Two of the pharmaceutical companies that won a slice of the health department’s latest Aids drug tender are in business rescue and have been unable to reliably supply the state.
Avacare Health subsidiaries Barrs and Innovata, which last year each won a share of the core contract to supply the three-in-one pill taken by most HIV patients, were placed in business rescue in December.
Companies go into business rescue when they are financially distressed and cannot pay their debts, in an attempt to restructure their operations and avoid liquidation.
Avacare and its subsidiaries did not notify the department of the business rescue proceedings, and neither Barrs nor Innovata have been able to meet their tender obligations, said health department spokesperson Foster Mohale.
“Both suppliers have been experiencing manufacturing constraints affecting their ability to supply,” Mohale said.
The department has agreed to Barrs’ request to supply an alternative product, while Innovata has indicated its supplier has resumed production after the holiday shutdown but has yet to confirm when it will resume supply, he said.
“The department has engaged with other awarded suppliers to increase their production to ensure continuous availability of these medicines while the two … suppliers address their supply constraints,” he said.
Aspen Pharmacare’s head of strategic trade, Stavros Nicolaou, said the company is willing to step in. “We will work with the health department to try and solve whatever the volume gap is,” he said.
The development is the latest in a string of controversies dogging the Aids drug tender, which began on December 1.
Local pharmaceutical manufacturers cried foul when the tender was announced in August, after several well-established players — including Adcock Ingram, Cipla and Sun Pharmaceuticals — were excluded from the contracts to supply monthly and three-monthly packs of the three-in-one pill combining tenofovir, lamivudine and dolutegravir (TLD).
Biggest contracts
The TLD contracts, worth R12.6bn in total, are the biggest contracts in the R15.5bn tender, and any disruption to supplies puts patients at risk of developing resistance to the drugs.
Aspen, Emcure, Innovata, Barrs, MacLeods, Viatris and Aurobindo won a share of both contracts, while Pharma Dynamics won a share of only the monthly pack contract. Barrs and Innovata won a combined 28.76% of the contract for three-monthly packs and 24.49% of the one for monthly packs.
Shortly after the award was announced, the South African subsidiary of Indian generic manufacturer Hetero Drugs launched legal action against the department, alleging it had been unlawfully excluded from the contracts for TLD because its prices had been lower than all but one of the successful bidders.
The Competition Commission launched an investigation into Hetero for alleged collusion, a move triggered by a referral from the health department.
It has now emerged that Avacare and its South African subsidiaries — Barrs, Innovata and Supra Healthcare — are all in business rescue. Former Avacare CEO André Meyer, who resigned on November 25, declined to comment.
Debt ‘north of R250m’
Business rescue consultant Karl Gribnitz said the companies had accumulated debt to their suppliers “north of R250m”, but they were all going concerns. Two groups of investors intended to recapitalise the companies once the business rescue process is complete, he said.
The business rescue plan for Innovata was approved by creditors earlier this week, sign-off was imminent for Barrs and Supra Healthcare, and all three companies were expected to be out of business rescue by the end of next week, he said.
Creditors have been offered up to 50 cents in the rand, according to business rescue practitioner Barry Urban, who was appointed to deal with the affairs of Avacare, Innovata and Barrs.
Barrs and Innovata’s problems extend beyond HIV medicines, said Mohale.
“There have been stock shortages of multiple items from both companies,” he said.
Barrs is the state’s sole supplier of morphine powder, a cheap and powerful painkiller, according to the master health products list published by the health department.
Mohale said Barrs is currently supplying stock to address outstanding back orders of morphine.
.
