Malawi President suspiciously cancels drug deals and awards them to cronies

Malawi President Joyce Banda has cancelled duly processed contracts to buy cholera, malaria and diabetes emergency medicines worth $2 259 242 (around K890. 7 million).

State House, which confirmed the decision on Thursday, defended the move, saying the President has powers to directly intervene if things are not going well as was the case in this matter.

But the Malawi Law Society (MLS) argued that Banda has overstretched her presidential powers by throwing out a process approved by the Office of the Director of Public Procurement (ODPP), which is the guardian of the Public Procurement Act (PPA).

Following the contract cancellation, sources from the Office of the President and Cabinet (OPC) and from State House said this week government has directed Central Medical Stores Trust (CMST) to award contracts to two suppliers—Sadm Pharmaceuticals Limited and Victoria Pharmaceuticals— before a fresh procurement process it has ordered is finalised.

Sadm Pharmaceuticals Limited is owned by Lilongwe-based business mogul David Bisnowaty whereas Victoria Pharmaceuticals is owned by Farook Gani, the Blantyre-based tycoon who also runs Victoria Hotel.

New quotations

It was only last week when the trust started advertising a request for quotations (RFQ) whose deadline was Monday this week.

Coincidentally, on December 24 2012, President Banda toured and praised Sadm Pharmaceuticals Limited for manufacturing drugs locally which, she said, saves foreign currency and creates jobs.

The trust has not procured drugs in two years as donors demanded a complete reform of the institution following procurement problems at the then Central Medical Stores (CMS). During this time, donors were buying the drugs themselves.

CMS—the public drug management agency—was turned into a trust last year as part of its institutional repositioning.

It was at the trust’s internal procurement committee (IPC) meeting held on November 14 2012 that, among others, they planned the first drug procurement in two years.

The IPC decided to prioritise cholera and malaria drugs purchase as an emergency instead of going through a lengthy procurement process that the rest of medicine supplies would undergo because the two diseases are more prevalent between November and April.

CMST chief executive officer Feston Kaupa—in a November 20 2012 letter we have seen to ODPP appealing for rapid approval to buy the drugs as an emergency—said Malawi “has completely” run out of cholera and malaria medical supplies.

The chosen suppliers, four of them, are Dawa Limited of Kenya and three local companies—Sonali Pharmaceuticals Limited, World Wide Pharmaceuticals and Intermed Commodities. CMST said they were chosen based on their previous track records.

Our State House and OPC sources said that on Wednesday, December 19 2012, President Banda summoned officials from the Ministry of Health, the trust and Office of the President and Cabinet (OPC) to an emergency meeting at Kamuzu Palace in Lilongwe where she told Kaupa to cancel a package of contracts that was to procure drugs enough for three months from the four firms.

As the State House meeting was in progress, sources said, the trust’s IPC was also in session finalising the contracts to the four firms that had been called to a pre-award meeting scheduled for 2pm on the same day.

Kaupa had to communicate the cancellation to his IPC via a text message through a secretary, a source from the trust said.

The IPC, chaired by the trust’s director of corporate affairs, David Nungu, was meeting after ODPP had approved the process, according to documents we have seen.

Lengthy procurement

Following the presidential order, the trust has been forced to start the process all over again using a more lengthy procurement method, which will delay the purchase that would have seen cholera and malaria drugs in stock at the trust by December end. It has now received 28 bids.

Kaupa, in his November 20 2012 letter to ODPP, said it would take two days for the trust to evaluate five bids, which may translate to roughly two weeks to professionally evaluate the 28 bids.

They also require a week or more for the Ministry of Justice to conduct a vetting process. The trust would also wait for a maximum of three days to send and receive signed contracts from successful bidders.

When all is done, they would require a maximum of 16 days before all the medicines are supplied, making end January or mid February the only realistic target when the drugs can be supplied.

On Thursday, the trust’s spokesperson Herbert Chandilanga said they expect successful firms to deliver by end January.

The President’s intervention came at a time the Attorney General had applied to vacate an injunction that five local medical suppliers obtained to stop the emergency procurement process because they were not included on the list of eight companies from which the trust obtained quotations.

Sadm and Victoria were among the five. The others were Malawi Pharmacies Limited (which later disassociated itself from the case), Kantam Products Limited and Pharmanova Limited.

How the drama unfolded

The controversy started when the trust decided to separate the procurement for medicines and medical supplies for cholera, diabetes and malaria control from the main arrangement that would have used a longer procurement method to buy the rest of the medicines for the country through normal procurement methods.

In a special appeal for a ‘No Objection’ on November 15 2012, Nungu advised ODPP of the need to separate the three items from another tender for which a ‘No Objection’ was already granted.

“However, we have observed that medicines to be supplied by successful bidders in this particular tender shall not be in our warehouses before end of the year due to the lengthy procurement processes.

“We have also noted the inability by water boards to supply potable water to the people of Malawi as yet another catalyst for cholera outbreak. Considering the current stock status of cholera medicines, we are concerned that the nation would be at risk of losing lives to preventable cholera outbreak. This would impinge on the inviolable right to life,” wrote Nungu.

In the letter, the trust asked ODPP to allow them use RFQ focusing on a “minimum of four credible pharmaceutical suppliers with good track records on supply contracts of such items with the trust.”

This surprised ODPP, who called for a meeting with the trust’s management to justify the “emergency need.”

After the meeting on November 20 2012, Kaupa wrote to Mawindo the same day: “These suppliers were identified through a performance appraisal for 2011 emergency procurement for cholera supplies.”

Further justifying the “emergency”, Kaupa wrote: “The country is already in the rainy season, which is the season when malaria and cholera cases are at peak and the medical supplies for these two conditions are completely stocked out at the [trust] and in the public facilities in the country.”

In response, on November 22 2012, Mawindo allowed the trust to procure the three months supplies, but also directed that the RFQ be extended to three more firms—Missionpharma, Cipla and Dawa.

“As this is not the default method of this procurement, this approval has been granted on humanitarian grounds given that life would otherwise be at risk,” reads Mawindo’s letter.

Mawindo also scolded the trust: “Sadly, we note that there was laxity in the way the whole procurement was handled. In order to stamp out this behaviour which has dogged CMST procurement for a long time, we urge you to establish reasons behind the lack of planning that seem to characterise most of the procurements from your organisation.”

Court action

While the procurement process was in progress, some five local manufacturers and suppliers were unhappy and got a court injunction stopping the process. They complained that they were not included among the eight from where the trust sought quotations.

But through the Attorney General’s Chambers, the trust challenged the five in the affidavit sworn by Nungu who argued that the plaintiffs were simply looking for business opportunities and “failed to appreciate that what is at stake is human life.”

The plaintiffs have since withdrawn the injunction.

Strange trail

Barely four days after the Kamuzu Palace meeting, President Banda toured Sadm Pharmaceuticals on December 24 2012 where, among others, she declared support for Sadm and recalled part of the proceedings that prompted her to cancel the contracts.

“As the meeting was going on, we learnt that in Malawi, there are five companies that manufacture drugs but are not given contracts to supply and, as a result, they are on the verge of closure. Yet, drugs are being bought from outside such as India where (i) they take a year to come to Malawi and (ii) local companies who should be supplying are laying off staff due to lack of business…We asked them why they are not giving contracts to local companies, but they were just blubbering,” recalled the President.

At the same function, Sadm owner Bisnowaty reported to the President that the Trust ignores them.

President Banda’s press secretary Steven Nhlane said in a written response that “it is true the President ordered that the contracts be cancelled and expedite drawing of new ones as a matter of urgency.”

“The President noted some irregularities in how some contracts were done in favour of foreign suppliers and at the expense of local suppliers who could deliver the same products in the right amounts, quality and much faster as well as in a manner that gives value for money,” said Nhlane.

He added: “The President has oversight responsibility to ensure good governance and accountability. She has powers to intervene where things are not going well for the benefit of all Malawians.”

But MLS president John Gift-Mwakhwawa sees an overstretch of presidential powers in the whole issue.

“Procurement is not the domain of the President. There are procedures laid down and as long as those procedures have been followed, it is not the prerogative of the President to choose who should supply,” he said on Thursday.

Our investigations show that although government has ordered the trust to give Sadm and Victoria Pharmaceuticals the contracts to supply part of the emergency drugs, the duo has also been allowed to participate in the new process as part of the 28 for the remaining items.

They are also participating in the main tender to procure more medical supplies for the country.

Riding luck

In an e-mail interview last week, Ministry of Health spokesperson Henry Chimbali said: “As of December 23 2012, which is the 7th week of the cholera season since November 1 2012, Malawi has not registered any cholera case.”

He also said the country has sufficient medicine to deal with any cholera outbreak.

“We have made available basic supplies to manage any outbreak in any district in the country,” he said.

But in Nsanje, one of the cholera prone districts in the country, the situation is not as rosy as the ministry paints it.

Nsanje district health officer Dr. Medson Matchaya said in an interview on Wednesday that “we do not have enough medical supplies. He added that in the event of an outbreak, we can only respond partially. He has asked well-wishers to help with additional cholera medicine.

In the 2011/2012 season, Malawi recorded 1 856 cases of cholera with 36 deaths, according to Ministry of Health records.