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7 October, 2011  ▪  Yurii Nikolov

You’d Rather Be Dead

The war of pharmaceutical groups is leading to a catastrophically short supply of vital medicines in Ukraine

Does Premier Mykola Azarov know that every 6th Ukrainian with AIDS, of the 24,000 officially registered with the Health Care Ministry, lives in Donetsk Oblast, the harbour of his Party of Regions? This is not a rhetorical question, nor is it meant to point the finger at the troubled region. Civil servants are now doing their best to give the necessary salvation medicines to people with AIDS in Donetsk and elsewhere. Meanwhile, the Premier is personally hampering the campaign to purchase pills for public money which was recently launched by the Health Care Ministry.

The situation looks disastrous. The last time the Health Care Ministry bought medicines was autumn 2010! Hospitals without aspirin is one thing, but people who cannot survive without pills is something much more serious.

There is, however, one alternative supply channel for people with AIDS. An NGO established by the international AIDS infected community imports the necessary treatment into Ukraine. But there is a problem, this year the government has rather alarmingly clogged that channel. The NGO’s Dmytro Sherembei says the organization recently tried to import a large amount of medicines for people with HIV and AIDS, but filled in an old, now unused, customs form, which was a purely technical mistake. The paper could have easily been refilled instantly and the pills would have arrived at their destination in Donetsk. Yet, the customs officers who received the shipment noticed a good chance to advertise themselves. They immediately put the cargo, worth UAH 15mn, under arrest and reported it as potential smuggling to a higher administration. The Prosecutor General immediately responded to the case while public activists went straight to the Health Care Ministry for help. The cargo was a salvation for the Ministry as it has been having a hard time purchasing medicines for HIV and AIDS carriers this year. The Ministry explained to the Prosecutor General that this was not a case of smuggling and the investigators would have closed the case if not for the customs officers, who refused to recall their complaints that served as the ground for the alleged crime. As a result, the pills are still under arrest.

This case is just one element in the pharmaceutical chaos Ukraine’s hyperactive, or inert, government has dragged the country into. Cynical as it looks, it was business interests that left the hospitals short of medicines.

MONOPOLY PILL PUSHERS

Over the past few years a pool of companies has emerged in Ukraine that has been involved in every large scale procurement of medicines by the Health Care Ministry. The most powerful players were entities owned by Petro Bahriy and Andriy Lirnyk, though the industry looks strongly fragmented to an outsider. Still, numerous companies turned out to be related in different aspects that were hidden from the public eye, such as offshore zones, common addresses and remote, yet ultimate owners.

Their growth peaked in 2008-2010 when Zynoviy Mytnyk was running the Health Care Ministry’s procurements. Mr. Mytnyk was a member of both Yulia Tymoshenko’s and Mykola Azarov’s governments, getting to the latter through the quota for the Communist Party. Clearly, this monopolized public procurement system for medicines affected the whole pharmaceutical market. The cost of pills in the country, in dollar equivalent, grew 100-300% over 2005-2009, while the hryvnia dropped 60% compared to dollar.

This all changed dramatically last autumn when President Yanukovych appointed Illia Yemets, a well-known doctor, as the Health Care Minister. This was the first step in the collapse of the then available medicine public procurement system, under which the Ministry was at least purchasing pills and vaccines, even if it was at a price three times higher than normal.

Mr. Yemets immediately froze all tenders of the Health Care Ministry until the government settled all its issues with the big players on the pill market. In winter rumours circulated of the huge sums suppliers had to deposit at slate clubs to meet the needs of some of the Minister’s assistants. This lasted until mid summer when journalists sounded the alarm because hospitals had no, or a next-to-zero supply, of vital medicines.

The Public Procurement Newsletter’s investigations confirmed that the Ministry had been trying to do something. At least, it announced the tender eventually. Yet, nobody turned out willing to take part in it. The whole market that had looked so fragmented before suddenly completely ignored the Ministry’s invitation, as if following a wave of a magic wand, despite the huge annual budget for public procurements which exceeded UAH 1bn. Obviously, no one said aloud who exactly was holding the magic wand.

NEW KINGS BRING NEW PLAYERS

This was when the president personally interfered, as medicine, along with utilities and commodity prices, is a direct electoral shot in the government’s head. Mr. Yemets was sent back to his hospital and replaced by Oleksandr Anishchenko, a Donetsk-born medical bureaucrat. The new minister launched the first public procurements of medicines, which apparently affected the then key players on the market.

Mr. Bahriy’s Hanza company still had its contracts but they were incomparable to those of the previous year in terms of procurement amounts. Back in 2010, the entity had won tenders to supply medicines and medical equipment worth UAH 564mn, confidently beating other public suppliers. Meanwhile, Mr. Anishchenko brought companies that had been dragging behind when Mr. Mytnyk had been Minister, to the forefront using some illegal ways. For instance, the Health Care Ministry’s tender to buy vaccines had only two price bids: UAH 101mn from NVTs Bionika and UAH 108mn from Farmex Group, two companies with common owners. A big player on the pharmaceutical market said in an interview for The Ukrainian Week that this signaled re-distribution of the Ministry’s tender flows from Mr. Bahriy’s entities to a group owned by Borys Lytovsky, another gray cardinal in the market. Whether these developments will turn into a stable trend will only become clear after the government arranges tenders worth at least UAH 1bn.

Obviously, this case looks very much like corruption, with violations right on the surface. In fact, however, the tender has a justification of sorts: at least it has occurred, encouraging Ukrainians to hope that the medicines will eventually arrive in hospitals.

Clearly, the ex-favorites could not sit idle and watch outsiders steal “their money.” At the end of July, Mr. Bahriy’s Hanza filed several complaints with the Antimonopoly Committee about what they described as discriminating terms of the tenders by the Health Care Ministry. The latter terminated the tenders. Hanza withdrew the complaints a few days later but accomplished its task, i.e. postpone the tenders. This aggravated the problem further which was also fuelled by some influential media frequently producing programs and articles on the catastrophic shortage of medicines in hospitals, yet they never mentioned the role of the ex-favorites in this sad outcome.

Mykola Azarov did not take long to respond to all this. The very next morning after a report about the lack of medicines for hemophilia patients appeared on TV, the premier called this an emergency and instructed the Emergency Ministry to contact foreign producers and urgently purchase the medicines with no tender. Viktor Baloha, the omnipresent Emergency Minister, hurried to carry out the order. With a list of a dozen foreign producers of the necessary pills from the Health Care Ministry in hand, he ran to buy something somewhere. And it was definitely something, and somewhere, because two weeks after Mr. Azarov’s instruction there was still no news of any contracts for medicine supply.

 According to sources at the Health Care Ministry, handing the procurement budget to Mr. Baloha was still better than nothing. It makes the arrival of medicines in hospitals more likely as no tender and no direct contacts with producers will prevent anyone from interfering with the procurement process. Yet, the ex-favorites have another bargaining chip which they are apparently trying to play. They can turn the situation upside down, i.e. remove Minister Anishchenko, the one who stirred the medicine procurement revolution.

Premier Azarov talked of the great likelihood of the Health Minister’s resignation as he took away a share of his Ministry’s medicine procurement quota. For sick people, though, the shift of ministers is like a poultice on a wooden leg, or worse than that. Everybody knows that it was Mr. Azarov who last year supported Mr. Mytnyk, the minister who monopolized public procurement for medicines. And it was Mr. Azarov, also known as a friend of Mr. Bahriy, who openly protected Mr. Mytnyk from his PR colleagues when they blamed all possible tender flaws on the “outsider” from the Communist Party. Could it be that if Mr. Anishchenko is fired, the premier could once again step up for the group? 


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