w w w . L a w y e r S e r v i c e s . i n


BHARAT BIOTECH INTERNATIONAL LIMITED, HYDERABAD VERSUS A.P. HEALTH AND MEDICAL HOUSING AND INFRASTRUCTURE DEVELOPMENT CORPORATION, HYDERABAD

    W.P. 22293 Of 2002
    Decided On, 10 December 2002
    At, High Court of Andhra Pradesh
    By, THE HONOURABLE MR. JUSTICE J. CHELAMESWAR
    For the Appearing Parties: E.Madan Mohan Rao, S.Ravi, Advocates.


Judgment Text
J. CHALAMESWAR, J.


( 1 ) THE present writ petition is filed with the prayer as follows:". . . . . . . PLEASED

to pass an order or order or writ more particularly one in the nature of writ of

mandamus declaring the action of the respondent in imposing the stipulation of

WHO-pre-qualification certificate for participating in the tender process vide short

tender Notice No. 10/hm HI DC/drugs Wing/ 2002-2003, dated 28-10-2002 as

arbitrary, illegal and violative of the rights of the petitioner under Articles 14 and 19

(l) (g) of the Constitution of India and consequently direct the respondent to

consider the petitioner's tender filed in response to Short tender Notice No.

lo/hmhidc Drugs Wing/ 2002-2003 dated 28-10-2002 without regard to WHO-prequalification

Certificate and pass such other order or orders as this Honourable court

deems fit and proper in the interest of justice."


( 2 ) THE first petitioner is a Company and the second petitioner is the shareholder

of the first petitioner-Company. The first petitioner-company is engaged in the

business of manufacture and sale of vaccines and drugs. The company's registered

office is at Hyderabad and its manufacturing unit is at Turkapally Village, Shameerpet

Mandal, Rnga Reddy District. The first petitioner- company has a manufacturing

capacity of 100 million doses of Hepatitis Vaccine. It is stated in the affidavit filed in

support of the writ petition that the first petitioner- company commenced its

commercial production in the year 1998. It is further asserted in the affidavit that

the first petitioner-Company has all the necessary licences and permits to carry on

the activity of manufacture and sale of various vaccines and drugs as required under

the law of land.


( 3 ) THE first respondent is a State owned Corporation. The second respondent is

the State of Andhra Pradesh. Third respondent who got himself impleaded in the

present writ petition is trade rival of the first petitioner, which is also manufacturing

hepatitis-B Vaccine.


( 4 ) IT appears from the affidavit that the Government of Andhra Pradesh took up a

programme called 'immunization strengthening Progamme' to immunize the citizens

of the State from Hepatitis-B by administering a vaccine called Hepatitis-B vaccine. A

philanthropic organisation known as Bill and Melinda Gates Foundation contributed

an amount of Rs. 50. 65 crores and the Government of Andhra Pradesh is

committed to contribute an amount of Rs. 18. 67 crores over a period of five years,

commencing from 2001. It appears that the said project was launched in six districts

of State of Andhra Pradesh during the month of November, 2001. Those six districts

are Anantapur, Kurnool, Cuddapah, Chittoor, Mahaboobnagar and Guntur.


( 5 ) FOR implementing the above mentioned programme, the Government of

Andhra Pradesh requires the vaccine and therefore the first respondent issued a

paper notification on 30-10-2002 calling for tenders for the supply of Hepatitis-B

vaccine. The terms of the said tender notification are not relevant for the present

purpose, except Condition No. 1 which reads as follows: ?the A. P. Health and

Medical Housing and infrastructure Development Corporation is inviting tenders for

supply of Hepatitis B vaccine from Primary manufactures in India with WHO prequalification

only"


( 6 ) FROM the above condition, it is clear that the Government invited tenders for

the supply of Hepatitis-B Vaccine only from the primary manufacturers in India with

further condition that such primary manufacturers of vaccine should possess 'who

pre-qualification.


( 7 ) THE subject matter of the writ petition is only the above extracted condition

No. 1 of the tender notification. The petitioner challenges the stipulation of the

above mentioned condition on the ground that it is arbitrary, violative of Article 14

and also that such condition is tailor-made to benefit to only one manufacturer, i.e.,

third respondent herein.


( 8 ) THE petitioner further asserted in the affidavit filed in support of the writ

petition as follows:". . . . . . . . IT is submitted that so far as the situation in India is

concerned, there are well established manufacturing facilities licensed by

Government under the Drugs and Cosmetics Act, 1940, with facilities for research

and testing. The standard to which the particular drug or vaccine could be 2003 (1)

FR-F-30 65 manufactured are set out prescribed under the Drugs and Cosmetics Act,

1940, read with the Rules."


( 9 ) IT is further averred in the writ- affidavit that other than the petitioner and the

third respondent, there are some more primary manufacturers of vaccine in

question, other than the petitioner and the 3rd respondent herein. It is stated in the

affidavit that four other companies, such as m/s. Glaxo, Cadila, VH Bhagat and LG

which are importing and marketing the vaccine in question.


( 10 ) IT is specifically averred that the impugned condition of the tender notification

is intended only to benefit the third respondent herein, excluding the above referred

manufacturers or suppliers of the vaccine in question, thereby creating a monopoly

in favour of the third respondent.


( 11 ) THE petitioner also averred that insofar as the vaccines are concerned, they

are required to be tested and approved by the Central Drug Laboratory, Kasauli,

himachal Pradesh before they are released into the Indian market either for actual

use or clinical trial. The fact that a particular manufacturer or supplier has "who Prequalification"

will not automatically entitle such person to release the vaccine into

the Indian market, unless it is approved by the Central Drug Laboratory. Therefore,

the petitioner submitted that the stipulation of WHO Pre-qualification is arbitrary and

without any rational basis, thereby violating article 14.


( 12 ) COUNTERS are filed by the respondents. The relevant averments in the

counters will be referred at the appropriate place in the judgment.


( 13 ) TO understand the nature and scope of the controversy, an examination of

law of the land relating to the maintenance of the standards of drugs and vaccines is

required. Apart from that it. is also required to be examined as to what is meant by

the expression 'who Pre-qualification.'


( 14 ) DRUGS and Cosmetics Act, 1940 is the law which regulates the import,

manufacture, distribution and sale of drugs and cosmetics in this country. The main

object of the Act, as it is observed by the supreme Court in Chimanlal Jagjivindas

Sheth v. State of Maharashtra (AIR 1963 sc 665) is to prevent sub-standards in

drugs presumably for maintaining high standards of medical treatment. The

expression 'drug' is defined under Section 3 (b) of the act, as follows:" 'drug

includes': (i) all medicines for internal or external use of human beings or animals

and all substances intended to be used for or in the diagnosis, treatment, mitigation

or prevention of any disease or disorder in human beings or animals, including

preparations applied on human body for the-purpose of repelling insects like

mosquitoes; (ii) such substances (other than food) intended to affect the structure

or any function of the human body or intended to be used for the destruction of

(vermin) or insects which cause disease in human beings or animals, as may be

specified from time to time by the Central Government by notification in the Official

Gazette; (iii) all substances intended for use as components of a drug including

empty gelatine capsules; and (iv) such devices intended for internal or external use

in the diagnosis treatment, mitigation or prevention of disease or disorder in human

beings or animals, as may be specified from time to time by the Central government

by notification in the Official gazette after consultation with the Board".


( 15 ) AN examination of the scheme of the Act discloses that it deals with the drugs

falling under various medical systems called Allopathy, Homoeopathy, Ayurveda,

siddha and Unan. There cannot be a second opinion other than that a vaccine is also

a 'drug' within the meaning of that expression as defined under the Act. It is

common knowledge that vaccine is a substance administered for preventing disease.


( 16 ) FOR the purpose of regulating the standards of drugs, the Act contemplates

establishment of the Drugs Technical advisory Board under Section 5 of the Act, the

function of which is to advice the central and State Governments on technical

matters arising out of the administration of the Act and to carry out the other

functions assigned to it by the Act. Similarly a Drugs consultative Committee is

contemplated under Section 7 of the Act, the purpose of which is to advice the

Central and State governments and the Board referred to above, 'on any matter

tending to secure uniformity throughout India in the administration of this Act. '


( 17 ) IT is also to be noticed that various chapters of the above enactment deal

with the various varieties of drugs separately. For the purpose of the present case

we are only concerned with those provisions which deal with allopathic drugs.


( 18 ) CHAPTER IV of the Act deals with the manufacture for sale, selling and

distribution of drugs. Section 16 stipulates that for the purpose of the said Chapter,

expression 'standard quality' in relation to a drug means that the drug should

comply with the standard set out in the second schedule. Section 17 of the Act deals

with 'misbranded drugs'. Section 17-A deals with 'adulterated drug'. Similarly Section

17-B deals with the 'spurious drugs'.


( 19 ) SECTION 18 of the Act mandates that from such date as may be fixed by the

state Government by notification in the official Gazettee, no person shall

manufacture for sale or for distribution or sell or stock or exhibit for sale or

distribute any drug which is not of a standard quality or is misbranded, adulterated

or spurious. Proviso to Section 18 also mandates that none of the above referred

activities shall be carried out by a person except under and in accordance with the

conditions of licence issued for such purpose under the Chapter. Section 18 (b)

stipulates that every person holding a licence shall keep and maintain such records,

registers and other documents as may be prescribed and further mandates that

such person shall furnish to any officer or authority exercising any power or

discharging any function under the Act for carrying out the purposes of this Act.

Section 20 contemplates appointment of government Analysts by the State

government as well as Central Government subject to limitations imposed under

section 20. Section 21 contemplates appointment of Inspectors by both the

governments. The powers and functions of the Inspectors are required to be

prescribed by the Government appointing them by Rules. Section 22 confers certain

enumerated powers on the Inspectors, which powers are required to be exercised

subject to the Rules made by the Central Government and provisions of Section 23.


( 20 ) SECTION 27 prescribes the penalty for the manufacture, sale etc. , of any

drug which is adulterated or spurious or any drug used by any person for or in the

diagnosis or prevention of any disease or disorder, which is likely to cause the death

or is likely to cause such harm to the human body, which would amount to grievous

hurt within the meaning of Section 320 IPC, punishable with imprisonment for a

term which may extend up to a term of life and with fine. Analysis of the other

provisions of the chapter-IV may not be necessary for the purpose of the present

case.


( 21 ) SECOND Schedule of the Act is relevant for the present purpose which deals

with the standards to be complied with, by both the imported drugs and drugs

manufactured for sale. This Schedule is referred to both in Section 8 of the Chapterill

(dealing with the import of drugs) and section 16 of the Chapter-IV (which deals

with the manufacture, sale and distribution of drugs ). Both the provisions stipulate

that standard quality for the purpose of these two Chapters is set out in the Second

schedule.


( 22 ) ENTRY 2 of the Second Schedule of the Act deals with the vaccines, which

reads as under: class of drug standard to be complied with 1. Xxxx xxxxx 2.

Substances commonly known as Vaccines, sera, toxins, toxoids, antitoxins and

antigens and biological products of like nature for human use or for veterinary use

xxxxxx xxxxx the standards maintained at the International Laboratory for Biological

standards, Stantans Serum Institute, Copenhagen and at the Central Veterinary

Laboratory, Weybridge, Surrey, UK and such other laboratories recognised by the

World Health Organisation from time to time and such further standards of strength

quality and purity as may be prescribed.


( 23 ) RULES are made by the Union of India in exercise of various powers conferred

under the Act. Those rules are called Drugs and Cosmetics Rules, 1945. The Central

drug Laboratory mentioned earlier by definition under Rule 2 (e) is the Laboratory

for the purpose of Rules.


( 24 ) THE sale of drugs other than homoeopathic drug is regulated by Part VI of the

said Rules. Rule 59 therein contemplates appointment of licensing authority for

various purposes mentioned in the said part. Part VII of the Rules deals with

manufacture, sale and distribution of drugs other than Homoeopathic drugs. Rule

68-A stipulates the requirement of a licence for manufacture, sale or distribution of

drugs specified by the Central Government by a notification published in the Official

gazette, which is required to be taken from the Central Licence Approving Authority.

Various forms of licences are prescribed for various persons who deal with drugs in

various capacities such as manufacturers, dealers, stockists etc. Similarly Rule 69

deals with various forms of licences prescribed for the manufacture of various kinds

of drugs. Licences insofar as manufacture of allopathic drugs are concerned are

granted either in Form 25 or 25 F. Rule 71 prescribes various conditions which are

required to be satisfied before a licence under Form 25 or 25f is granted. One of the

conditions is that the manufacturing activity shall be conducted under the active

direction and personal supervision of competent technical staff, (whose

qualifications are stipulated under the rules) and another is that the factory

premises shall comply with the conditions prescribed in Schedule M.


( 25 ) SCHEDULE M to Rules deals with good manufacturing practices. Such as the

standards or safeguards to be maintained in the premises, plant and equipment. It

also provides for the various stringent measures which are required to be followed

by a manufacturer who seeks a licence either in form 25 or 25f. Those stipulations

deal with, the quality of the water used in the manufacturing process, appropriate

arrangements for disposal of waste, health, clothing and sanitation of the workers,

precautions to be taken while designing the machinery, systematic maintenance of

the record of the raw materials which are used in the manufacturing process, etc. ,

Para 9 of the Schedule M also mandates the maintenance of records as per the

Schedule- u for each batch of drugs produced, and further stipulate that such

records 'provide a complete account of the manufacturing history of each batch of a

drug showing that it has been manufactured, tested and analysed in accordance

with manufacturing procedures and written instructions as per the master formula'.

Para 16 stipulates that manufacturer must have an exclusive Quality control

Department, the duties of which are specified in the said paragraph to ensure

maintenance of standards.


( 26 ) SIMILARLY Rule 76 deals with grant of licences in Form 28 for the

manufacture of drugs specified in Schedules C and C 1. Even in the case of Form 28

licences, the conditions stipulated in Schedule M are required to be complied with.

Rule 74 (2) mandates the same.


( 27 ) APPROPRIATE sanctions are provided for in the Act to deal with those persons

who violate the law. Section 27 already noticed is one of them.


( 28 ) THE analysis of these provisions made so far demonstrates that the law of this

country is very strict in dealing with the activities of manufacture, sale etc. , of the

drugs. The standard quality that is required to be maintained, is the same as is

maintained by the various international institutions referred in the Second Schedule.


( 29 ) NOW the rationale behind the stipulation of the tender notification which

required WHO Pre-qualification for intending tenderer is required to be examined. As

a first step the meaning of the expression 'who Pre-qualification' is required to be

found out.


( 30 ) A document titled "procedure for assessment and acceptability in principle of

vaccine that produced by the United Nation agencies" is placed before me. The

following facts emerge from the examination of the said document. World Health

organisation (WHO) advises UNICEF and other agencies of the United Nations on

the acceptability in principle of vaccines considered for purchase by such agencies.

For the purpose of tendering advise, WHO is necessarily required to have a

procedure for evaluation of the vaccines manufactured and offered for sale to the

agencies of the united Nations. In fact the purpose of evaluation is described in the

document as follows: ?the present document is a new revision that takes into

consideration the above mentioned considerations and also includes a new policy

governing pre-qualification of vaccines from manufacturers that perform only bulk

filling and formulation activities. The purpose of the assessment is to verify that the

vaccines (a) meet the specifications of the relevant UN agency and (b) are produced

and overseen in accord with the principles recommended by WHO, including those

for Good Manufacturing Practices (GMP ). This is to ensure that vaccines used in

national immunization services in different countries are safe and effective and that

they meet particular operational specifications for packaging and presentation".


( 31 ) THE assessment of the product even according to the said document is based

on the principles described in the document in the following terms: ?reliance on the

National Regulatory authority (NRA) of the country of manufacturer; general

understanding of the product and presentations offered, production process, quality

control methods and relevance for the target population of available clinical data.

Assessment of production consistency through compliance with GMP specifications.

Random check testing of vaccines to monitor compliance with tender specifications

on a continuing basis. Monitoring of complaints from the field. Since reliance on

effective and independent quality assurance by the NRA plays a critical role in the

system, WHO recommends that manufacturers (a) inform their NRA of their

application for the assessment procedure (b) at the same time request the NRA to

participate in the process; (c) provide the nra with the necessary authorization to

discuss the relevant files with WHO representatives. WHO can advise UNICEF and

other UN agencies whether vaccine effectively meet WHO recommended

requirements only if the National Regulatory Authority of the producing country

exercises independent and appropriate oversight of the vaccines in question and if

the vaccines have been assessed through the procedure described in this document.

It should be noted that other vaccines that have not gone through this process may

be as safe and effective as those that have actually been assessed".


( 32 ) FROM the above it can be seen that even WHO places reliance on the national

Regulatory Authority of the country of manufacture and it is further categorically

made clear that vaccines which have not gone through the assessment process by

the who should be as safe and effective as those that have actually been assessed.

From the language of the document, it appears that such assessment is made by

the WHO either at the instance of the manufacturer itself or otherwise.


( 33 ) THE assessment procedure starts with the collection of data which includes

information regarding the premises and equipment, the vaccine composition,

production, quality control, satiability, clinical experiences etc. After the data is

collected by the WHO, the same is examined by experts appointed by the WHO. The

next step is that samples of the product are actually tested in the laboratory chosen

by the WHO. WHO also makes an evaluation of the existing regulatory mechanism

of the country of manufacture. The next step in the process of evaluation is the visit

of the site where the manufacture took place. The experts committee constituted by

the WHO visits the place of manufacture to examine the manufacturing process,

more specifically with reference to the process of production, quality control and

good manufacturing practices. After the site visit, a report is prepared by the WHO,

a copy of which is required to be sent to the manufacturer as well as the National

Regulatory Authority. At that stage 'if minor adjustments need to be made by the

manufacturer, WHO will postpone it's final recommendations to unicef or the other

UN agency involved until such adjustments have been incorporated and verified by

WHO'.


( 34 ) AFTER completion of the entire exercise described above , if the WHO is

satisfied, the vaccine would be included in the list of Pre-qualification. Such

assessment is undertaken at regular intervals usually every two years or at such

shorter intervals if required, in situations where the pre- qualified vaccine fails to

meet WHO recommended requirements and/or the specifications of the offer to bid

etc.


( 35 ) FROM the above it can be seen that the WHO makes an assessment of the

quality of the product as well as the efficiency and purity of the manufacturing

process. What exactly is the criteria adopted by the WHO while making such

assessment is not indicated in the document. I hasten to add that the WHO is not

under any obligation to disclose the same and also conscious of the fact that these

are the internal procedures adopted by the WHO for the sake of a fair and

systematic conduct of its operations and WHO is not making any law which would

be amenable to the scrutiny of the Courts administering municipal Law. The fact I

wish to highlight is that nothing is brought to my notice to establish the fact that the

WHO adopts any standards which are higher than the standards adopted by the

Indian Law for assessing the quality of the product. The Indian law in this regard as

already noticed also seeks to ensure the quality of the product by very stringent

measures and standards which are adopted from the international institutions and

international practices in the matter of manufacture and sale of the drugs.


( 36 ) THE letter of the Indian Law in this regard takes every care to ensure

avoidance of the sub-standards in the field of drugs. In fact in a letter dated 14-6-

2001, Mr. John. Gillmartin, Chief Procurement officer, UNICEF, New Delhi addressed

to the Commissioner, Family Welfare and Ex- officio Secretary to Government,

Health, medical and Family Welfare Department, government of Andhra Pradesh,

stating as follows:"3. . . . . I believe the HBV specification in India conforms with the

WHO requirements. 4. What difference WHO Certificate in India versus WHO

Inspection for GMP; ltnicef's experience with pharmaceuticals and vaccines

manufactured in India indicates that the GMP Certificate is issued by State

authorities does not reflect high levels or consistent application of the GMP

standards. We have seen some inspections which were rigorous and the certificate

reflects a high level of GMP compliance. Others appear to be using a very different

interpretation of the standards. The frequency of re-inspection has not been

consistent, nor generally well documented. The follow up with manufacturers to

correct deficiencies noted is also not consistent with good GMP compliance. . . . . . "


( 37 ) THE background and relevance of the letter will be discussed in the later part

of the judgment. Two points are required to be noted from the above letter that

even Mr. John Gillmartin opined that Hepatitis-B vaccine specifications in India

conforms with the WHO specifications. All that Mr. John Gllmartin pointed out in

substance is that there is some laxity on the part of the executive in enforcing the

standards stipulated by the law and that too, such laxity is not a general feature, but

there are occasions where such laxity is noticed by who. The said observation is

general in nature and does not specifically refer to any particular manufacturer.


( 38 ) IT is a very sad commentary on the state of affairs in the country regarding

the enforcement of law by the executive. The executive instead of rectifying the

deficiencies pointed out seeks to take shelter under the above observations to justify

it's stand in stipulating the impugned condition of the tender notification.


( 39 ) IT is also relevant to notice that there are only two manufacturers of the

vaccine in question in the State of Andhra Pradesh. It is not very difficult for the

State to cross-check the correctness of the observation of Mr. Gillmartin with

reference to the two local manufacturers. Apart from the present problem the State

owes such a legal obligation under the Constitution and the Drugs Act.


( 40 ) THE entire thrust of the argument of the respondents 1 and 2 is that by

stipulating a condition such as one challenged in the present Writ Petition, the State

is only ensuring a higher quality in the commodity which is sought to be procured. It

is argued by the learned Additional Advocate-General that the criteria adopted and

object sought to be achieved by the adoption of such criteria being inherently

rational, the same should not be interfered with by this Court in exercise of its

jurisdiction under Article 226 of the Constitution. I have no doubt about the said

proposition of law. But, the question is whether the criteria adopted by the State can

be called a rational one. The learned Additional Advocate-General submitted that

such criteria of adopting 'who Pre-qualification' is not found for the first time at the

time of issuing the impugned tender notification, but in fact was adopted earlier also

in the year 2001 when the State sought to procure Hepatitis B vaccine. He therefore

argued that submissions made by the learned Counsel for the petitioner that the

impugned stipulation is only tailor-made to benefit the third respondent is factually

incorrect and legally unsustainable.


( 41 ) IN the year 2001, when the government of Andhra Pradesh wanted to procure

Hepatitis B Vaccine, the government of India, (Department of Family welfare)

guidance was sought regarding the source from which the vaccine is to be procured.

By" letter dated 8-5-2001 the secretary to the Government of India informed the

Government of Andhra Pradesh that the Government of India did not have any past

experience in that regard and advised the Government of Andhra Pradesh to contact

Mr. Gill Martin, who is the chief Procuring Officer of UNICEF at New delhi for further

action on the issue. In fact the relevant portion of the letter, which is filed by the

Government along with the counter reads as follows: ?kindly refer to your letter

dated 25-4-2001 regarding assistance in procurement of hepatitis B Vaccine could

claim equipment and AD Syringes under the Bill and Melinda gates Foundation

Project. During 2001-2002 HSCC is procuring the cold chain equipment for the

Universal immunization Programme. However they do not have any past experience

in vaccine procurement or on procurement of AD syringes. UNICEF has a very large

base and mechanism for procurement of this item and could be contacted as they

have been supplying these items to more than 100 countries. I would suggest that

you may like to contact Mr. Gill Mariyn, Chief Procurement Officer, unicef, New Delhi

for further action on this issue. So far as WHO approved Hepatitis b vaccine is

concerned, one of the Indian manufacturers are currently approved by who. The

Indian manufacturers have applied to WHO for inspection which will take some more

time."


( 42 ) AS a consequence, the Government of Andhra Pradesh started

correspondence with Mr. Gill Martin. In one of the letters written by the Secretary to

Government of Andhra Pradesh dated 9-6-2001 the government sought certain

information from Mr. Gill Martin in the context of the procurement of Hepatitis B

Vaccine. The relevant portion of the letter reads as under "thank you for sending the

signed MOUs promptly. Regarding the comments on the domestic vaccine issue for

Hepatitis B vaccine, I request you to kindly furnish the information on the following

issues for facilitating the Government of Andhra Pradesh to take a decision. 1. What

are the pre-requisites/ qualifications that a vaccine manufacturing company

musuhave, if the Vaccine is to be procured by UNICEF for use in EPI/uip. 2. What

are the technical clearances if any the company needs to possess for supply of

vaccine to UNICEF for EP1 use. 3. Are there any differences in composition/

specifications between the Hepatitis-B vaccine when marketed domestically and

when marketed internationally. 4. What is the difference between WHO GMP issued

by Drug Controller of India and inspection by WHO for review of manufacturers for

GMP mentioned in your letter. 5. Are there any companies in India manufacturing

Hepatitis-B Vaccine which meet all the pre-requisites/requirements for procurement

of Hepatitis-B Vaccine by UNICEF for use in EPI/uip. 6. What is the cost difference of

Hepatitis- b Vaccine if procured locally and if procured internationally."


( 43 ) ONE thing that is required to be noticed from the above referred letter is that

at that point of time, the Government of Andhra Pradesh was also conscious of the

fact that there could be a cost difference in the procurement of the vaccine in

question depending upon the fact whether the same is procured from the local

manufacturer or international manufacturer.


( 44 ) IN response to the above mentioned letter, Mr. Gill Martin wrote to the

Government of Andhra Pradesh on 14-6-2001 which is already referred to earlier. In

this context, it is necessary to extract the entire letter: "dear Dr. Sawhney, thank

you for your fax received 11. 06. 2001 requesting information on vaccine

procurement. The following is an interim reply as some points will need further

consultation. 1. Qualifications for vaccine supply through UNICEF: Most Vaccine

UNICEF buys is supplied by export from one country to another, i.e., it moves in

international trade. Suppliers in this market are required to comply with a WHO

qualification process for supply to UN Agencies. UNICEF is the major vaccine supply

agency in the UN and provides funding for WHO to carry out qualification services.

They include licence review, clinical data review, assessment of the National Control

Authority and National laboratory and finally assessment of the manufacturer's GMP.

Occasionally, UNICEF buys a domestically made vaccine for domestic consumption

OPV made in India is the largest example of this type. In this case, the

manufacturers in India were reviewed by who for GMP compliance. This was done to

reassure the large number of donors, the world Bank and the GOI who collectively

were investing about Rs. 200 crore annually, that the quality of OPV used for

eradication met high standards for safety and effectiveness. 2. Technical clearance a

company requires: essentially, the supplier need to demonstrate that it is selling a

fully licensed product, meeting all national vaccine requirements, meeting the WHO

technical requirement for that vaccine in EPI use and confirming to who Good

Manufacturing Procedures (what is generally referred to as 'who GMP?). 3.

Differences between domestic marketed and International HBV: there are several

specifications for HBV in use in different countries: plasma derived, recombinant,

pediatric and adults strength levels vary among countries. UNICEF refers evaluation

of a specific vaccine to WHO to confirm that it conforms with the WHO HBV

requirements. In the case of a domestic HBV vaccine for domestic use, the national

licence and regulatory authority determine acceptability within that country. UNICEF

would consult with WHO to advise if there were significant differences between the

nationally licensed vaccine and the international specifications. I believe the HBV

specification in India conforms with the who requirements. 4. What difference WHO

certificate in India versus WHO Inspection for GMP: UNICEF's experience with

Pharmaceuticals and vaccines manufactures in India indicates that the GMP

certificate is issued by State authorities does not reflect high levels or consistent

application of the GMP standards. We have seen some inspections which were

rigorous and the certificate reflects a high level of GMP compliance. Others appear to

be using a very different interpretation of the standards. The frequency of reinspection

has not been consistent, nor generally well documented. The follow up

with manufacturers to correct deficiencies noted is also not consistent with good

GMP compliance. That was the basis for requesting WHO to provide additional

inspection services. These are always conducted with national inspection authorities

to assure that consistent interpretation of the standard are applied regardless of the

location of the supplier. The findings of the WHO inspection team are discussed and

shared with the manufacturer and national inspectorate. WHO provide GMP experts

with extensive international experience and the observations are clarified before

departure so that all parties understand the findings, the recommendations if any.

Most manufacturers and inspectors find the process a valuable professional audit by

well qualified professionals. Generally it offers an opportunity to further improve the

vaccine. 5. Suppliers in India Meeting WHO requirements: This question is being

referred to WHO. I believe there are or will be several in the next months. There is

an on going assessment in process and the results should be available before year

end. 6. Cost-difference: A good question. The domestically made vaccine when

approved generally is less costly than imported. The domestic vaccine would be

purchased in local currency and delivery to project locations would be included in

the price. Domestic vaccine will not require import clearance and transport from the

international airport to the project sites. Domestic HBV will be required to meet the

same VVM requirement applied for international supply. If you wish UNICEF can

tender from the domestic product now to secure prices while the approval process is

being completed. If domestic vaccine is not less costly then UNICEF would supply

the lower cost option. Recommendation: You may wish to purchase the first quarter

of HBV from the international source and thus assure that you will have the vaccine

you require before end September. Tendering can being in advance of the domestic

approvals and then place future orders for domestic HBV after WHO has completed

their evaluation. I will write separately on the domestic AD syringe supply. We are

confirming the availability of domestic AD's at this time. "


( 45 ) THE following features are required to be taken note from the above letter

that Mr. Gill Martin opined at that time that domestically manufactured vaccine

generally is less costly than imported. Mr. Gill Martin also informed that if the State

so wished to procure the vaccine from the domestic market, the price structure

could be examined to find out the cost of the vaccine. However in view of the

urgency of the matter, he advised the State to purchase the vaccine from the

international market as the assessment regarding the quality of the domestically

manufactured vaccine had not yet been completed by the WHO.


( 46 ) IN response to the above letter dated 14-6-2001, the Secretary to the

government of Andhra Pradesh wrote back to the Mr. Gill Martin, the relevant

portion of the letter reads as under: ?based on the information given in your e- mail

dated 4-6-2001 and clarification given by you in your letter dated 14-6-2001, it is

requested to take action to procure hepatitis-B vaccine with a national tender for

supplies to the project with the necessary technical clearances from the competent

authorities subject to quality, availability and cost effectiveness. Further, since

Hepatitis-B vaccine is being introduced for the first time in EPI/uip, it is necessary

that the most stringent and highest quality standards are set for the vaccine. Hence,

while procurement is to be done domestically, the standards set by UNICEF for a

supplier to be pre-qualified for international bidding should be met by the domestic

manufacturers. This would include, I presume as per your letter, licence review,

clinical data review, assessment of the National Control Authority and National

Laboratory, assessment of the manufacturers GMP by WHO experts among others.

Further it is presumed that the specifications of Hepatitis-B Vaccine will conform

with the WHO requirements for UIP programme. Further, I presume that the

manufacturers will have all such technical clearances needed to demonstrate for

supply of vaccine to UIP as per UNICEF standards. Further I presume that it would

be preferable that in keeping with the current practice in respect of polio vaccine,

samples of every consignee be tested by the National Control Authority (CRI,

Kasauli). This testing could be organised either by you or us as per convenience. I

would appreciate if you could kindly confirm whether the presumptions made in para

above are in order and will not lead to unduly delay and are exhaustive enough to

ensure that the highest standards are set for the vaccine. Regarding AD Syringes

and cold chain equipment also, Government of AP prefers national procurement

subject to availability, quality and cost effectiveness. If these are not available,

procurement will have to be done from international market".


( 47 ) AFTER some correspondence in this regard, the Government of Andhra

Pradesh took a decision to procure the vaccine in question from the international

sources for the year 2001. The reason for such decision is mentioned in Para 12 of

the counter affidavit filed by the State-second respondent and Paragraph 12 of the

counter-affidavit reads as under: ?however, UNICEF was not able to procure

hepatitis-B Vaccine locally. As per UNICEF, 'all three local invitees effectively offered

the same prices, there was only one US cent difference between the three offers

which were substantially higher than the equivalent offshore landed price. This

factor plus the reality that none of the local suppliers are pre-qualified does not

advance the matter in a direction that would ensure an imminent or positive

outcome'. Therefore UNICEF recommended and desired that the procurement be

done internationally from a pre-qualified source that would ensure a guaranteed

delivery at a very competitive price. Accordingly, considering the issue of quality,

guaranteed delivery, the competitive price, and WHO pre-qualification, UNICEF had

procured Hepatitis-B vaccine internationally".


( 48 ) IT can be seen from the above that UNICEF advised the State Government to

procure Hepatitis-B Vaccine from international sources for two reasons. First is that

none of the local manufacturers had 'who pre-qualification', secondly, the difference

in price offered by the three domestic manufacturers was only about one American

cent, which in turn was substantially higher than the equivalent offshore landed

price. In fact this assertion of the State goes against the earlier opinion of Mr. Gill

Martin that domestically manufactured Vaccines generally are cheaper than the

imported vaccines. For all the said reasons, both UNICEF and State government

thought that it would be better to procure the vaccine in question from the foreign

sources.


( 49 ) ONCE again for the present year, when the State wanted to procure the

vaccine, it started enquiries to find out whether there are any WHO pre-qualified

manufacturers in the country. An examination of the original files/records clearly

indicates that by the date of the decision to call for tenders from primary

manufacturers of India who have WHO pre-qualification, the State was aware of the

fact, that there is only one manufacturer who acquired the WHO pre-qualification. In

fact the respondents were in regular correspondence. Still the State went ahead

with the process of calling for tenders stipulating the condition that the tenderer

should be a primary manufacturer with WHO pre-qualification.


( 50 ) IT may be open for the State to prescribe such rational conditions as it thinks

fit in the matter of entering into a contract for procurement of commodities. In my

view the rationality of the decision, cannot be decided only on the basis of the

prescription of the standard of quality of the commodity sought to be procured. It is

already noticed that for the earlier year, the state had more than one criteria for

identifying sources from which vaccine is to be procured. Undoubtly one of them is

quality of the commodity, but the second and equally important is the cost of

procurement. As already noticed from paragraph 12 of the counter, the State was

advised by the UNICEF to go for procurement from the international market for the

reason that it not only ensured the quality of the material, but also worked out

cheaper.


( 51 ) HOWEVER, when it came to the present year, the State does not appear to

have considered the question whether procurement from the domestic market would

be cost effective. A factor which was considered relevant for the previous year. For

the reasons best known to the state, the State ignored that consideration. The

counter of the State is silent in this regard. Yet the State seeks to justify the

impugned stipulation in the tender notification to be a rational one and beyond the

reach of the Court's scrutiny.


( 52 ) THE only reference with regard to the cost effectiveness of the procurement

in the domestic market is to be find at the paragraph 13 of the counter, which reads

as under:". . . ACCORDINGLY, APHMHIDC was addressed, vide letters dated 11-10-

2002 and 21-10-2002 to procure from National manufacturers with WHO prequalifications at a cost less than last year's procurement price from UNICEF

APHMHIDC invited tenders for supply of Hepatitis-B Vaccine from primary

manufacturers in India with WHO pre- qualification only. . . "


( 53 ) IN the background of the above, it becomes very difficult to understand as to

why the State decided to call for tenders from the primary manufacturer in India

with who pre-qualifications. The State had definite information that only one such

manufacturer exists. When State decided to procure vaccine at a price less than the

cost of the imported vaccine only from the domestic manufacturers with WHO prequalification, the State could have straightaway negotiated with the third respondent

after actually ascertaining the actual current cost of the imported vaccine. However

the State did not choose to take such course of action. For some mysterious

reasons, the State chose to call for tenders with the impugned condition. Therefore

the allegation of the petitioner that the impugned condition is tailor-made to suit

only one person, i.e., third respondent is to be accepted.


( 54 ) NOTHING further is brought to the notice of this Court in this regard whether

any assessment was made to find out the difference between the current cost of the

imported vaccine vis-?is the vaccine manufactured in India. On the other hand, i

am informed at the time of hearing that when the tenders are opened there is a

price variation of almost 100% between the petitioner who participated in the

process pursuant to the interim order in this writ petition and the third respondent,

the price offered by the third respondent being higher. A premium which the third

respondent obviously demands for being the only manufacturer in this country who

satisfied the conditions stipulated in the tender notification.


( 55 ) BUT that does not solve the problem in the present case. The third

respondent filed an affidavit along with certain documents indicating that the

petitioner had also made an attempt in the month of July, 2001 to obtain WHO Prequalification, but failed. This fact is not disputed by the petitioner tho

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ugh the petitioner raised some objections regarding the production of the document on the ground that it is a confidential correspondence between the petitioner and WHO, the third respondent being the trade rival of the petitioner cannot be permitted to place the document on the record of the Court, without disclosing the source from which he had obtained the document. ( 56 ) IN a case like the present one the larger public interest, that is the requirement of maintenance of higher standards in the health care of the society, should prevail over the private law rights of the parties. The examination of the said document discloses that the WHO made certain observations to the effect that the petitioner's manufacturing operations did not meet the good manufacturing practices set up by the WHO. Such observation was made an year and half back. The learned Counsel for the petitioner vehemently submitted that, now the first petitioner meets all the standards set up by the WHO. In fact in the counteraffidavit filed in response to the implead petition, the writ petitioner also made an assertion that the petitioner has already initiated the process once again to obtain who pre-qualification. ( 57 ) FROM the above facts, it is clear that the third respondent definitely has the WHO pre-qualification whereas the petitioner does not have the same as on today. Since the acquisition of the WHO pre-qualification is optional on the part of any domestic manufacturer, it is doubtful whether such a prescription could be sustained if a manufacturer who never attempted to acquire such pre-qualification ever challenges the condition such as the one impugned. For the present I do not wish to examine the said question, as the petitioner unsuccessfully attempted to acquire such pre-qualification cannot now complain that such a stipulation in the tender notification is arbitrary. ( 58 ) THE state of facts inevitably lead to another question. Whether the State can take a stand that the quality of the petitioner's product is not up to the required standard for purchase by the State, whether such a stand would be consistent with its obligations under the Drugs and Cosmetics Act and the obligations of the executive under the constitution to administer the law. ( 59 ) THE State permits the petitioner to sell its product including Hepatitis B Vaccine in open market, in fact the petitioner asserted in the affidavit filed in support of the Writ petition as follows:". . . IT is submitted that the first petitioner is a regular manufacturer and supplier to both trade and institutions which include both central and State Governments and also to countries like Peru, Mexico, Phillpines, moldavia and also in the process of registration and supplies to various other countries like Georgia, Ghana, Zimbabwe, Sri lankr, Bangladesh etc. " ( 60 ) THE allegation is not rebutted by any one of the respondents. ( 61 ) IF the product of the petitioner is available for purchase in the open market with a certification of the State that the quality of the product is in accordance with the standard stipulated by the law of the land, I do not understand how the State can contend that the same product cannot be purchased by the State as it does not have who Pre-qualifications. ( 62 ) THE only basis for the contention can be that, the State obviously has no faith either in the adequacy of the law dealing with the standard quality of the drugs manufactured in the country or in the standard of the implementation of such law. But the State does not disclose it's stand in this regard. ( 63 ) BUT, in view of my conclusion that the legality of prescribing the condition of WHO pre-qualification cannot be decided in the present case, I shall assume for the sake of argument, that the belief of the State that a WHO pre-qualified manufacturer's product would be of a higher standard is justified, still the State will have to explain the reasons which prompted the state to call for tenders only from the domestic manufacturers with WHO pre- qualification. For by making such a stipulation the State obviously overlooked the cost factor which even according to the State was a relevant factor in the previous year. No explanation is forthcoming from the State, to justify the stipulation to procure the material from only a domestic manufacturer with such pre-qualification. Therefore I find it difficult to accept the submission of the state that the impugned stipulation is inherently a rationale stipulation. ( 64 ) NO assessment of the current price of the commodity manufactured by the who pre-qualified manufacturer in the international market is demonstrated to have been made. ( 65 ) FOR the above mentioned reasons, I am of the opinion that the impugned stipulation insofar as it invites tenders only from domestic manufacturers is arbitrary. The Writ Petition is therefore allowed to that limited extent.
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