Substantial investments are made by the Union Ministry of Health and Family Welfare on the purchases of medicines and medical equipment. Union Ministry of Health and Family Welfare procures medicines and medical equipment for implementation of various disease control programmes, Centre Government Health Scheme and for providing essential healthcare facilities to the people in Central Government hospitals, research bodies and institutes. Inadequate management of the pharmaceutical procurement procedures and operational principles for acquisition of medical equipment result in financial losses and more importantly affect the objective of providing diagnostic and therapeutic services to the people. During the year 2002-07, expenditure on purchase of supply and materials including medicines and medical equipment constituted about 13 to 16 percent of total expenditure of the Union Ministry of Health and Family Welfare. Performance Audit of procurement of medicines and medical equipment in the Union Ministry of Health and Family Welfare revealed that good procurement policies were by and large not followed and procurement processes were characterized by ad-hoc decisions. The basic requirement of developing formal written procedures, using explicit criteria or key performance indicators for making procurement decisions was not met. Similarly, a Management Information System for tracking demand and supply of medicines and medical equipment has not been set up either in a manual or computerised environment for planning and managing procurement.