To bypass corruption and decrease the exorbitant prices for drugs, the Health Ministry transferred its public procurement functions to non-profit international and foreign organizations under laws adopted on March 19.
The corrupt procurement practices of the recent past meant
that not enough medicine was being purchased for the 3.6 million patients
living with hemophilia, AIDS, tuberculosis and other serious diseases. The
Health Ministry would purchase medicine unjustifiably at above-market prices
that it would later distribute, and not enough given its meager budget, while
benefiting from kickbacks during the procurement process.
The clean-up included the dismissals of former Health
Minister Oleg
Musiy and his deputy Ruslan Salyutin on Oct. 1.
In the three months since the law was adopted, it is still
unclear who will purchase drugs for Ukraine’s patients, or whether the drugs
will be procured at all.
According to legislation the following organizations are to
purchase drugs on Ukraine’s behalf: World Health Organization, UNICEF,
International Dispensary Association Foundation (Holland), Crown Agents (U.K.),
Global Drug Facility (Switzerland) and Partnership for Supply Chain Management
(U.S.).
The Cabinet of Ministers did not meet the May 25 deadline to establish
the list of drugs and medical products allowed to be purchased under the
procedure, as well as other crucial secondary legislation.
Borys Danevych, partner at Marchenko Danevych law firm said
the ministry “had enough time” to do this and implement the law. However, the
drafts were prepared only by June 16 and still are not approved.
He said it is time to decide what is more realistic: to
revert to the previous procedures or have the non-profits procure drugs. Otherwise,
the ministry will have to use no-bid procedures such as negotiations to
purchase the drugs and avoid deficit.
“It (no-bid tenders) will cause even more harm than
procurement of pharmaceuticals under the previous corrupt procedure,” Danevych added.
The
Anti-Corruption Action Center, a Ukrainian watchdog organization, found that
the Health Ministry inefficiently spent more than Hr 1.2 billion in 2014,
according to a study published on June 9.
The
group in fact said the ministry’s previous leadership in 2014 had cultivated
new corrupt schemes in addition to the older practices.
It examined over 90 tenders in six state programs. “There
were substantial violations in nearly all of them,” Olena Shcherban, the head
of the group’s legal department, said.
“If earlier corruption took the form of cartel agreements
between market players while keeping out other bidders,” in 2014, market
players were deliberately blocking tenders to get favorable conditions and
eliminate competitors, Oleksandra Ustinova, board member of the Anti-corruption
Action Center, said.
The report says that in July-October 2014, 50 out of 110 lots
of pharmaceuticals were blocked or contested.
In certain cases the mark-up price for drugs could reach up
to 40 percent, Lana
Sinichkina, partner at Arzinger law firm, said.
Allegedly, in 2012-2014, one of Ukraine’s biggest
distributors of drugs had been supplying pharmaceuticals at 20-40 percent wholesale
mark-ups. The ceiling set by the Ukrainian law was 10 percent, a Feb. 11 State
Security Service statement said. The imported medicines amounted to Hr 1.26
billion.
Ukrainian patients paid the ultimate price.
The legislative amendments adopted on March 19 deprived the Health
Ministry of its mandate to choose what gets purchased and the winning bid. They
also eliminated the ministry’s power to set the price of drugs, Sinichkina
said.
To open the market to more imported medicines and foster competition,
Parliament exempted pharmaceuticals procured by specialized organizations from
the 7 percent value-added tax and 5 percent import duty, Vitalii Savchuk from
the Legal Alliance Company, told the Kyiv Post.
However, “this type of public procurement has to be launched
first,” Viktoriya Podvorchanska from Egorov Puginsky Afanasiev & Partners
Ukraine said. Otherwise, the advantages of the new procurement procedure will
be compromised.
Some high-level officials said the designated non-profit
organizations won’t start making drug purchases this year.
Dmytro Shymkiv, deputy head of the Presidential Administration,
said the non-profits won’t start making purchases earlier than in 2016. He told
BBC Ukraine on June 15 that the “approval of any such procedure by specialized
organizations takes from six up to eight months.”
Meanwhile, Health Minister Alexander Kvitashvili is
more optimistic. He said on May 29 there is no reason to panic yet because
historically tenders for procurement of pharmaceuticals did not start earlier
than July–August of the calendar year.
Kvitashvili said there is still enough time to adopt the
secondary legislation to implement the new procurement procedure and get the
consent from the non-profit organizations.
Kyiv Post’s legal
affairs reporter Mariana Antonovych can be reached at [email protected].
