Here is a model Indian States can implement to ensure smooth flow of medical supplies to health facilities


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Photo: John Isaac / World Bank

Though the Indian government has steadily increased funding for its health sector, per capita allocation is still low; reform is thus critical to effectively utilize the available budget.

​The underlying question is: Given a set of resources, how do you procure goods in a way that achieves value for money and maximum efficiency?

In India, procurement of health sector goods has been a major concern for the government.  Drugs and medical supplies are not procured and distributed in time, and this interruption in the delivery of services in health facilities affect the general population’s health outcomes.

Technology is an important tool to address these concerns. The Tamil Nadu Medical Services Corporation (TNMSC) set up in the State of Tamil Nadu had successfully demonstrated a cost-effective model: basically, an IT system is an integral part in the supply chain infrastructure to support management, decisions, and adequate attention to quality in drug procurement. This model was advocated for adoption with suitable modifications to the Union and many State Governments.

India’s Ministry of Health and Family Welfare (MoHFW) is annually procuring health sector goods such as vaccines, family planning goods, drugs for malaria, TB etc. that are valued at about US$ 200 Million for use by the State Governments. However, the inefficiency in procurement has led to complaints of shortages and wastages. Inaccurate quantification, delays in tender decisions, payment delays, inadequate monitoring etc. are responsible for this.

In 2011, these deficiencies were presented to the Cabinet of Union Ministers, who were convinced and approved the need for reform.

Based on the Cabinet decision, the Health Ministry set up the Central Medical Services Society (CMSS) on the lines of the TNMSC to procure and distribute supplies to States through web-connected warehouses in State capitals. The Society has financial and administrative autonomy to take decisions on procurement related issues. It also has finalized standard bidding documents and has also floated its first tender.

An IT vendor has been identified to take up the IT work and a quality control framework has been put in place. Its warehouses are being equipped with necessary storing and warehousing equipment, which will distribute to the States the items that are procured by the Ministry. Since the warehouses will be connected through the IT system, it will be possible for the Society to monitor the inventory in warehouses preventing stock outs and wastages.

Many State governments have also adopted a similar reform process. Fortunately, drug budget, which was a major concern in low-income States like Orissa, Bihar and Rajasthan, is no more an issue, since the State governments, keen to ensure continuous availability of drugs to those accessing public health facilities and services, have substantially increased their budget for drugs.

The reform had been initially implemented only in the States of Tamil Nadu and Kerala. With the support of the World Bank, the State governments of Rajasthan, Bihar, Orissa, Chhattisgarh, Jharkhand and Haryana have set up Corporations similar to the TNMSC to eliminate shortage and wastage, and to enhance the quality of drugs through careful selection of vendors and an excellent quality assurance system.

They are now fully conscious of the need for an Essential Drug List, standard tender document, proper supply chain infrastructure, a proper IT system for inventory control and management decisions.

Noting the success of these entities, many more States are expected to adopt similar reform, with the support of the national government. If all State governments implement the model, there will be a chain of interconnected supply chain infrastructure throughout the country that will facilitate a smooth flow of medical supplies to health facilities.

What do you think? Share your comments below. 


Shanker Lal

Lead Procurement Specialist

Join the Conversation

Sangeeta Pinto
December 18, 2014

An informative and good read. Apart from drug procurement, medical services corporations are also engaged in procurement of medical equipment critical for the functioning of the public health system. The corporations are best placed to negotiate terms and conditions for warranty and annual maintenance contracts. Consequently, the reform must encompass strengthening of capacities at the central and state levels for management and maintenance of medical equipment, for their effective and efficient utilization.

jayakumar gangipogu
January 05, 2015

in india medical sector is growing than what it was now we see rural and urban places public hospitals severes is well. Our GDP 6 percent only we are spending. central ruling part may has future plans to impure this sector.

Geeta Shivdasani
December 18, 2014

Excellent Read ! Here is a related link :…
The Bharatiya Janata Party’s (BJP) election manifesto spoke vaguely of making drugs more accessible and affordable. Now, post-election, it remains to be seen whether the notion of “affordable” will be augmented by the urgency of “free”. But the idea does seem to be back on the table. On May 30, newly appointed Health Minister Harsh Vardhan announced a plan to meet with ministers of health from various states to discuss the possibilities of streamlining procurement and distribution of generics. An honest assessment of problems would be a refreshing start.
Secondly, and at a micro level, it would be good to have a comparison with Rajasthan Medical Services Corporation [RMSC] and Karnataka State Drugs Logistics & Warehousing Society.

Rajnish Sinha
December 24, 2014

Adoption of TNMSC model of drug procurement by other states and Center has been recommended by many, including the World Bank and HLEG. The major attributes of TNMSC model recommended for emulation are organization structure, essential drug list primarily consisting of generics, standard tender conditions; IT enabled backbone, central drug stores in all districts, pass book and quality control.
No doubt, the TNMSC model is a success as far as TN is concerned. However what has worked for Tamil Nadu, it may not work for other states where the local environment and requirements may be different. By this logic health care indicators (IMR, MMR, institutional deliveries etc.) of Tamil Nadu are above average the national figures and entire healthcare system of TN can be emulated by others.
TNMSC model was developed in 1990’s primarily by Mr. Poornalingam, the then health secretary of TN and the reform had political backing and support. This was followed up by effective leadership, multi-stakeholder participation and sufficient budget allocations. The virtuous circle thus created survived political changes and an autonomous organization survived and thrived. Even today, not all states may readily back, support and sustain such changes. Delhi, after starting well (Delhi Durg Policy), could not create the virtuous circle.
The leadership to assume responsibility for large-scale drug purchases is another soft issue essential for success. Kerala, while emulating the TNMSC model succeeded only after Mr. Biju Prabhakar provided leadership in 2011(KMSCL started in 2007). The per capita drug consumption in rupee terms is high for TN which gives it a large budget to make purchases and also to cover fixed costs. For some states, like Orissa, this figure is very less and will not translate into sufficient budgets. Thus merely emulating some elements of TNMSC may not lead to desired results.
Further there are states where the local context and needs may be very different. Kerala which has implemented this model buys branded generics (compared to plain generics of TNMSC) as people prefer branded drugs. There tender turnover threshold criteria is Rs 10 crores (compared to Rs 10 lakhs of TNMSC). However this condition has failed in Orissa as bidders could get a stay from High court.
To sum up, emulation of the TNMSC model by others should come up only after a comprehensive scrutiny of the state’s condition and its ability to construct and sustain new organizational structures.

April 30, 2018

Government have to consider the rural areas while alloting the budget for healthcare service and equipment .Also allocate the sufficient budget for alternative system of medicine like homeopathy in urban and also in rural area so many /a>functioning and provides service to the peoples

May 02, 2018

n India the health sectors are growing tremendously, treatments for various diseases has been increased widely. even there is a good hope medical tourism.i am very much happy to see your blog about the health care activities. last week i visited a doctors website in Barcelona about integrative medicine which is quiet impressive. he says that "Treatment actually affects all factors that influence health and well-being, including the body, mind, spirit and the community in which the patient is part".
body and mind