Health Minister Maithripala Sirisena has directed his officials to look elsewhere for supplies to meet urgent requirements, officials added.
"I have been told by my officials that Indian companies have violated tender procedures or have supplied low quality drugs," Sirisena was quoted as saying in local press.
The Indian companies' shortcomings have led to shortages in some urgently needed medicines, officials charge.
Around 100 Indian drugs suppliers are in the Colombo Health ministry's suppliers roll, but the companies in the spotlight have been blacklisted for supplying sub-standard medicine while paying no heed to deadlines for supply and violating procedures.
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