how ARV contract costs ballooned by R4bn
- The long fight by activists for access to ARV is now threatened by dubious price hike cycles driven by pharmaceutical suppliers
- The Tender No HP13-2015ARV worth R14.2bn has ballooned by R4bn in the span of a few months, begging the questions: how did officials at the health department justify exorbitant price increases, and where is the auditor-general in this shenanigan?
- Lest they forget, there are real people whose lives depend on that money, which evil suppliers see fit to gorge on
The full extent of the price escalation debacle surrounding public pharmaceutical contracts is only now emerging. uSpiked Investigative & Data Team can now partly lift the lid on the mother of all scams in this financial horror that pales into insignificance the R138m price hikes on the tuberculosis medications contract that we recently exposed.
The current price tag for the ARV tender (HP13-2015ARV) is pretty astounding: As of July 2016, the cost of the tender reached R18.2 billion from the original R14.2 billion, an increase of R4 billion for the same quantities as they were in July 2015. In the span of a few months, eight of the nine contracted suppliers shared the extra R4 billion, with two of the companies each pocketing as much as a billion rand.
When we first looked at the ARV tender, we mainly queried its value and why the Department of Health was contracting for purchase of Stavudine, a WHO-declared toxic drug. We also identified the suppliers and the specific products on their contracts. Eight companies won Tender No. HP13-2015ARV, initially worth R14.2 billion. Khadija Jamaloodien, the National Director for Affordable Medicines at the Department of Health, signed off the tender on the curious date of 23 December, 2014.
The procurement contract was for the period beginning April 1, 2015 to March 31, 2018. Then on August 25, 2015 [about five weeks after we published our report], Jamaloodien added another company, Emcure Pharmaceuticals (Pty) Ltd., to the list, to supply 90,000 of Atazanavir 150mg 56 Capsule at a Unit Price of R219.35. This ballooned the contract value by R19 million. In the same period the Stop-Stock-Out project was increasingly reporting shortages of ARVs in government health facilities.
At the end of the spectrum were nine suppliers, eight of which were deviously seeking permission from the National Department of health to increase their contracted prices. The department gave the first go-ahead on September 18, 2015 and September 19, 2015. From mid February 2016, rounds of further price hikes were granted to the same eight companies. Ultimately, the increases to the ARV contract averaged around 29% of the initial tender value.
MSD (Pty) Ltd. however kept its ARV contract prices unchanged, just like it did for the TB medications tender. Why would the officials at the health department justify price escalation by some of the suppliers; and by as much as 41%. Can Jamaloodien and her fellow technocrats tell the public how many suppliers missed out on the tender for having been a few percentages higher?
These are not just mere numbers; we are talking about real people whose lives depend on that money, which evil pharmaceutical companies deem fit for grabs. By the time they paused [around June 2016], the figures looked messy:
- Aurobindo Pharma (Pty) Ltd – 41% (R21 million more)
- Abbvie (Pty) Ltd – 38% (R515 million more)
- Emcure Pharmaceuticals SA (Pty) Ltd – 37% (R7.2 million more)
- Cipla Medpro SA Ltd – 32% (R636 million more)
- Sonke Pharmaceuticals (Pty) Ltd – 32% (R1.017 billion more)
- Mylan (Pty) Ltd – 27% (R1.13 billion more)
- Pharmacare Ltd – 22% (R590 million more)
- Adcock Ingram Healthcare (Pty) Ltd – 21% (R148.5 million more)
No explanation is forthcoming from the department’s officials or Kenneth Brown, the chief procurement officer at Treasury.
There is no guarantee that, come the end of this particular tender on March 31, 2018, there won’t have been further price hikes. You can bet the predatory suppliers will be back for more, at the expense of taxpayers.
The history of ARV roll-out in South Africa’s public health system is turbulent and points back to activism by the Treatment Action Campaign (TAC) over a decade ago.
Zackie Achmat and Mark Heywood, the activists behind TAC - the NGO founded in 1998 to push for greater access to HIV treatment - continued the brave fight to defend what they believed to have been the right thing. The road to TAC’s victory began in February 2003 when TAC initiated the campaign for universal access for HIV treatment in the public health system. Despite resistance from officialdom and specifically the late health minister Manto Tshabalala-Msimang, the government is now obligated to provide antiretrovirals (ARVs) at public health facilities and with a huge budget to boot.
Seemingly, the pharmaceutical companies that once sued the state over drug patents are now ripping-off the same system while the formidable TAC’s gun is pointed elsewhere.
[More vigilance is required to check the billions of rands flowing between the state and pharmaceutical companies. We must ensure that the health department is buying the right products and affordably. The loopholes that have enabled profiteering in the industry must be sealed. — editor]