Karnataka’s proposal to make hospitals buy medicines directly from manufacturers is being presented as a response to the state’s spurious-drug investigation. But the plan is about more than removing carrying and forwarding agents and stockists from a supply chain. It exposes a harder administrative question: how can a hospital procurement system move medicines efficiently while preserving traceability, technical oversight and clear accountability at every stage?
Health Minister UT Khader told The Times of India that the government is considering a new procurement system under which hospitals could source drugs directly from manufacturers. The proposal follows the investigation into the Bidadi spurious drug racket and concerns raised about a similar pattern in Belagavi. The minister said the government was examining whether multiple intermediaries between manufacturers and final users made it more difficult to identify responsibility when something went wrong.
The immediate context is serious. According to the report, the Food and Drug Administration has cancelled the licences of 16 retail and wholesale firms and suspended eight others during the probe. The suspended entities include a Pfizer carrying and forwarding depot in Nelamangala. These actions are regulatory steps connected to an ongoing investigation; they do not by themselves establish that every affected firm was involved in supplying counterfeit medicines.
The proposed reform therefore sits between procurement policy and drug regulation. A C&F agent or stockist is not merely a commercial link in a distribution chain. Such intermediaries can hold inventory, move products across locations and make medicines available to institutions that may not have the capacity to negotiate and coordinate directly with every manufacturer. Khader acknowledged that the existing chain was established to make distribution easier and create employment. His concern was that too many points between the company and the final user could create obstacles to accountability.
That distinction matters because a shorter chain is not automatically a more transparent one. Direct purchasing can clarify who sold a medicine to a hospital, but it also places greater responsibility on hospitals and manufacturers for forecasting, ordering, delivery, storage, documentation and verification. The supplied report does not establish whether Karnataka has assessed the staffing, technical capacity or digital systems required for hospitals to manage these additional functions. It does, however, show that the government is considering new rules for the intermediaries who remain in the system.
The Belagavi episode illustrates the control problem the government is trying to address. Khader said a pharmacy at KLE Medical College and Hospital procured 15,300 vials from a Pfizer C&F at a discounted price, stating that the medicines were required by the hospital. The hospital later issued an acknowledgement for receipt of the stock, but the minister said the hospital actually required only 140 vials. According to his account, the remaining stock was allegedly sold in the market by the pharmacist at a higher price.
The allegation raises questions about how institutional discounts are controlled after medicines leave a manufacturer or distributor. It also shows why procurement records alone may not be enough. A hospital acknowledgement can establish that a consignment was received, but it may not explain whether the quantity matched clinical demand, whether the stock remained at the intended institution or whether medicines were diverted after delivery. The minister further said investigators suspected that some spurious medicines linked to Krupa Health Care, a wholesale drug centre allegedly operated by a key accused in the Bidadi case, may have been mixed with this consignment and entered the market. These allegations remain part of the ongoing investigation and have not been independently established in the supplied material.
The proposed direct-purchase model is being considered alongside a traceability approach adopted in Uttar Pradesh. The report says Uttar Pradesh’s drug regulator tightened requirements for medicines supplied to hospitals and other institutions at special discounts. Such medicines must be billed to the intended institution, delivered to the stated destination and marked “institutional supply” on the packaging. The approach addresses a different part of the same chain: not simply how many intermediaries exist, but whether a product’s intended buyer and destination remain visible after the sale.
For Karnataka, this could mean that procurement reform will depend on the rules attached to it. Removing a layer of distribution may reduce the number of transactions and, as Khader said, potentially reduce commission-related costs. But the evidence in the report points to several controls that cannot disappear with the intermediary: manufacturer identification, batch verification, institutional billing, quantity validation, destination checks and records of final use. The report does not say that Karnataka has finalised these controls or quantified any likely savings.
The minister also questioned the regulatory requirements for C&F agents and said they should possess at least some technical knowledge and expertise. He said the government would design fixed rules. This indicates that the proposal may not be limited to a binary choice between direct manufacturer-to-hospital sales and the current distribution structure. It may instead produce a more tightly regulated network in which intermediaries are permitted but subject to clearer qualifications and responsibilities.
That is an important institutional distinction. Hospital medicine supply is not only a market transaction; it is also a public-health control system. Manufacturers are responsible for the quality and authenticity of products they release. Distributors and C&F agents handle storage, movement and documentation. Hospitals determine requirements, receive supplies and use them for patients. Regulators inspect firms, investigate violations and act against licences. When a product is counterfeit, diverted or misrepresented, the public interest depends on being able to reconstruct this chain quickly.
The Pfizer statement cited in the report shows how manufacturers are responding to the current investigation. The company said patient safety and product quality were its highest priority and that it had worked with authorities after counterfeit medicines were brought to its attention. It said it had removed Pfizer batches from the market where batch numbers had been copied by counterfeit products, supported efforts to distinguish original from counterfeit medicines and provided technical and other information related to affected batches. The statement reflects the manufacturer’s position and does not resolve the wider questions surrounding the distribution chain.
The numbers reported in the case also reveal the scale of the accountability gap. The difference between the 15,300 vials procured and the 140 vials the hospital reportedly required is not a minor documentation discrepancy; it is a mismatch of more than 15,000 vials between stated institutional need and reported procurement. The supplied material does not establish how the quantity was approved, who authorised it, how the excess was handled or whether the alleged resale has been proven. Those unanswered questions are precisely where a revised system would need to place responsibility.
Karnataka’s next step is linked to a national conclave of Food and Drug Administration officials scheduled to be held in Bengaluru in October. Khader said further action on the proposed changes would follow that meeting. Until then, the direct-purchase idea remains under examination rather than an operational policy. The state’s challenge will be to show not only that the supply chain has fewer links, but that each remaining link can be identified, audited and held responsible when medicines move from a manufacturer to a hospital and ultimately to a patient.
