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Exposed: Government Employees Medical Scheme’s R600m ‘dodgy’ multivitamins contract

Afrocentric CEO Ahmed Banderker. Picture: File

Afrocentric CEO Ahmed Banderker. Picture: File

Published May 9, 2022

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Manyane Manyane and Mashudu Sadike

Pretoria - The Government Employees Medical Scheme (GEMS) has irregularly issued a R600 million multivitamins contract, in violation of the Public Finance Management Act (PFMA) and other regulations.

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The controversial contract was awarded to pharmaceutical company Activo Health (Pty) Ltd in December last year through the quotation system. This was despite the PFMA requiring state contracts above R500 000 to be advertised and subjected to competitive bidding.

Pretoria News can reveal today that Gems appointed pharmaceutical company Activo Health on Christmas eve to supply multivitamins A-Z to its one million members for a period of five months, starting from January 2022.

At the current retail price of R130, the contract is valued at more than R600m.

According to highly placed sources and official documents seen by the Pretoria News, Medscheme recommended its sister company, Activo Health, for appointment. The records include official GEMS documents, quotations submitted by the bidders, as well as letters exchanged between Medscheme and the service providers.

Activo Health and Medscheme, which facilitated the “special project”, are both the subsidiaries of Afrocentric Group, the largest health administration and medical risk management solutions provider. It is chaired by Dr Anna Mokgokong.

Medscheme is one of GEMS’ service providers.

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It provides administrative and operational services, including contribution and debt management services and Managed Care Organisations under Medscheme Health Risk Solutions (MHRS). In addition to this role, it was appointed by GEMS to source the multivitamins on its behalf. After sourcing and evaluating the quotations, Medscheme recommended Activo Health’s appointment.

In a request for information letter sent to LHC Pharmaceuticals, one of the potential service providers approached, Mthabisi Ncube, Medscheme’s Advanced Specialist for Strategic Sourcing, said the scheme sought to “ascertain the willingness of LHC Pharmaceuticals to participate in the supply of multivitamins to the beneficiaries of one of our large medical scheme clients”.

“The medical scheme intends to supply the selected multivitamins to all of its beneficiaries over the age of 18, approximately 1 000 000 (one million) for a period of 5 months, starting in January 2022. The multivitamins are to be dispensed in pack sizes of either 30s, 60s or 90s to the eligible beneficiaries through the scheme’s retail and courier pharmacy network,” Ncube added.

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But the sources said that the decision to appoint Activo Health was done abruptly, and the approvals fast-tracked in breach of normal procurement and regulatory processes.

“They have pursued this initiative with complete neglect and disregard for appropriate procurement policies, dispensing, and clinical best practice. This is contrary to Good Pharmacy Practice (GPP) regulations as determined by the South African Pharmacy Council.”

Another industry source said black pharmaceutical manufacturers were sidelined even though they played a major role in the supply of over-the-counter (OTC). This included products like multivitamins, cough mixtures, and the Covid-19 personal protective equipment.

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“The multivitamins are mainly produced locally and most black manufacturing businesses thrive on them for existence. These companies are struggling to make it in highly protected industries, and they are very much excluded from participating fairly in the value chain,” the source added.

Gems Principal Officer, Dr Stan Moloabi, signed the contract. Moloabi confirmed that Medscheme sourced quotations and adjudicated the process on behalf of GEMS. However, he said GEMS made the decision to appoint.

“The Scheme mandated Medscheme as its contracted Managed Care service provider to analyse claims trends for the most commonly claimed vitamins on the market and obtain quotations from these. The scheme then adjudicated the outcome of the quotations, to identify a preferred vitamin supplier based on the procurement criteria outlined to all prospective suppliers. This process was in line with strategic purchasing criteria of the scheme.”

Moloabi confirmed Activo Health’s appointment.

“Activo Health was one of the suppliers that submitted a quotation and was appointed on the basis of its retail sales volumes as a proxy for general consumer acceptance of the vitamin brand. All the submissions from the five suppliers were considered equitably by the Scheme and Medscheme’s role was to facilitate the analysis, with the final decision being made by GEMS.”

Moloabi did not respond to specific questions on whether due processes were followed and whether or not the tender was advertised. He said the Council for Media Schemes protocols did not apply to GEMS’ strategic purchasing processes. Moloabi maintained that all GEMS processes were conducted in line with its rules and in compliance with the Medical Schemes Act.

Afrocentric Chief Executive Officer, Ahmed Banderker, confirmed that Activo Health got the contract. Asked what procurement process was followed and whether it was advertised, Banderker, said: “GEMS made a decision to supply multivitamins to its members as an expansion of the GEMS wellness programme. As part of Medscheme’s contracted managed care services function of strategic sourcing of healthcare services, the Scheme then requested Medscheme to do research based on a set criterion, which was defined by the Scheme. The market research had to include the following:

Assess Top retails sales of various multivitamin brands. This was based on an independent report published by IQVIA

• Engage the Top 3 identified suppliers/manufacturers. However, we engaged Top 5

• Capacity of the various manufacturers to supply the volumes to 1,2m beneficiaries

• Ability to commence supply in January 2022

• The ability to package in set quantities in order to minimise number of deliveries and dispensing events, to reduce the costs of supply

• Price

“Medscheme submitted an output of the research to GEMS for decision making and appointment. GEMS made the final decision,” Banderker said.

He said the company and its subsidiaries had no relationship with any of the GEMS board members.

However, the Black Pharmaceutical Industrial Association (BPIA) questioned the process, saying GEMS did not advertise the contract to exclude black businesses.

BPIA chairperson Kingsley Tloubatla accused Medscheme of sourcing information from other suppliers merely to tick the box before ensuring the multi-million contract was given to Activo Health. He called the entire process “entrenched corruption” which had been happening for years.

“The procurement process was not completed. Only Activo. What is worrying for us is the conflict of interest not declared by the administrators, Medscheme, who awarded their subsidiary company, and apparently it's not only at GEMS but all other medical aids they administer.

“It’s an untransformed sector of our economy, since the advent of our constitutional democracy. Institutions like the regulator don’t recognise the BEE Act or the Constitution of the Republic as it relates to the Equality Clause,” Tloubatla said.

“NT in 2018/19 awarded the biggest portion of DLT (ARV tender) to 100% Indian owned companies. One of them employs two, as in two people in SA, reducing allocations to SA owned manufacturer’s including Aspen and Adcock in favour of imports. So if our own government does this, they have little or no regard to transforming a hugely biassed industry. They reject the Black Economic Empowerment Act promulgated by a democratically elected government,” he added. The Government Employees Medical Scheme (Gems) has irregularly issued a R600 million multivitamins contract, in violation of the Public Finance Management Act (PFMA) and other regulations.

The controversial contract was awarded to pharmaceutical company Activo Health in December last year through the quotation system. This was despite the PFMA requiring state contracts above R500 000 to be advertised and subjected to competitive bidding.

The Pretoria News can reveal today that GEMS appointed pharmaceutical company Activo Health on Christmas eve to supply multivitamins A-Z to its 1 million members for a period of five months, starting from January 2022.

At the current retail price of R130, the contract is valued at R600 million.

According to highly placed sources and official documents seen by the Pretoria News, Medscheme recommended its sister company, Activo Health, for appointment. The records include official GEMS documents, quotations submitted by the bidders, and letters exchanged between Medscheme and the service providers.

Activo Health and Medscheme, which facilitated the “special project”, are both subsidiaries of Afrocentric Group, the largest health administration and medical risk management solutions provider, chaired by Dr Anna Mokgokong.

Medscheme is one of GEMS’ service providers. It was appointed by GEMS to source the multivitamins on its behalf. After evaluating the quotations, Medscheme recommended Activo Health.

In a request for information letter sent to LHC Pharmaceuticals, one of the potential service providers approached, Mthabisi Ncube, Medscheme’s Advanced Specialist for Strategic Sourcing, said the scheme sought to “ascertain the willingness of LHC Pharmaceuticals to supply multivitamins to the beneficiaries of one of our large medical scheme clients”.

“The medical scheme intends to supply the multivitamins to all of its beneficiaries over the age of 18, approximately 1 000 000 (one million) for 5 months, starting in January 2022,” Ncube said.

But sources said the decision to appoint Activo Health was done abruptly, and the approvals fast-tracked in breach of normal procurement and regulatory processes.

“They have pursued this initiative with complete neglect and disregard for appropriate procurement policies, dispensing, and clinical best practice. This is contrary to Good Pharmacy Practice (GPP) regulations as determined by the SA Pharmacy Council.”

Another industry source said black pharmaceutical manufacturers were sidelined despite playing a major role in supply of over-the-counter (OTC) multivitamins, cough mixtures, and Covid-19 personal protective equipment.

“The multivitamins are mainly produced locally and most black manufacturing businesses thrive on them for existence. These companies are struggling to make it in highly protected industries, and they are very much excluded from participating fairly in the value chain,” the source added.

GEMS principal officer, Dr Stan Moloabi, signed the contract. Moloabi confirmed that Medscheme sourced quotations and adjudicated the process on behalf of GEMS. However, he said GEMS made the decision to appoint.

“The scheme mandated Medscheme to analyse claims trends for the most commonly claimed vitamins and obtain quotations. The scheme then adjudicated the quotations, to identify a preferred vitamin supplier based on procurement criteria outlined to all prospective suppliers.”

Moloabi confirmed Activo Health’s appointment. “Activo Health was appointed on the basis of its retail sales volumes as a proxy for general consumer acceptance of the vitamin brand. All the submissions from the five suppliers were considered equitably …”

Moloabi did not respond to specific questions on whether due processes were followed and whether or not the tender was advertised. He said the Council for Media Schemes protocols did not apply to GEMS’ strategic purchasing processes. Moloabi maintained that all GEMS processes were conducted in line with its rules and in compliance with the Medical Schemes Act.

Asked what procurement process was followed and whether it was advertised, Afrocentric chief executive officer, Ahmed Banderker said “GEMS requested Medscheme to do research. Medscheme submitted an output of the research and GEMS made the final decision.”

Banderker said the company and its subsidiaries had no relationship with any of the GEMS board members.

But the Black Pharmaceutical Industrial Association (BPIA) questioned the process, saying GEMS did not advertise the contract to exclude black businesses.

BPIA chairperson Kingsley Tloubatla accused Medscheme of sourcing information from other suppliers merely to tick the box beforeawarding the multi-million contract to Activo Health. He called the process “entrenched corruption” that had been happening for years.

“The procurement process was not completed. Only Activo.

“What is worrying is the conflict of interest not declared by the administrators, Medscheme, who awarded their subsidiary company, and apparently it’s not only at GEMS but all other medical aids they administer.

“It’s an untransformed sector of our economy. The regulator doesn’t recognise the BEE Act or the Constitution as it relates to the Equality Clause.

“NT in 2018/19 awarded the biggest part of DLT (ARV tender) to 100% Indian owned companies. One of them employs two people in SA, reducing allocations to SA-owned manufacturers in favour of imports.

So if our own government does this, they have little or no regard to transforming a hugely biased industry.”

Pretoria News

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