Even when the same digital infrastructure is being used across states, there are substantial differences in capturing last-mile delivery. For instance, e-Aushadhi (E-Aushadi is an information management system that was developed by the Centre for Development of Advanced Computing (CDAC), Ministry of Electronics and Information Technology, India) was designed as a customisable system that states could adapt to their procurement workflows. In practice, states differ significantly in how far the system extends along the supply chain, particularly whether tracking stops at warehouses, at PHIs or continues to the point of patient dispensation. For instance, while Andhra Pradesh is using e-Aushadhi down to the patient level, Maharashtra and Karnataka have only extended it to the PHI level. That is, while all three states robust in inventory tracking, requisition automation and supplier payment management, only Andhra Pradesh extends the system to recording the final issue of medicine against a patient prescription. This comparison highlights that digitisation alone does not automatically guarantee vertical integration down to the patient level.
The horizontal integration problem: a multiplicity of systems
In India, multiple programmes and schemes, at both Union and state levels, operate in parallel, each with their own procurement information management systems. For instance, general essential medicines procurement, disease-specific programmes (such as TB or HIV) and insurance-linked supply chains often procure overlapping medicines through distinct workflows.
This can be attributed to India’s federal structure. State governments control ‘public health’ (including hospitals and dispensaries), while ‘drugs’ fall under the Concurrent List, allowing both Union and state governments to legislate and operationalise procurement activities. This division of authority has resulted in overlapping procurement systems across central schemes, state-level supply corporations, insurance-linked mechanisms and disease-specific vertical programmes.
At the Union level, different schemes follow distinct procurement architectures. The anti-TB scheme under the National Tuberculosis Elimination Programme (NTEP) procures centrally through the Central TB Division, whereas the National AIDS Control Organisation (NACO) delegates procurement functions to State AIDS Control Societies (SACS). The National Health Mission (NHM) Free Drug Service Initiative relies largely on State Medical Services Corporations, which operate through platforms such as e-Aushadhi. In parallel, the Pradhan Mantri Bhartiya Janaushadhi Pariyojana (PMBJP), which provides low-cost medicines, procures centrally through the Pharmaceuticals & Medical Devices Bureau of India (PMBI) and distributes via a separate retail network. Meanwhile, Ayushman Bharat Pradhan Mantri Jan Arogya Yojana, which provides health insurance cover, forecasts medicine demand through empanelled hospitals and private supply channels that are often invisible to state procurement bodies.
This multiplicity produces several structural distortions:
- First, duplication and misalignment at the PHI level. A PHI may receive the same drug, for example Amoxicillin, through multiple channels: the State Medical Services Corporation (essential drug list), an NHM allocation for maternal health and an externally funded disease-specific programme. Each channel maintains its own system. A hospital or dispensary may show ‘stock-out’ within one scheme while inventory may exist under another. The absence of a unified PHI-level stock view results in artificial shortages, parallel storage and misreporting.
- Second, fragmented systems obscure total treatment costs. Programmes such as TB and HIV operate sophisticated patient-linked MIS (e.g. Ni-kshay). However, if a TB patient requires additional antibiotics for a secondary infection, those medicines are procured and dispensed through a State Medical Services Corporation supply chain. The cost of those medicines is recorded in a separate system. As a result, the total pharmaceutical expenditure associated with treating a single TB patient is never aggregated in one place. This fragmentation prevents policy-makers from understanding the true cost of care per treated patient, weakening the link between health budgets and demand estimation.
- Third, insurance-linked procurement creates blind spots in demand estimation. Under PM-JAY, empanelled hospitals may procure medicines through private pharmacies or reimbursement-linked supply channels. These transactions are often not visible to state procurement corporations such as TNMSC or APMSIDC. Consequently, central procurement agencies underestimate actual medicine demand within the public health ecosystem, leading to distorted forecasting and budgeting.
- Finally, non-standardised nomenclature hinders data aggregation. Different MIS platforms use different drug coding standards, some based on generic names, others on stock-keeping units (SKUs), and others on internal catalogue codes. Without a unified national drug registry or interoperable coding architecture, aggregating consumption data across schemes becomes analytically unfeasible.
This horizontal fragmentation makes it difficult to translate health expenditure into reliable healthcare delivery because economies of scale that ensure supply are lost, treatment continuity becomes vulnerable to cross-scheme stock mismatches, and true cost-per-treated-patient cannot be calculated. As a result, policy-makers cannot reliably answer fundamental questions about how many patients were treated, and at what total cost, for a given budget allocation.
In a system where expenditure is rising but procurement and consumption data remain fragmented, increases in budgetary outlays do not automatically generate commensurate improvements in treatment coverage or disease reduction.
Emerging pathways
Significant efforts are under way to deploy digital tools in procurement management, health information systems and public financial management to address the structural fragmentation of India’s public medicine procurement landscape. The next phase of reform must move beyond digitisation in isolation towards integration and interoperability across systems. We discuss four priority areas for policy reform and future research.
PHI-level capacity
For such systems to function efficiently, state Departments of Health must build capacity at the PHI level to be able to deploy and operate them. PHIs are often resource-constrained, understaffed, lack trained personnel for digital records maintenance and operate in low-connectivity environments. Even where sophisticated warehouse-level systems exist, last-mile integration depends on PHIs to enter, validate and transmit consumption data. Without strengthening their digital capability, through training, simplified interfaces and appropriate hardware, integration efforts risk failing at the point of care.
Future research should examine: (i) the cost–benefit of equipping PHIs with patient-level dispensing modules; (ii) behavioral incentives for accurate data entry; and (iii) the role of district-level authorities.
Data standards and interoperability frameworks
Horizontal integration across schemes requires common data standards. For multiple schemes to converge for unified demand estimation or measurement of consumption/treatment continuity, this will require the Ministry of Health to deploy:
- a national drug registry with standardised identifiers;
- interoperable APIs across procurement, financial and clinical adherence platforms;
- harmonised reporting formats at the PHI level; and
- governance protocols for cross-scheme data sharing.
The institutional research challenge is to preserve State- and Union-level autonomy while enabling shared data architectures. That is not to centralise procurement, but to standardise information.
Treatment-based procurement
A key limitation of drug-based procurement is that it is often static, while clinical practice is dynamic. Procurement systems typically rely on predefined drug lists and historical demand patterns, which may not keep pace with evolving treatment protocols or changes in pharmaceutical markets.
For instance, experts recommend that the National List of Essential Medicines be revised every 2–3 years. In India, the first list was published in 1996, and the current 2022 list is only the fourth revision. In contrast, treatment protocols, often based on global clinical guidelines and updated with new evidence on efficacy and resistance, reflect current standards of care. As a result, drug-based procurement may continue to demand drugs that are outdated, suboptimal or no longer widely manufactured, leading to weak supplier participation and supply disruptions, while newer recommended therapies may not be procured adequately.
Shifting to treatment-based procurement, where planning is anchored to standardised and regularly-updated treatment protocols, helps align procurement with both clinical best practice and market realities, ensuring that demand signals remain relevant, supplier participation improves and medicine availability better supports effective patient care.
Future research should focus on the feasibility and impact of operationalising treatment-based procurement within India’s existing procurement frameworks. This includes examining how treatment protocols can be systematically translated into procurement demand estimates, how frequently such protocols should be updated to reflect evolving clinical standards, and how procurement systems can adapt to these changes without creating instability in supply.
Supply-side market effects
Fragmentation has implications beyond the administrative inability to accurately estimate demand. It shapes supplier behaviour. When states procure different combinations of drugs for the same condition/disease, or when schemes operate ring-fenced budgets, demand becomes fragmented and unpredictable. This reduces economies of scale, increases production complexity and may deter broader supplier participation in public tenders (Vashist et al., 2024).
Future research should engage with market participants to understand the factors driving or deterring their participation, such as demand predictability, tender or delivery conditions, preferences for particular supplier types and payment timelines, in order to design procurement systems that attract reliable and competitive suppliers.
Conclusion
This chapter argues that procurement management systems constitute a critical pathway through which public health expenditure can be converted into better access to healthcare delivery. While the analysis is grounded in the Indian context, the underlying challenges are not unique to India. Many low- and middle-income countries face similar issues of fragmented supply chains, parallel procurement systems and limited integration between logistics, clinical and financial data systems. The evidence on frequent stock-outs, low availability of essential medicines and inefficiencies in supply chains suggests that these are systemic issues in public health delivery, rather than country-specific anomalies.
The Indian case offers several lessons for other health systems. First, digitisation of procurement processes, while necessary, is not sufficient. The design of information systems must ensure that data flows extend to the point of care through last-mile traceability of information. Second, integration across schemes and levels of government is essential for aggregating demand, improving economies of scale and enabling accurate forecasting. Third, reforms in procurement information systems must be accompanied by investments in building institutional capacity, particularly at the level of public healthcare institutions, and by governance frameworks that ensure data standardisation and interoperability.
Across health systems, citizens continue to bear a high burden of out-of-pocket expenditure on medicines as the substantial public funds allocated for healthcare are not effectively translated into reliable service delivery. Strengthening procurement management systems through better integration, visibility and alignment with treatment protocols and patient needs is therefore essential for improving the efficiency of public expenditure, reducing the financial burden on citizens and ensuring timely access to medicines.