Public procurement

“Sick” procurements in healthcare field

Foto simbol. Autor: Constantin Grigoriță
Author: Mariana Rață, Anastasia Nani
29/09/2016 22649

National Agency of Medicines and Medical Devices (AMDM) announces a public tender for supply with necessary medicines for hospitals in 2017. As much as about 500 million lei were earmarked for healthcare field. Center for Investigative Journalism showed in an investigation that, in previous years, public money intended for procurement in Health – about 800 million lei - reached the accounts of seven companies. Four of them were included in 2015 in the blacklist of the Public Procurement Agency, after Moldovan medical institutions faced a drug shortage crisis which, according to authorities, was caused by the boycott of these companies that have delayed the supply  of medicines. Companies have escaped punishment. Meanwhile, the Ministry of Health aims to create a new institution, the Centre for centralized public procurement in Health, in charge with tenders in healthcare field. Former hospital managers argue that the new structure could worsen the situation.

„Kings” of drugs

In 2015, medical institutions in the Republic of Moldova purchased medicines, medical devices and pharmaceutical products worth about 721 million lei. The money spent for this type of goods represents more than one third of the total sum of state procurement which was carried out last year. Tenders in health care field were brought forward, by price and amount just by procurements in construction services. According to the Public Procurement Agency, 419 million lei out of 721million (58 %) reached the accounts of 7 companies,that have been winning most of public procurement competitions for many years. They are: Dita EstFarm, Esculap Farm, Medeferent Grup, Sanfarm Prim, GBG-MLD, Distrimed and Tetis International Co. The success of these companies is amazing in conditions when the first 4 companies were included early last year in the “black list” of Public Procurement Agency and did not have the right to participate in tenders within 3 years and GBG-MLD won 151 procurement contests worth 26,3 million lei while the founder of the company, businessman Tudor Ceaicovschi was detained by National Anti-corruption Center, under criminal investigation in a case of illegal tenders in healthcare field.

In the first half of current year, medical institutions in the Republic of Moldova purchased medicines and medical products in the amount of 67, 8 millionlei.  The most important procurement of medicines is carried out as a rule at the end of the year, to meet the needs of medical centers and hospitals for next year.

The Lion’s share goes toDita EstFarm

Company Dita Estfarm is a leader in terms of winning tender for supply of medicines and medical devices.  In 2015, the company won 992 public procurement contests worth 243.5 million lei, or one third of the total amount of procurements in medicine. This, despite the fact that on March 27, 2015 due to drug shortage scandal  in hospitals, the Public Procurement Agency decided to include upon the request of the Agency of Medicines,  the company in the black list for participation in public tenders by March 2018. Dita Estfarm was removed from this list four days later under a court judgement. March 28, 29 were days off and the company  had less than two days to challenge the decision of PPA and assign the request  to a judge  who decided on removing Dita Estfarm  from the  blacklist  until the  request filed by the company is examined. Furthermore, the company has won 16 tenders within four days of "prohibition". According to the Public Procurement Agency, contracts were signed on March 30.

Justification of the Supreme Court of Justice

The case of Dita Estfarm against the Public Procurement Agency was examined on August 17, 2016, by the Supreme Court of Justice that agreed with the economic unit, establishing that there was no reason to introduce the company in the black list. The company has been restored rights though it had delays in fulfilling contractual obligations assumed under previous signed contracts. IMSPCimislia Health Centre, IMPS Municipal Clinical Hospital "SfantaTreime" and IMSP Mandresti Health Centre  complained at the court about  the failure  of contractual provisions implementation. But their objections were ignored by judges.

Also this year, Dita Estfarm escaped a sanction worth 14 million lei, applied by the Competition Council for abuse of dominance, registered in drug shortage crisis. CC fined six companies, including Dita Estfarm, because they refused to honor their contractual obligations and supply necessary drugs in set terms to the medical institutions in early 2015. On July 13, 2016, the Supreme Court set suspension of payment of the fine until the case is settled. According to judges, this sanctionwould  "block economic activity and cause imminent damage both to the applicant and to medical institutions with which it has signed agreements".

„ Agency of Medicines and Medical Devices is liable”

This year, Dita EstFarm signed only 10 public procurement agreementsworth 1, 6 million lei. In 2 cases, the company had a sole source contract with the Republican Clinic Hospital, that bought products estimated at 200.000 lei.

This company is owned 100% by businessman Iurie Chirtoaca and was in the attention of many scandals on pharmaceutical market. One of the recent scandals involving the company, was revealed by an investigation carried out by Rise Moldova. Dita EstFarm was in the attention of the prosecutors from Bosnia andHerzegovinafollowing some suspicious transactions with the BosnianCompany- Bosnalijek. The agreements stipulated a 10% discount of the total amount of medicines sold by Dita EstFarm, but the discounts reached the personal accounts of couple Chirtoaca. Off-shore companies and consulting agreements were included in the cash flow.

Contacted by reporters of CIJM, IurieChirtoaca explained that the Agency for Medicines and Medical Devices is liable for the  delayed delivery of medications in hospitals. This agency has just announced on December 28 the winners of the tenders held in September.  "I do not know the reason of this delay. Designation ofwinners lasted nearly four months. I do not think it's fair to be penalized for delay, especially it’s about the delayed delivery of a single drug of400 which we sell to medical institutions", said the businessman. Chirtoaca does not believe that Moldova might face a similar situation, if the winnersof the tenders are announced byearlyNovember.

Director of Dita Estfarm denies that the company had won tenders in the period when it was included in the black list. "We have not participated in any tender in that period. Our company's audit is performed by KPMG, which has an impeccable reputation. If we had had violations, they would have been reported ", says Chirtoaca.

Another company escaped punishment

Another pharmaceutical company, Esculap Farm was sanctioned by the Competition Council for not honoring its contractual obligations in January 2015 and did not supply in set terms medicines to the Institute of Cardiology.  The fine worth 1, 4 million lei was suspended by the Court of Appeal following the same scheme applied for Dita EstFarm (within 3 days since the request was sent to the court - n.r.), and on July 20 by the Supreme Court of Justice, until the case is examined.   In 2015, Esculap Farm won 559 public procurementcontests and signed agreements worth24,95 million lei. This year, the company signed only one sole source agreement worth 645.000 leiwith the Clinical Republican Hospital.

"Under  the order of January 22, 2016 of the Ministry of Health,  medicines and supplies for treating patients  sick with AH1N1, but also drugs and supplies to complete the mandatory fund of medicines, for two months were purchased in emergency regime,"  said representatives of the Republican Clinic Hospital  and explained why they opted for  procurement from a single source. Esculap Farm Company is owned by businessman Oleg Sili, who is also the owner of the pharmaceutical network "Apoteka".

Magistrates keep secret

Veronica Cojocaru, head of the press service of the Competition Council told us that except one pharmaceutical company, R & P Bolgar Farm, that paid the fine; the other five targeted in the decision of CCchallenged the decision at court and obtained suspension of fine payment.

"It is their right. The decision is suspended until the substantive examination. If a final judgment in favor of the Competition Council is issued, they will still have to pay the fine. But the trial might last a year or more. So far, there has been no hearing on the merits", said employee of CC.

It is worth mentioning that in its judgment, the Competition Council found that drugs that were not supplied by sanctioned pharmaceutical companies were soldin pharmaceuticalnetworks of these companies.

State company with problems at court

Sanfarm Prim and Metatron companies also escaped the "black list" of the Public Procurement Agency (PPA) and, at least temporarily, owing to judges, from paying the fine imposed by the Competition Council. Actually, SanfarmPrim is the only state-owned pharmaceutical institution and has problems at court. Thus, to be excluded from the black list of PPA, the state-owned company needed half a year against 4 days for Dita Estfarm Company, to obtain a favorable court decision. Representatives of the Health Ministry also pleaded for removing Sanfarm Prim from the "black list". They argued that this company is the only one that promotes the state policy in the field of medicines and conducts national programs of the Republic of Moldova to supply medical institutions with medicines for treating certain types of diseases, and the decision ofPPA harms both the state budget, life and health of citizens who will be deprived of medicines.

As for suspending the fine worth 1, 4 million lei applied by CC, unlike Dita EstFarm, Esculap Farm and Metatron, Sanfarm Prim won the case at the Supreme Court of Justice, after the Court of Appeal Chisinau established that applying a measure of insurance is groundless. The Health Ministry pleaded in favor of this pharmaceutical company again.

Sanfarm Prim won in 2015, 439 tenders worth 21, 44 million lei.  This year, the amount of 5 agreements signed is estimated at about one million lei.

Reputation of the company Metatron

Company “Metatron” had the most "original" excuse before judges for failing to honor contractual obligations in early 2015. The company claimed that the failure to deliver drugs to IaloveniHospital inFebruary and March 2015 is not related to the infringement of competition law. "Temporary delay of drug supplydid not deprive the medical institutions from the right or possibility to purchase medicines from other suppliers", said representatives of the company Metatron at court. They said that the fine worth 47 872 lei affected "the reputation and vast experience” of the company. The law expressly prohibits public medical institutions to purchase the necessary medicines from other enterprises, with which they have not signed procurement agreements.

In the past, Metatron company had image problems related to the quality of the medical products. In 2013, the National Anti-corruption Center revealeda scheme of money laundering and tax evasion involving this company and another, Sangalimed that was included in the black list of PPA for a short period. Also, Anti-corruption officers found that the two companies would have prejudiced the state by over 90 million lei.  CNA revealed then that many drugs imported by these companies and sold to medical institutions were of poor quality, with falsified certificates of origin. The Ministry of Health ordered hospitals and pharmacies to withdraw some products worth 500,000 lei supplied by one of these companies. Subsequently, the criminal case was dismissed. Under some alleged procedural violations, the judge GhenadieMorozancanceled the evidence collected by prosecutors during raids conducted at the offices of the two companies.

Inefficient sanction

In 2013, company Metatron was included in the black list of PPA for supply with medicines of poor quality. The company delivered to public institutions Dexametazon, Ringer solution, Amoxicilin, Oxytocin, which the Agency of Medicaments said that are inefficient, which is why they were later on withdrawn from public institutions.

A month and a half later, PPA’s decision was suspended by a court decision until the examination to the merits of the case. For now, there is not a final decision on this case and the Metatron Company’s deadline in the black list November 2016. Thus, though judges will determine that the company was penalized properly, the penalty will not be applied. Meanwhile, Metatron won in 2015, 309 public tenders, totaling three million lei. This year, the company has not won any public procurement contest yet.

Poor-quality medicines, registered by court decision

In recent years, Metatron went to court to obtain registration of several drugs imported in Moldova, for which AMDM refused to issue certificates of quality because of doubtful quality. Thus, on July 30, 2015, the Court of Appeal ordered the agency to issue certificates of quality for company Metatron for "Eufilin" for which laboratory tests showed that it contains impurities. On December 9, 2015, the decision was cancelled by the Supreme Court of Justice. Instead, in another case on March 2, 2016, the Supreme Court ordered the AMDM to issue certificates of quality for preparations"Amoxan" and "Ampicillin" of the same company. The court upheld the company’s evidence that the analysis reports of medicines comply with standard quality andthe rebutwas invented by the Agency. Also based on court decisions, the company tried to change the results of public tenders organized by Agency of Medicaments, objecting that the  priceto medicines proposed by them was the smallest. Contacted by the Center for Investigative Journalism, Metatron representatives said they did not want to talk about it.

GBG-MLD, still gains public tenders

The case of rigged tenders in medicine was sent to court in mid-November 2015. Among the 30 defendants is former Health Minister Andrei Usatii accused of facilitating and expediting procurement while he managed this ministry, several heads of medical institutions at republican and local level, heads of departments and deputy directors of  institutions of the Ministry of Internal Affairs and  of the Department of Penitentiary Institutions, responsibles within the Healthcare field and the  businessman Tudor Ceaicovschi, founder of  GBG-MLD SRL. The businessman is accused of complicity of abuse of power of responsibles and persons with public dignity and seizing property through swindling in large proportions. However, the company continues to gain public tenders.

For example, in the first six months of 2016, GBG-MLD SRL  signed 48 contracts worth 6.2 million lei with the state . The biggest acquisition was made by a public Healthcare Institution, Territorial Medical Association Ciocana that bought reactives and laboratory supplies worth 1.5 million lei. "Tenders are public. They consider both the price and quality. There are not conflicts if the economic unit meets the norms. He could reproach me that it is not judged, there is not final decision against him", said Dorina Tizu, director of the institution.

On 14 June, the Health Centre Cahul, an institution headed by Alexandru Hagioglo, charged in the same case, concluded 11 procurement agreements with several firms that bought reagents, laboratory supplies, laboratory, film or films and consumables for radiology, para-pharmaceutical products and disinfectants. The biggest contract worth 750,000 lei is concluded with GBG-MLD. Also, they concluded a contract worth 78,000 with Intermed, another affiliated company of Tudor Ceaicovschi. The remaining contracts were worth between 150,000 lei and 100,000 lei. 13 companies participated in the tender. "We organize procurementcentralized, with the help of Agency of Medicaments.  GBG-MLD works with all health institutions, not just with us. GBG-MLD and Intermed are serious economic units and provide quality products", said Alexandru Hagioglo. He added that he became part of the rigged tenders in medicine "accidentally". " X-ray apparatus was very old. We needed a new one. I wrote a project to the National Health Insurance Company, I respected set term. I have applied several times and finally I wonthe tender in 2015", said Alexandru Hagioglo.

"There was no reason to introduce our company in any black list. The company GBG has 22 years ofexperience of supplier of medical equipment in Moldova. It did not appear overnight. It is a company with authority. It works with over 150 producers from abroad.  We were targeted in the criminal case at the command of our competitors who cannot fulfill their obligations to the medical institutions. We really did not violate any rule. I have not admitted any deviation from the contract. Moreover, medical institutions have not paid for any equipment which we have supplied. While we were in custody for six months, the State Fiscal Inspectorate and the Financial Inspection performed searches at our company. It has been demonstrated that the company is working  in line with the law ", said businessman Tudor Ceaicovschi.

Prosecutors say that they cannot intervene because, according to them, the company has the right to win further public tenders. " Wedo not have the right to get involved. If we did it, it would be considered abuse on our behalf. We could only intervene if we have proof that they committed new violations", said  prosecutor Dorin Compan.

Asked by representatives of the Centre for Investigative Journalism,  representatives  of the Agency of Medicines and Medical Devices referred to the Regulation on compilingand control of  the black list of suppliers. Under the document, the request for inclusion suppliers in the list and  thedecision in this regard shall be submitted to the contracting authority that initiated the procurement procedure or to the control authorities, within 45 days of a final judgment of a court which found  that the company  committed economic fraud or corruption case. There was not a final decision about GBG-MLD SRL.

Black list, ignored

Some businessmen whose companies are in the black list dodge to participate in public tenders. For example, Divabona SRL won over the past years, hundreds of tenders, the  biggest contracts are with the National Blood Transfusion Centre, two of them,  in 2012 and 2013, are worth four million lei. The company has suppliedmedical institutions withlaboratory reagents, para-pharmaceutical products, medical devices, etc. Following several complaints on behalf of health institutions in December 2015, the company was included in the blacklist  ofsuppliers for "non-performance of contractual clauses". The company will be in the black list of PPA by  December 2018.

Within a  month after the Public Procurement Agency took this decision, on January 19, 2016 Boris Granaci, founder and leader  of Divabona SRL, established another company that  continued to win tenders this year  and supplied  with  drugs and reagents the laboratories. "The legislation does not allow this somehow? Divabona SRL was included in the black list because of a complaint  written at the command of competitors with the help of representatives of medical institutions. I have challenged the decision of the Agency at the court ", said Boris Granaci, and refused to give details.

Even so, some heads of medical institutions showed discontent with the products delivered by the new company. "We were supposed to buy from Medglobalfarm 1,500 cervix brushes, for early detection of cancer. Instead of complex cervix brushes, they delivered simple brushes. We returned theproducts and we are waiting for products which we ordered. If the situation is not solved, we will complain to the Agency of Medicaments and the Public Procurement Agency. We have had a similar case with the same company last year, while they activated under the name Divabona SRL ", says Alexandru Hagioglo, director of Healthcare Center in Cahul.

" Noone objected so far. In Cahul, products were delivered under the contract. The fact that they want other products, that's their problem. I understand that sometimes sides of the contract are not satisfied... ",added Boris Granaci. Businessman criticized the new law on procurement that came into force a few months ago. "By this law, the trader does not have any mechanisms to defend oneself. The agency entitled to settle disputes is still out of work", he said.

"The conditions for participation in tenders are drawn up by the contracting authorities and if they do not request any experience on the market on behalf of participanteconomic units, then economic units that were registered on that day can participate in the procurement procedures. Certain limitations cannot be made. It is actuallyimpossible to follow that after a certain company is included in the black list, the founder opens another company, possibly with other founders. Under the legislation, bans have impact just on companies included in the list", said Valeriu Secas, deputy director of the Public Procurement Agency.

Polisano Prim SRL benefited from contracts in healthcare signed with the state. This company was founded by Olga Latis, business partner of Ruxanda Glavan, Minister of Health. INFO Sanatate portal previously wrote that the company founded by Ruxanda Glavan changed the name shortly after she was appointed Minister of Health. Bank accounts, tax code and manager of the company have not changed yet. Polisano Prim SRL has obtained contracts worth about 150,000 lei. The company offered mostly laboratory supplies and reagents. We failed to get a comment from Minister of Health because when we tried to ask questions on the phone, she hung up.

Expert: „We face the same problem for 3 consecutive year- shortage of medicines and devices in hospitals”

Tatiana Savva, expert at the Analytic Center „Expert-Grup” says that currently, the procurement of medicines is problematic from institutional viewpoint as well as the procurement processitself. „Who is responsible? Normally, the beneficiary (in this case the hospitals) are responsible for the quality of medicines and medical consumables. Also, the Agency of Medicaments and Medical Devices is responsible for the acquisition itself.  The responsible should be clearly set starting from hospitals to Ministry of Health; they should have procedures of risk management. There is the problem of budgetary instability. We havehad this problem for the third consecutive year - hospitals face shortage of medicines and medical devices because of budget calendar delay. In the absence of budgetary risk management procedures, neither hospitals nor the National Health Insurance Company and the Agency of Medicaments and Medical Devices know what to do. The worstthing is that doctors do not have medicines and medical devices to treat patients", commented Tatiana Savva.

On the other hand, the expert considers that the access to tenders of only seven companies can be viewed from several perspectives. "Our market is smalland big players are not interested. The Agency of Medicaments is responsible to attract many market players. One solution would be that the responsible authorities accede to a regional market, for example the Romanian market. This would allow the negotiation of better conditions on the pharmaceutical market on one hand, and on the other hand this would provide authorities’ extra capacity of negotiations. In Moldova, the authorities tried to make a list of good economic operators, but underthree years of financial instability, you cannot meet obligations to economic unitsand you cannot assume that you have a functional market", said Tatiana Savva.

"It is the task of the working groups to designate the winners. Questions regarding the appointment of same companies should be addressed to them. Agency cannot interfere in the appointment procedure of winners, it just registers contracts. We cannot intervene", said Valeriu Secas about the seven companies that win most tendersin healthcare field.

Representatives of AMDM argue that under the legislation, winners are selected either based on advantageous offers from technical-economic viewpoint or for the lowest price. “Experts in the field (doctors, pharmacists, etc.)are involved in the evaluation process, theyexplain on  their own account, about the compatibility of goods submitted by tenderers with the requirements of the tender documents. The tender documents are developed by working groups responsible for tenders at the Agency of   Medicines and Medical Devices together with professionals, representatives of interested institutions, upon the requests of medical institutions, of the Ministry of Health etc. Thus, the working groups responsible for tenders at the Agency for Medicines and Medical Devices assess the offer upon price  just after they  consider the suitability of the goods from the offer with all criteria and technical requirements of the tender documents as provided by the current normative  framework",  reads a reply of AMDM sent   to the Center for Investigative Journalism.

Authorities aim to establish a new institution

Requested by the Center for Investigative Journalism to talk about solutions of the authorities for public tenders in medicine, Ruxanda Glavan, Minister of Health cut it short: "Please watch next week's Government meeting. A new decision will be passed by the Government and therewill be another procurement mechanism in medicine. We are at the stage of finalization. "

The authorities decided to establish a new institution - Center for centralized public procurement  in Healthcare field. "Following the crisis of supply with medicines, para-pharmaceuticals and medical devices in healthcare system in Moldova in autumn 2014 - winter 2015, they   found that there is urgent need to take efficient impactful  measures on ensuring trading of these products on the market, measures that would ensure the continuous supply of drugs and other medicines and  medical devices at reasonable price for public medical institutions  in Moldova, measures that would not endanger life and health of patients ",  reads a note from the Ministry of Health.

According to the authors, the setup of this center would become a powerful tool in this regard. "This center aims to planning procedures of public procurement of drugs, other medical products and medical devices, evaluation, supervision and monitoring of the execution of agreements of public procurement of drugs and other medical products and medical devices for the needs of healthcare system, taking into consideration the institutional Farmaco-therapeutical Application, dosage, pharmaceutical form of medicines, National Clinical Protocols (...) ", reads the note.

Stefan Gatcan, former director of the Institute of Mother and Child (IMC) is skeptical about changes planned by the Ministry of Health,  as a new center to supply hospitals with drugs would only complicate things. According to him, medical institutions must deal with the procurement because only they know exactly what preparations they need. Former manager of IMC says that it is incorrect whenthe Agency of Medicines and Medical Devices organizes tenders and purchases other medicines that those requested by hospitals, just because they are cheaper or have arrangements with some economic units. "When it comes to human health, the focus should not be on the price of medicines, but on their efficiency", concluded Stefan Gatcan.

"In fact, they will aim at procurement centralization in the coming years. Most of contracting authorities do not have sufficient human resources and capacity to conduct effective procurement. Actually, purchasing medicines and medical equipment under a single umbrella is a good thing. This is already performed by the Agency of Medicines, which of course has other functions, in addition to planning and conducting procurement in health care field. Creating a new entity is justified only if it manages to demonstrate its independence, transparency and impartiality in procurement procedures, and also to ensure a complex management of risks at all stages from procurement planning to contract execution. The mere delimitation of procurement functions and separating them into a new structure does not guarantee elimination of the problems faced by the health system in past years", comments Olesea Stamate, chairperson of the Association for Efficient and Responsible Governance.

The investigation was accomplished under the Campaign „Public Money Is My Money Too”, carried out by the Centre for Investigative Journalism (CIJM) and the Association for Efficient and Responsible Governance (AGER), within a project funded by the European Union and the National Endowment for Democracy.



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