Pharmaceutical firms uninterested in state tenders due to outstanding payments

• Outstanding payments owed by SPC estimated at over Rs.10bn

By Nishel Fernando

Sri Lanka’s pharmaceutical firms are becoming less enthusiastic to participate in government tenders, due to the financial strain from outstanding payments running into billions of rupees and unfavourable tender clauses.

“As the industry faces financial challenges, the extensive delays in payments by State Pharmaceuticals Corporation (SPC) have caused severe financial strain on companies, pushing them beyond their limits. We urgently request your attention to address the issue of delayed payment settlements and to reconsider the one-sided tender clauses,” Sri Lanka Chamber of Pharmaceutical Industry President M. Prathaban told the Annual General Meeting (AGM) held in Colombo, last Friday.

According to him, the current outstanding payments owed by SPC are estimated at over Rs.10 billion.  
As the mark-ups are lower in state tenders, with the lowest bidder securing the tender, Prathaban pointed out that it has become financially non-viable for firms to compete in state tenders, in particular, given the current interest rate regime of 20-25 percent.

“The companies have little interest in participating in state tenders now. When fewer companies are participating, SPC won’t get the best pricing,” he added.

Meanwhile, Prathaban also highlighted that a number of tender clauses are either one-sided or unfavourable to both parties.

He urged the government to revisit these unfavourable tender clauses and replace such clauses with more pragmatic ones.

“We have previously discussed this matter with the relevant personnel and we believe that revisiting these clauses will ultimately benefit the institution by enabling the procurement of high-quality medicines at competitive prices,” he said.

Health Minister Keheliya Rambukwella, who attended the AGM as the chief guest, assured the industry that the government has given its utmost priority to settle the due payments, despite the difficult circumstances the country is going through.

“Let me once again take this opportunity to assure you that the government places the highest priority on this matter and we are doing the best we can, given the extremely difficult circumstances we are in,” he said.

Earlier, the government partially settled the outstanding payments to the industry, via Treasury bonds, after the outstanding payments peaked to around Rs.30 billion.