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Delhi Healthcare Corporation

Delhi Healthcare Corporation

The efficient operation of health institutions like dispensaries, hospitals etc. depends upon multiple factors like drug supply chain management, availability of equipment, human resources etc. Predictable health systems give rise to predictable health behaviour.

In June 2015, the Dialogue and Development Commission (DDC) undertook a detailed analysis of the existing healthcare system in Delhi and found several gaps in the supply chain management of drugs and medical equipment. Delhi had a 'Drug Policy' since 1994 and the Essential Medical List (EML) was prepared from time to time which mandates the Government of the National Capital of Delhi (GNCTD) to provide generic drugs to patients. It was found that the patients that were coming to the Delhi Government health facilities did not get all the drugs within the Essential Drug List prescribed by the doctors and had to spend out of their own pocket.

The analysis conducted by DDC revealed several issues faced by Delhi's healthcare institutions, such as:

  • Unavailability of drugs;
  • Absence of procurement specialists;
  • Complex payment procedures;
  • Absence of scientific forecasting;
  • Lack of quality control;
  • Absence of centralised buffer stock;
  • Absence of independence to choose the drug requirements of individual institutions;
  • Difficulties in equipment procurement and contract management;
  • Hospital/ cluster-wise procurement of sanitation and security service;
  • Absence of projects like e-hospital, and telemedicine in institutions.

As such, the Health Department, including the Secretariat, was engaged only in the day-to-day operations of the Healthcare institutions.

To alleviate the institutions of these problems, DDC conducted a detailed study of the existing system in Delhi and the approach undertaken by other state governments in dealing with the issues mentioned above. Other states had systems in place which took care of day-to-day operations. One such successful initiative done across states such as Tamil Nadu, Kerala, Orissa, Jammu and Kashmir etc. was the formation of a 'Medical Service Corporation' for drugs/surgical, supply chain management, equipment and retail pharmacy.

To further understand the workings of the corporation, DDC organised a visit to the Tamil Nadu Medical Services Corporation (TNMSC) participated by representation from DDC Delhi, DHS, PWD and the Department of Finance.

DDC also held consultations with various stakeholders like the Health Department, Finance Department and Planning Department in the same regard to map out the feasibility and on-ground implementation of the Health Care Corporation.

Key Learnings

It was decided to understand and analyse the Medical Services Corporations of other states and benchmark the key findings to identify the best practices for adoption in Delhi. The findings by DDC were as follows:


  1. For procurement of drugs, TNMSC uses utilisation certificates and this helps avoid the cumbersome procedure of settlement in advance.
  2. TNMSC is responsible for auditing their books instead of involving CPA which might lead to complications, delay and inefficiencies.
  3. Only manufacturers can participate in a tender and distributors are restricted from doing so. However, in the case of Delhi, distributors effectively control the value chain because manufacturers participating in the tender make payments to the distributors.
  4. There is an urgent need for establishing warehouses to perform functions like delinking hospitals from receiving goods, buffer stocks and quality checks before their release to institutions.
  5. Incorporation of a passbook system which holds funds allotted to different institutions and they are free to choose the drug of their choice from the warehouse. Post successful procurement, the amount will get deducted and the passbook will be updated accordingly.
  6. On successful completion of a work order, TNMSC charges up to 5% of the total amount and manages its expenditures within it.
  7. Based on TNMSC, Rajasthan also created its corporation called Rajasthan Medical Services Corporation (RMSC).


DDC recommended the formation of a separate 'Delhi Health Care Corporation' to perform the functions of procurement of drugs, and equipment, implementation of e-health initiatives, and outsourcing of services like sanitation, security, etc on the lines of other states like Rajasthan, Tamil Nadu, Kerala, Orissa, etc.

The proposed corporation shall charge up to 5% on successful tenders and manage all operational expenditure needs through that. Charging a fixed percentage shall ensure that the proposed corporation will not be a loss-making entity. This provision shall be included in the Article of Association itself so that it is binding on the corporation and is not dependent on the Government.

The nature of functions of the proposed health care corporation shall be completely different from other Delhi Government Corporations that generally compete with market forces. The proposed corporation shall only and exclusively do the task of procurement of medicines, etc for the government and hence it will have assured returns while at the same time achieving efficiency, transparency, and integrity in government procurements.

Through the above recommendation, DDC also mitigated the concern of the government departments that the Health Care Corporation will be another loss-making corporation in the system. Accordingly, DDC drafted the Memorandum of Association and Articles of Association of the proposed Corporation and submitted these recommendations to the Department of Health & Family Welfare, GNCTD.