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The health department’s controversial Aids drug tender is under fresh attack from a pharmaceutical company alleging it was unfairly excluded from the deal, after Cipla filed an application in the Pretoria high court last week seeking to scrap the R15.5bn contract.
Cipla joins a legal challenge launched last year by Hetero SA, the local subsidiary of Indian generic manufacturer Hetero. Both companies are taking aim at how the department evaluated bids and divided up contracts for the daily three-in-one pill taken by the majority of South Africa’s HIV patients.
In its papers, Cipla argues officials failed to tackle allegedly collusive bidding, botched the allocation of preference points used in scoring rival bids, and did not give proper consideration to local manufacturing. It also alleges the department made mistakes in the way it split winning bids and failed to conduct due diligence on the financial position of companies bidding for contracts.
Its legal challenge comes as parliament turns up the heat on health minister Aaron Motsoaledi, who was earlier this week called to account for the fact that two of the companies that won contracts went into business rescue barely a week after the tender began on December 1, forcing officials to ask other suppliers to increase their volumes.
South Africa has the world’s biggest HIV burden, with about 5.6-million people on treatment with anti-retroviral medicines. The health department keeps several months of buffer stock on hand and splits tenders between multiple companies to mitigate the risk of disruption, as interrupting treatment is potentially life-threatening.
Cipla Africa CEO Paul Miller said the company has taken legal action to ensure the integrity of the public procurement process. “Our responsibility is to protect patients by supporting a fair, transparent, and lawful process that safeguards uninterrupted access to treatment,” he said.
Cipla was among several local manufacturers that were excluded from the contracts to supply monthly and three-monthly packs of pills combining tenofovir, lamivudine and dolutegravir (TLD), despite having previously supplied antiretrovirals to the state. The R7.25bn TLD contract for monthly packs was split between eight companies, while the R5.38bn TLD contract for three-month packs was split between seven firms.
Our responsibility is to protect patients by supporting a fair, transparent, and lawful process that safeguards uninterrupted access to treatment
— Paul Miller, Cipla Africa CEO
Aspen, Emcure, Innovata, Barrs, MacLeods, Viatris and Aurobindo won a share of both contracts, while Pharma Dynamics won a share of the monthly pack contract only.
In court documents, Cipla questions whether Barrs and Innovata, the two firms that went into business rescue, had disclosed to the health department that they were related enterprises, as they were at the time both subsidiaries of Avacare.
The close alignment in their scoring and pricing, coupled with their group relationship, was consistent with co-ordinated bidding, Cipla said in its papers. Given that the department had referred Hetero SA to the competition authorities for alleged price collusion, the fact that it had not done so with Barrs and Innnovata was arbitrary and irrational, said Cipla.
Similar questions were posed in parliament on Wednesday. The health department’s chief financial officer, Phaswa Mamogale, who chaired the tender bid adjudication committee, told MPs that Barrs and Innovata had different directors and were therefore independent.
Cipla claims the health department’s allocation of preference points awarded for historically disadvantaged individuals is materially flawed, as it was awarded only 0.36 points when its own calculations put the figure at 2.5 points. Rival bids are often so close in price that the HDI points can materially alter a company’s ranking. The tender allocated up to 90 points for price and up to 10 points for HDI.
Investment in local manufacturing
Cipla said it has invested heavily in local manufacturing over the past decade and set aside 40% of the production capacity at its KwaZulu-Natal site for making antiretroviral medicines. It argues the health department failed to properly apply preference for locally manufactured products, contrary to the tender requirements and government policy, and thus undermined security of supply for antiretroviral medicines.
It says the health department’s approach to splitting the TLD contracts was irrational because Cipla, which had a proven track record of supplying these medicines, was completely excluded. Cipla said it has the capacity to supply more than half the three-monthly packs and nearly half the monthly packs of TLD.
Cipla also said the health department made mistakes in the splits made between winning bidders, demonstrating its irrationality and undermining the fairness and transparency of the process. It said the formula set out in the special requirements and conditions of contract document published by the health department should have seen Innovata get 13.6% of the monthly TLD, but it was awarded just 11.38%.
The health department was not immediately available to comment.
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