Authorities ( Sample size – 10), Companies (sample size – 9)
• Data collection instrument: Different questionnaire for each type of respondent
The survey was carried out in Ahmadabad, Vadodara, Mumbai and Delhi where 55 Super
stockists and druggists were interviewed. Also 20 high profile doctors were interviewed to
know their preferences for NLEM and the formulary list related data. Some respondents
declined to comment on the survey or some of the responses were not completely filled. So,
10 respondents were discarded. Convenient sampling was carried out to select the doctors,
and distributors. Also 11 responses were taken from different Tender inviting authorities.
And after all 9 responses were taken from different companies. The Questionnaire was
structured. Before collecting data I did pilot survey on 5 stockists and distributors. The
changes recommended by the stockists and distributors were incorporated in the
questionnaire
3.4 Limitation of the study
 The study was conducted in Northern and Western parts of India only.
 Hospital type and it’s per day patient incident ratios were not taken into consideration.
Also the many of the respondents were very apprehensive to give the information due
the fear of spread of the information and threat to them in form of increase in the
competition.
 Respondent may be bias during survey.
 Available time and resources were limited so pan India survey could not be conducted
and so more generalized conclusions could not be drawn.

4. Data Analysis & Interpretation
4.1 Perceptual Plot of Bidders and their perceptions’ match with respectively preferred
TIA based on the attributes (Discriminant plot)
Discriminant analysis in SPSS has been done to know the group membership of each
respondent on the perceptual map based on the ratings given to the attributes related to the
TIAs.

Tests of Equality of Group Means
Wilks' Lambda F df1 df2 Sig.
HighEMD_10 .683 7.132 3 46 .000
Payment_10 .479 16.710 3 46 .000
Location_10 .392 23.735 3 46 .000
E_TENDER_10 .777 4.393 3 46 .008
Allow_Pre_10 .524 13.918 3 46 .000
Fluctuation_10 .570 11.584 3 46 .000
Regulation_10 .632 8.918 3 46 .000
Bank_10 .762 4.792 3 46 .005
FOR_LIST_10 .632 8.937 3 46 .000
SME_10 .601 10.191 3 46 .000
Table 8. Discriminant analysis of Attributes vs. Type of TIA
Interpretation: Here the sig. values which are less than 0.005 shows the significant
difference in the rating of each attribute and high value of F stat validates the discriminant
function proper for the test.
Figure 10. Discriminant plot of Type of TIA and Attributes
Interpretation: This plot shows the ability of the attributes on the basis of the ratings to
discriminate the attitude of the participant to be more inclined to particular type of the TIA.
And the results show that the 84% accuracy to predict the group membership.

Highest no. of participant preferred the PSU participation, second highest preferred DHS
participation, third NRHM schemes and last private hospitals.
(Highest profitability is there in the private hospitals but though there quality and prior
preferences of Private party matters so there are lesser inclinations.)
Let us have a look on similar preference plot with the same ratings on attributes and
predictions for the discrimination between areas to where participants belong.
Figure 11. Preference plot showing the discrimination between areas of bidders based on their ratings of
the attributes for all the TIAs
Interpretation: Here its easily understood that based on the ratings one can easily identify
the operational area of any bidder and this model can help the TIAs to modify their rules and
regulations to be more lenient or strict to the local players or to give opportunity to the local
players and to restrict the outsiders. Also the SMEs in the local region can be given benefits
accordingly.
Let us have a look on the preference plot based on the ratings directly given to the TIAs on
the Likert scale of 5. Here the direct ratings to the TIAs will give us the idea that how the
bidders are inclined to different TIAs.

Figure 12. Preference plot of discriminant analysis of type of TIA and ratings to the TIAs
Interpretation: Here same as above the group membership prediction can be easily done and
the segmentation of the different type of TIAs can be easily done based on the direct rating to
them rather than ratings to their specific attributes. This plot is a bit easier to interpret than
above two plots. All the four categories of TIAs are nicely discriminated based on the direct
ratings.

4.2 Multidimensional scaling of different TIAs as per the similarity ratings of Bidders
In this test the stress values are near to 0.25 so it show the good variability on the bases of
dimensions of similarity.
Figure 13. Multidimensional scaled plot of the TIAs according to the similarity ratings
Interpretation: Here one can easily interpret the RCH, JSSK, CGHS and ESI fall under the
one roof and so the bidders tending to participate in any one of these are inclined to
participate in others also. Same is the case with Air India and ONGC like PSUs. DHS are far
apart from all and the participants of DHS are using quite different criterions for winning the
tenders. Also as shown by emphasizing CGHS and ESI also show a bit difference from RCH
and JSSK.

4.3 Correspondence analysis of specific attributes and their relevance with different TIA
Figure 14. Correspondence analysis based on the TIAs preferred based on one of their major attributes
Interpretation: Here in this case its clearly shown that for PSUs( 1st
TIA) is differentiated
based on the 9th
, 1st
, 4th
and 5th
attributes and they are high EMD demanded for small
quantity of drugs, E-tendering, huge formulary list and allowance to be present at the time of
bidding. Like that DHS are differentiated on the basis of 2nd
and 3rd
attributes and they are
long period of payment release and different locations of depots where drugs are to be
supplied. NRHM schemes are set apart by 7th
and 6th
points that are fluctuations in forecast
values and demand for deep regulatory approvals. Private hospitals are set apart by 8th
and
10th
attributes, huge bank deposits and preferences to the SME sector. All the TIAs set apart
by the specific characters and those characteristics are the basic attitudes towards the TIAs.
Based on this analysis one can easily identify the opportunity and core competencies to enter
into the markets.

4.4 Factor analysis of the attributes of TIA
KMO and Bartlett's Test
Kaiser-Meyer-Olkin Measure of Sampling
Adequacy.
.778
Bartlett's Test of
Sphericity
Approx. Chi-Square 362.626
Df 45
Sig. .000
Total Variance Explained
Co
m
po
ne
nt
Initial Eigenvalues
Extraction Sums of
Squared Loadings
Rotation Sums of
Squared Loadings
Tot
al
% of
Varianc
e
Cumul
ative
%
Tota
l
% of
Varian
ce
Cumul
ative
%
Tot
al
% of
Varianc
e
Cumula
tive %
1 5.14
0
51.403 51.403 5.14
0
51.403 51.403 5.0
97
50.969 50.969
2 2.32
1
23.210 74.613 2.32
1
23.210 74.613 2.3
64
23.644 74.613
Rotated Component Matrixa
Component
1 2
HighEMD_10 -.578 .543
Payment_10 .861 .059
Location_10 .923 .075
E_TENDER_10 -.123 .901
Allow_Pre_10 .892 -.046
Fluctuation_10 .824 .312
Regulation_10 .817 -.170
Bank_10 .135 .806
FOR_LIST_10 .562 .679
SME_10 .822 .104
Table 9. Factor analysis SPSS output of tests of significance and factor loadings
Interpretation: Here the KMO test shows 0.7 above value, so the factor analysis is proper
and will give the proper results. Also the Eigenvalues of each factor shows the total
cumulative 74% justification by factor analysis. Also the significance values are less than

0.005 so it shows the significant difference among the factors differentiated based on the
values of attributes.
Figure 15. Factor plot of attributes
Interpretation: Here the attributes are how scattered on the two factor plot can be analyzed
by the factor plot and also the proximity of different attributes to the specific factor can be
judged by this plot.
Here two factors are extracted.
Factor Justification Attribute contribution Type of factor
Factor 1 50%
Delay in Payment release
Profits and feasibility in
business based on long
term relationship related
factor
Different location of depots
Allowance to be present at
time of bid
Fluctuations in quantity
Deep regulatory criterion
preferences to SME
Factor 2 24%
Hi EMD Time influencing and
working capital related
factor
Bank deposite
E-tendering
Table 10. Interpretation of Factors
4.5 Preference plot of factor analysis to differentiate the TIAs
In continuation of the above factor analysis, let us have a look on the preference plot based on
the factor test. Here the same two dimensional plot is extracted based on the direct ratings to

the different TIAs. Here the 22 different TIAs are analyzed according to their proximity to
specific dimension.
Figure 16. Preference plot according to two factors (components)
So as per the above analysis one can easily classify the different type of TIA based on the two
factors. Ex. JSSK, NTPC, BHEL, MAZGOAN DOCK etc TIAs are highly related to or
influenced by the factor 1 and negatively influenced by the factor 2. Likewise other TIAs
analysis can be done.
4.6 Bidders thinking and preferences for the current system
Q. which are the highest bidded categories in the tender business which can fetch the high
quantity business?
Interpretation: As shown in the graphs anti infective (amoxicillin, ciprofloxacin,
azythromycin etc.) are the highest bidded molecules in different tenders. In UP state
government tender they have the budget of about Rs.400 cr. Out of that UP government used
to purchase Rs. 21cr worth fluconazole antifungal drug only. Such has been the case in the
Armed Forces tender in which the Anti pyretic and Analgesic categories are believed to be
the highly profitable. AFMC tender every year highest procured drug is Aspirin and then
paracetamol because the jawans used to have head ach very frequently.

Figure 17. Highest preferred TCs in tender business
Figure 18. Second highest profitable TCs in Tender Business
0
2
4
6
8
10
12
14
16
First preferred TC
Sodium
Salbutamol
Paracetamol
Iron - Folic
Iron
Diclofenac
Ciprofloxacin
Cetrizine
Azithromycin
Aspirin
Amoxycillin
0
1
2
3
4
5
6
7
8
9
10
Second preferred TC
Sodium
chloride
Salbutamol
Rehydration
salt
Ranitidine
Quinine
Paracetamol
ORS
Mefloquine

Figure 19. Third highest profitable TCs
Besides all in all tenders health supplements have different space in large quantities and many
firms in India are just based on the manufacturing of one of such product which fetch them
the sufficient business for one year if they win the tender. So highest demanded categories are
 Anti infective
 Health supplements
 Anti pyretic
 Anti fungal
 Cardiovascular
 Analgesic
Q. How much transparency you feel in the current scenario?
Figure 20. Transparency expected
Interpretation: Majority 42% participants still think that offline tendering system is 50
inefficient and it needs to be modified.
3
0
2
4
6
8
10
12
14
Third preferred TC
Vit-C
VIT-B COMPLEX
Trimethoprim +
Sulphamethoxazole
Tizanidine +
DiclofenaceSodium
Sodium chloride
Salbutamol
Roxythromycin
<50%
16%
50-75%
42%
>75%
34%
100
percent
8%
Transparency

Q. How much margin you are given by different companies for quoting their brand on behalf
of them?
Figure 21. Margin given by companies
Interpretation: It has been observed and inferred from the informal talk and the graph that
MNCs (GSK, ELI LILLY, NOVARTIS, ABBOTT etc.) bargain less compared to local and
domestic companies. MNCs tend to focus on the core business and quality rather local and
domestic companies (CIPLA, RANBAXY, MANKIND, CADILA, ALEMBIC etc.) used to
provide high commission compared to MNCs and also some incentive on winning of the
tender.
Q. Which documents are toughest to produce during tender filling?
Interpretation: In tendering system for many participants the reason to lose the tender is
their inability to provide the needed license and certain certificate in defined format. Most
difficult ones are GMP/CGMP certificate, Narcotics product related certificates and
regulatory aspect related certificates which are to be given by respective drug inspector. Also
many certificates regarding financial performance are sometimes difficult to produce the way
they have wanted. And many of the times it becomes the matter to be fail in the bid. (see
below figure 22)
0
2
4
6
8
10
12
Margin given by companies
8-10%
6-8 %
4-6 %
2-4 %

Figure 22. Documents which are tough to produce
Q. What changes do you expect with the entry of E-tendering system?
Figure 23. Effect of e-tendering system entry
Approval of
the
Concerned
FDA
11%
Financial
statement of
the current year
8%
GMP / CGMP
No due
certificates
11%
Import export
licences
7%
No due
certificates
7%
NOC/Clearance
certificate from
court
4%
Regualtory
certificates
4%
Regulatory
related
7%
Regulatory
related licenses
11%
Tax certificates
as per the
demand
4%
Valid
Appropriate
Drug Licence
of tenderer &
Valid Import
License for
imported
Products.
7%
Valid
Narcotics /
Explosives
Licence. (if
applicable).
15%
Valid WHOGMP
certificate of
manufacturer for life
saving drugs as well as
for imported drug
products.
4%
Documents
15
0 1
9
19
22
23
12
24
22
10
21
18
13
8
3
5
16
3
10 1 3 1 0
Ease of filling Security Unethical
practisces can
be reduced
Loss of
relationship
Time saved
E-tendering system effect
5
4
3
2
1

Interpretation: Here the entry of the E-tendering system is nicely anticipated by the
different participants due to its high efficiency and security for the transaction. It makes the
process fast and decreases the corruption practises. But for certain players it decreases the
relationship with the TIAs and it causes the failure in the tender.
Q. Relevance between who think that low price doesn’t affect the quality and their ratings for
the removal of unethical practises due to entry of E- Tendering.
Figure 24. Quality vs. Unethical practices
Interpretation: Here the participants who believed that low price doesn’t affect the quality
are believed to be more corrupt than others and they all have rated E- tendering system as
undesirable change because the E- tendering system decreases the chances of corruption. The
relationship proves the attitude match showing inclination to the corruption.
Q. Relevance between participants who believe that low price doesn’t affect the quality and
their thinking for the presence or absence at the time of bid opening.
Interpretation: Here the participants who have responded that low price doesn’t affect the
quality; they are believed to be more corrupted than others and they all also used to appear
more in the NRHM schemes and JSSK schemes. And so the same participants are more
influenced by the allowance to be present at the bid opening. Presence at the bid opening
meeting gives the chance to play the game of persuasion and they are having more chances to
get the tenders one or the other way. (See figure 25.)
1 12
15
7
1
3
9
2
0
5
10
15
1
2
34
5
Quality vs. Unethical practices
Yes it affects No it doesn’t matter

Figure 25. Quality vs. Allowance
Q. Do you have liaison officer?
Figure 26. Liaison officer
Interpretation: Having the liaison officer means the internal relationship to the tender
inviting authorities either way. And these companies and authorities are more believed by
other participant authorities to be more corrupt than others.
3
5
11
12
5
1
3
10
0
2
4
6
8
10
12
1
2
34
5
Quality vs. Allowance
Yes it affects No it doesn’t matter
Yes
44%
No
56%
Do they have liaison officer

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