Ukraine’s health ministry spends billions of hryvnias each year to purchase medicine and medical equipment. One priority area is tuberculosis and HIVAIDS drugs. But for several years, and despite changing governments, a narrow range of intermediary companies have dominated this lucrative field of public procurement fueling suspicions of collusion and corruption.
Two public reports on medical public procurement that encompass the years 2005-2008 and 2010-2012 found the needs of patients aren’t being met, leading in some cases to severe shortages in medicinal supply. They also found the state budget has incurred huge losses due to the marked-up prices government pays for medicine, often two to three times higher compared to what others pay.
Earlier this year parliament’s accounting chamber released a report for the years 2010-2012 on the use of taxpayers’ money allocated for tuberculosis. It found the health ministry met only 8-24 percent of regional demand for tuberculosis medicine in 2011. In 2012, though, this increased to 61-75 percent.
Parliament’s audit also found that tuberculosis medicine was purchased at inflated prices. For example, in 2011-2012, the health ministry purchased Cycloserine from Centropharm for Hr 16 and Hr 8.7 per capsule. These prices are, respectively, 2.6 and 1.3 times higher than what organizations pay using funds from the Global Fund to Fight AIDS, Tuberculosis and Malaria.
In 2010-2012 Centropharm, whose parent company is registered in Cyprus, won Hr 271 million ($33 million) in public procurement contracts.
Centropharm failed to respond to a Kyiv Post request for comment.
This situation is not uncommon, say experts from the Anticorruption Action Center, a public procurement watchdog. According to the group’s findings, the state purchased drugs dating back to mid-2000s at prices that at times were up to 20 times higher than what Global Fund’s grant recipients paid. The center says that although the scope of violations is currently less flagrant, prices are still high. In 2012 the group found that some successful bidders sold drugs that were 2-3 times more expensive than the Global Fund’s prices.
In summer 2012 the All-Ukrainian Network of People Living with HIV said the health ministry overpaid almost Hr 37 million ($4.6 million) for drugs. For example, the ministry paid Hr 4 for a pack of Efavirenz, whereas the All-Ukrainian Network – a Global Fund grant recipient – paid just Hr 1.3 for the same pack, or three times less.
Yet the health ministry defended its procurement practices.
“Some companies consider such supplies as charity and sell drugs at discounted rates. These prices are only for international non-profit organizations and are not for sale in certain countries. Global Fund buys these products for distribution worldwide, and manufacturers have a marketing policy for each country individually while taking part in public procurement,” the ministry’s press service responded.
Still, the World Health Organization estimates that only a third of HIV-positive patients in Ukraine receive treatment.
“That’s why public policy should ensure the quality and effectiveness of procured drugs, as well as its procurement for adequate prices,” said Volodymyr Kurpita, executive director of the All-Ukrainian Network of PLWH. “Since the majority of HIV-positive people receive state-funded treatment, procurement cancellation or delay of antiretroviral drugs will have a direct impact on the effectiveness of the program.”
A 2008 report published by Party of Regions lawmaker Valeriy Konovaliuk as the head of a parliamentary subcommittee related to public procurement sheds light on the historic violations in this particular area. For example, his report found that alleged collusion starts when ministry officials start drafting calls for proposals with potential bidders. As a result, procurement documentation may contain specific technical requirements that allow for single bidders to qualify and lead to inflated prices.
His report furthermore found patients’ needs are often neglected during the procurement of medicines and their subsequent distribution. It also found that some drugs procured were either expired or on the verge of expiration.
Konovaliuk’s report moreover says that up to 90 percent of public procurement contracts in such areas as tuberculosis, HIVAIDS and oncology were awarded to several financial groups.
One of them, according to the report, controlled by businessmen Petro Bagriy and Andriy Lirnyk, included such companies as Ganza, Sumy pharmaceutical company, L-Contract and Farmacevtychni Preparaty Regioniv (Pharmaceuticals of Regions).
“These commercial structures coordinate their activities and have a joint action plan during medicinal public procurement,” Konovalyuk’s report concluded.
One company in particular, Ganza, became notorious in 2009 after selling Tamiflu, an anti-flu drug, at an incredibly high margin during a flu epidemic in Ukraine. The health ministry at the time bought Tamiflu for Hr 251 per pack, when the manufacturer’s price for Ukraine was about Hr 70.
Bagriy, the co-owner of Ganza, didn’t respond to a Kyiv Post request to comment for this story.
Ganza and companies linked to it still successfully bid for governmental orders worth millions of hryvnias a year.
According to Nashi Groshi (Our Money) public procurement watchdog, in 2012 Ukraine spent Hr 9.81 billion ($1.2 billion) for medical purposes, or which Hr 3.74 billion on drugs.
The group said some of the most successful bidders were Lyudmyla-Pharm, BaDM and Alba Ukraine.
Other companies that often sold tuberculosis and HIVAIDS drugs to the health ministry are Ukroptpostach, Pharmadis, both of which have ties to Ganza’s owner Bagriy, according to Nashi Groshi, as well as Centropharm, which has no relation to him.
Often times, two companies bid for a public procurement contract that are related to each other.
It rarely happens that unexpected companies submit a bid, said Anticorruption Action Center’s lawyer Olena Scherban. As for foreign companies, some also attempted to bid, but they were turned down.
She added that combating non-transparent tenders is dangerous as it might affect people’s health because if a government order is cancelled, the supply of drugs could be delayed.
Anticorruption Action Center’s experts likewise believe that watchdog organizations could force bidders to reduce prices. According to their research, this year the ministry started to purchase some medicine at cheaper prices, which will help to save thousands of hryvnias.
Kyiv Post staff writer Kateryna Kapliuk can be reached at [email protected]
