1,146 Ways To Spend R29 billion

Misdirected Priorities By The Department of Health

Considering the critical drugs shortages in South Africa’s public hospitals, the R29b worth of pharmaceutical contracts issued by the Department of Health raise eyebrows.

In Brief

  • Drugs suppliers in South Africa are curiously unhappy with a decision by the health department to be transparent. The department recently availed detailed information on contracts it awarded to various companies
  • uSpiked’s probe into the list of products, costs and approved suppliers reveals questionable procurement decisions, including use of middlemen to procure locally manufactured drugs, as well as engagement of seemingly briefcase companies 
  • Considering the critical shortages of specific life-saving drugs in public hospitals, the department’s medical supplies shopping list leaves a lot to be desired

South Africa spends a fortune on pharmaceutical products, yet many patients cannot access the life-saving drugs. In the last few months patients who rely on public hospitals for dosages have been left helpless. In April this year the Department of Health confirmed the awards of procurement contracts to various pharmaceutical suppliers worth in excess of R29 billion.

The contracts (for a total of 1146 pharmaceutical products), we have confirmed, are pegged to the dollar. Suppliers are allowed to adjust their prices upwards if the rand loses value by the time of delivery, but do not lower prices if the opposite happens. 

Seemingly motivated by the finance minister’s 2015 Budget Speech in May that introduced a central supplier database for all tenderers (e-tender portal), the Department of Health publicly availed all records of awarded contracts.

Finance Minister, Nhlanhla Nene's transparency directive in his 2015 budget speech that went unnoticed.

Some companies are now bristling with annoyance at the department for making public the details of the eye-popping tender awards. Executives took to druginfo - an industry online forum - to express their vexation with the department’s action, which they claimed left them 'exposed'.

To find out why executives were getting hot under the collar, uSpiked investigative team peaked into records of all recent contracts awarded to various contractors.

To make sense of the records, we examined various other related records and then connected the dots. The results reveal startling goings-on at the department’s procurement system, and its association with some dodgy pharmaceuticals supply companies. We begin this series by looking at some of the beneficiaries of the lucrative tenders.

Barrs Pharmaceuticals Industries (Pty) Ltd - R368 Million Supply Contract

With registered offices provided as B4 Century Square in the Western Cape, Barrs main centre of operations is 10 Inyoni Street, Ndabeni. The address registered with the department is however PO Box 7348, Roggebaai, Cape Town. Barrs is the fortunate beneficiary of three fat supply contracts, HP02AI, HP08SS and HP12LQ, worth R367,835,880-80.

The products being supplied by Barrs are:

Cocaine Hydrochloride BP 25g, Morphine Hydrochloride BP 10g Powder, Sunscreen Spf 15 ; 150 ml 30 spf, Aqueous BP 100g Gram, Aqueous BP 500 Gram, Benzoin Tincture Co BP 100 ml, Benzoin Tincture Co BP 20 ml,  Betamethasone 0.1% 15g cream, Betamethasone 0.1% 50g cream, Buffered BP 500g cream, Calamine BP 100 mL, Cetomacrogol 10% 500g cream, Chlorhexidine, Alcohol 0.5%/70% 500ml solution, Chlorhexidine/alcohol 0.5/70% 500ml Spray, Clotrimazole 1% 20gm cream, Clotrimazole 10mg/g 50g Vaginal Cream, Diphenhydramine Combination . 100ml, Emollient Lotion BP 500g cream, Emulsifying BP 500g Ointment, Ferrous Gluconate 350mg/5mL 100 mL, Gentian Violet 0.5% 20 mL, Hydrocortisone 1% 20g cream, Methyl Salicylate 10% 25g Ointment, Paracetamol 120mg/5mL 100 mL, Paracetamol 120mg/5ml 50 mL, Paracetamol 120mg/5mL 500 mL, Potassium Citrate BP 200ml Bottle, Povidone Iodine 10% 25g Ointment, Povidone Iodine 10% 500g Ointment, Povidone Iodine 100mg/ml 1 Litre, Povidone Iodine 100mg/ml 100 mL, Soft Paraffin White BP 25g Ointment, Alcohol 96% 20 Litre, and Zinc And Castor Oil BP 25g Ointment.

This is an impressive list for a company that does not manufacture most, if not all, of the products. Why would the department award Supplier Code V4890 a R14million Bioearth Sunscreen Lotion? We talked to a handful (not a scientific survey) of skin cancer (melanoma and non-melanoma) patients who receive treatment in public hospitals and none of them ever received sunscreen. What does the department do with the sunscreen?

For other products like Cocaine and Morphine Hydrochlorides, other than noting that several countries including Australia stopped using cocaine hydrochloride as a local anaesthetic, we reserve our observations for now. With the same department also procuring about 12,000 litres of acetone, an individual with basic chemistry knowledge could easily convert the cocaine hydrochloride into low-grade crack. But hospital staff would not do that.

Barrs lists its directors as:

54 year-old Alfreda Elizabeth Le Roux. As per records obtained from the Department of Trade and Industries’ CIPC (Companies and Intellectual Property Commission), she is also a director of three other companies, Khusela Distributors (Pty) Ltd, Green Sun cc and Equity Distributors (Pty) Ltd.

70 year-old Graham George Feltham Michael. With 40% shareholding at Barrs Pharmaceuticals Industries, CIPC records credits him with directorships at Chemists Choice (Pty) Ltd., Josdel Property No 150 (Pty) Ltd., and The Guild of Link Pharmacies (NPC). Graham is listed as the contact person on the various contracts with the Department of Health.

75 year-old Joseph Lionel Morris. Also holding 40% of Barrs shares, Morris enjoys directorship at various companies under three different ID Numbers. Under the first ID No ***002 are Chemists Choice (Pty) Ltd., Josdel Property No 150 (Pty) Ltd and Barrs Pharmaceuticals Industries cc (since been converted to the (Pty) Ltd. ID No. Under ***4008, we found Combined Veterinary Supplies (Pty) Ltd and finally under ID No. ***4085 are Barrs Medical (Pty) Ltd, Barrs Pharmaceuticals Industries (Pty) Ltd., and Sekunjalo Investment Corporation (Pty) Ltd.

79 year-old Rubin Gabriel Norwitz. He also holds directorships at Nu-Pharmacy (Pty) Ltd (without any ID Numbers). Under ID No ***005; Barrs Pharmaceuticals Industries cc and On Appeal Investments (Pty) Ltd and under ID No. ***088, he is credited with seats at Barrs Medical (Pty) Ltd, Barrs Pharmaceuticals Industries (Pty) Ltd and Sekunjalo Investments Corporation (Pty) Ltd.

Going by registered shareholding at the previous Barrs Pharmaceuticals Industries cc, Norwitz who gives his permanent address of residence as 1 Arbel Road, Apartment 1B, Kfar Saba, Israel would be holding 10% of the converted company.

90 year-old David Sepel, a resident on Irvine County, California, USA also enjoys seats at Barrs Medical (Pty) Ltd and Sekunjalo Investments Corporation (Pty) Ltd., as well as Macumpton Gate Investments (Pty) Ltd. Based on the same previous version of the contractor, Sepel should be holding another 10% of Barrs Pharmaceuticals Industries (Pty) Ltd.

Though locally known simply as David Sepel, records we have obtained from California identify him as David Shirley Sepel. In 2007 he was booked for a criminal/traffic violation and charged at Orange Superior Court - (Case No. IRM282113). He pleaded ‘no-contest’ and was sentenced to spend time at a traffic school.

According to Graham Michael, Sepel only comes to the country for holidays and to spend time with some family members still living in South Africa; “He is just a shareholder and non-executive director.”

Talking to uSpiked on the shareholding issue, Michael revealed that Sepel and Norwitz each only own a modest 3.5% hence a mere 7% of the profits from the public contracts heads offshore (to California and Israel respectively). He, however, declined to disclose the shares distribution of the remaining 93%, and could not disclose even his own shareholding at the Ndabeni industria-based outfit. While agreeing that taxpayers have a right to know who benefits from their taxes, he hid behind confidentiality and wondered how we got hold of their contracts with the department.

Barrs Pharmaceuticals Industries (Pty) Ltd could easily be confused with Barr Pharmaceutical Inc., which was founded in 1970 by Edwin A. Cohen. The company is renowned for being first to market off-patent (generic) drugs. It was one of the early pioneers in development, manufacturing and marketing of generic and some proprietary pharmaceuticals. In July 2008, the company was acquired by its Israeli rival Teva Pharmaceuticals Industries Ltd for $7.46 billion. Barr currently only exists as part of Teva Active Pharmaceutical Ingredients, a sub-division of the New York and Tel Aviv Stock Exchanges listed Teva Pharmaceutical Industries Ltd.

So, other than the shared first four letters in the company names, and the US and Israel’s residencies of Sepel and Norwitz, uSpiked’s investigation has been unable to establish any links whatsoever between the two companies. Besides, the products being contracted to Cape Town-based Barrs have no known links with Teva Pharmaceuticals. One might wonder if the name was deliberately concieved to impress officials at the Health Department. Relavant officials at the department who could shed some light are keeping mum. The department’s director, H Zeeman, who signed-off the contracts on behalf of the Director-General did not return our calls.

Noko Healthcare cc - R1.4million Supply Contract

Moses Sipho Mampuru, (with no background in pharmaceuticals), is listed as the sole director of this company. Supplier Code V2PK3, Noko fits the description of a briefcase company. Recently awarded a contract (HP12LQ) worth R1,404,853-00 to supply Acetic Acid, Acetone BP, Alcohol 96%, Ether Technical and Formaldehyde BP, Noko appeared to be a good example of an entrepreneurial contractor empowered by the Department of Health. But closer examination of the company and Mampuru reveals a different story.

The 55-year old Mampuru seems to have found a way into the lucrative pharmaceutical industry. As soon as supply bids are called for, Mampuru places his own calls for bids on free Internet sites. From SA based to Chinese sites, Mampuru’s ‘tenders’ can be easily found. With slight tweaks, depending on the products the department is asking for, all his online tender calls are concluded as follows;

“…Please give me prices CIF Johannesburg and Letter on your letterhead confirming that you will supply NOKO HEALTHCARE (NHC) with your products if NHC wins the tender. Also send me your ISO/CE or TUV certificates for the products. Best Regards Moses Sipho Mampuru NOKO HEALTHCARE 32 BOSSMAN STREET OPHIRTON JOHANNESBURG SOUTH AFRICA.”

One of the several Noko Healthcare cc's online calls for tenders

What system does he have in place to ensure that the certificates for the products he would get from various ‘bidders’ are authentic? Since it is clear that the department’s procurement committees have been accepting such letters and certificates as proof of quality and capability of suppliers, should we trust the pharmaceutical products in public hospitals? Matters of pharmaceuticals are often the difference between life and death. So, why would officials at the department appear lax in conducting due diligence?

Noko Healthcare cc is also among the thirty-four (34) suppliers who have submitted bids for supply of ‘Forensic Pathology Services – Medical Consumable’. What are the chances that this close corporation would win a portion of the tender Ref No. GT/GDH/043/2015? Should the justice system be worried that such suppliers could potentially stock forensic laboratories?

Pharmaceutical Contractors (Pty) Ltd - R47m Supply Contract

Under two contracts numbers HP09SD and HP12LQ, Supplier Code VCJF7, Pharmaceutical Contractors (Pty) Ltd that lists its directors as 53 year-old Jose de Porefreacoa de Agrela Coutinho of Boksburg and a 58 year-old Claudio Manoel Martins, was awarded a R47,216,559-00 contract to supply the following:

  • Calcium Carbonate equivalent to elemental Calcium 500mg
  • Enalapril Maleate 5mg
  • Ibuprofen 100mg/5ml suspension

Meda Pharma South Africa (Pty) Ltd - R21m Supply Contract

Listing its directors as 63 year-old Esfandiar Faghfouri of Ulmenring 23A, 35418, Buseck, Germany and a 60 year-old Anthonius Matthijs Hullenaar with no known residential address (although the provided Passport Number shows he is also from Germany), Supplier Code V2ZD6 was awarded a lucrative contract worth R21,288,950-00 to supply Pyridostigmine bromide 60gm and Pyridostigmine bromide 10gm.

Pyridostigmine bromide is manufactured by Valeant Pharmaceuticals International Inc., whose products are locally handled by iNova Pharmaceuticals and Bausch and Lomb South Africa (Pty) Ltd. Why would the department therefore settle for off-shore entities?

Qualipharm cc R137.2m Supply Contract

Qualipharm cc, Supplier Code V1P16, lists 45 year-old Anusha Parusnath of Queensburgh, KwaZulu Natal as its sole director. Under Contract No. HP08SS, this close corporation has been granted a R137,271,896-00 contract to supply Organic N-Chloro Compounds plus compatible agents in 3, 6 and 30 grams. A great sum for the one-man company, indeed.

Fresenius Kabi South Africa (Pty) Ltd R419.4m Supply Contract

Supplier Code VAJL3, has multiple contracts with the Department of Health totalling R419,455,404.70 for supply of forty-five different pharmaceutical products.

CLICK HERE for Fresenius Kabi’s complete award list.

This Port Elizabeth based company lists as its directors:

  • 38 year-old Mikko Hendrik Tiitinen of Manchester, UK
  • 35 year-old Christopher Paul Harrison of Shropshire, UK
  • 48 year-old Albertha Magdalena Nel of Fairie Glen, Johannesburg
  • 51 year-old Zane John Langford of Little Falls, Johannesburg
  • 35 year-old Mark Ian Aindow of Wendywood, Johannesburg

According to CPIC records, both Aindow and Harrison provided invalid ID numbers on registration papers for the company. With this discrepancy, how did the company manage to obtain Tax Clearance Certificates, one of the pre-requisites for qualifying for a government contract?

  • Additional data acquisition and processing by M García of San Francisco, California 

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