Officials from the Department of Health have denied claims of flawed processes and collusive bidding linked to its controversial HIV drugs tender and in its court papers arguing against Cipla’s bid to scrap the whole tender, reports Business Day.
In defence, the department said the R15.5bn ARV drug tender was awarded after a “fair and rational process” to determine which companies should be allocated a share of the lucrative contracts.
The row revolves around the core contracts to supply the government with the daily pill taken by most HIV patients, effective from 1 December 2025.
Manufacturer Cipla, although having previously supplied the state and invested in local production capacity, was excluded from the awards to supply monthly and three-monthly packs of pills combining tenofovir, lamivudine and dolutegravir (TLD).
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.
In February, Cipla launched a High Court application to overturn the tender, accusing the department of failing to give due consideration to local manufacturing; allowing the participation of firms that should have been disqualified; and making mistakes in how it split the contract between winning bidders.
Its application has been opposed by the Health Department and most of the firms that won a chunk of the TLD contracts.
Now in the final stages of exchanging papers, the parties are expected to argue the matter in court in September.
The Health Department emphasised the financial impact of its decisions, disclosing the details of competing bids, and pointing out that Cipla’s prices were higher than those of the winners.
Cipla had been given the chance to reduce its prices during negotiations but had not improved enough to make the final cut, Khadija Jamaloodien, the department’s chief director for sector-wide procurement, said in papers.
A supporting affidavit filed by MacLeods Pharmaceuticals estimates that if Cipla had been awarded a share of each of the two TLD contracts at its bid prices, it would have cost the government R75m more than it had agreed to pay Aspen Pharmacare, which was not the cheapest supplier.
Cipla’s argument that the tender should be declared invalid on the grounds of allegedly collusive tendering, bidding by related entities and an irrational division of the award only affected Barrs and Innovata and not other successful companies, said Jamaloodien.
Barrs and Innovata, placed in business rescue in December, together won 25% of the TLD contracts.
Jamaloodien rebuts Cipla’s argument that the two should have automatically been disqualified for failing to indicate their related-party status, saying they had disclosed they were subsidiaries of Avacare.
Because they did not have any shared directors, they were not precluded by the tender rules from bidding, she said. There was also no evidence of collusive conduct or co-ordinated dealing between Barrs and Innovata, and Cipla had not provided any evidence to back up its allegations, she added.
But Cipla said that although Barrs and Innovata did not share directors, they did, in fact, share two key shareholders – Grace Job and Daniel Tshimbombo – who each held an 11.38% stake in both companies, and questioned why both companies had used a commissioner of oaths, located at the same address, and why their prices differed by just R1.50.
It argued that the Health Department should have referred the two companies to the Competition Commission for investigation for suspected collusion, as it had done with Hetero SA.
Jamaloodien said officials had no evidence of collusive conduct or co-ordinating bidding between Barrs and Innovata during the tender process and hence no grounds to refer them to the Competition Commission.
In court papers, Job said that as subsidiaries of Avacare, Barrs and Innovata had access to the same support services but shared no bid-sensitive information and had submitted their bids independently of each other. Their prices were similar due to market conditions, she pointed out.
Responding to Cipla’s complaint that the department had not considered local manufacturing capacity in awarding the TLD contracts, Jamaloodien said the department had, in fact, applied preference for local manufacturers by conducting two rounds of price negotiations in which they were invited to improve their offers.
See more from MedicalBrief archives:
Cipla joins legal challenge as Aids drug tender row escalates
HIV drugs roll-out under threat in court tender row
SA companies lose out on ARV drugs tender